Chapter 35, Problem 18CP

The McDonald Investment Company was a corporation organized and incorporated in the state of Minnesota. The principal and only place of business from which the company conducted operations was Rush City, Minnesota. More than 80 percent of the company’s assets were located in Minnesota, and more than 80 percent of its income was derived from Minnesota. McDonald sold securities to Minnesota residents only. The proceeds from the sale were used entirely to make loans and other investments in real estate and other assets located outside the state of Minnesota. The company did not file a registration statement with the SEC. Does this offering qualify for an intrastate offering exemption from registration? Explain your answer.

PSC Metals, Inc. (PSC), entered into an agreement whereby it extended credit to Keystone Consolidated Industries, Inc., and took back a security interest in personal property owned by Keystone. PSC filed a financing statement with the state, listing the debtor’s trade name, “Keystone Steel & Wire Co.,” rather than its corporate name, “Keystone Consolidated Industries, Inc.” When Keystone went into bankruptcy, PSC filed a motion with the bankruptcy court to obtain the personal property securing its loan. Keystone’s other creditors and the bankruptcy trustee objected, arguing that because PSC’s financing statement was defectively filed, PSC did not have a perfected security interest in the personal property. If this were true, then PSC would become an unsecured creditor in Keystone’s bankruptcy proceeding. Is the financing statement filed in the debtor’s trade name, rather than in its corporate name, effective? Explain your answer.

Muller, a shareholder of SCM, brought an action against SCM over his unsuccessful negotiations to purchase some of SCM’s assets overseas. He then formed a shareholder committee to challenge the position of SCM’s management in that suit. To conduct a proxy battle for management control at the next election of directors, the committee sought to obtain the list of shareholders who would be eligible to vote. At the time, however, no member of the committee had owned stock in SCM for the six-month period required to gain access to such information. Then Lopez, a former SCM executive and a shareholder for more than one year, joined the committee and demanded to be allowed to inspect the minutes of SCM shareholder proceedings and to gain access to the current shareholder list. His stated reason for making the demand was to solicit proxies in support of those the committee had nominated for positions as directors. Lopez brought this action after SCM rejected this demand. Will Lopez succeed?