Commercial Law, 2020 Bar — Question A.6
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A white hat hacker, a software engineer, a gamer, an ophthalmologist, and a computer engineer got together sometime in 2019 to develop a software that can identify a person using a photo of their eyes taken by a 10-megapixel camera. By early January 2020, they decided that they needed more equipment and capital, and that they had to protect their intellectual property rights. A wealthy entrepreneur offered to give them the funds they needed. They negotiated that the funds would be treated as an investment rather than a debt liability. Thus, the entrepreneur would recover through dividends rather than through amortized payments. At the same time, they did not want the wealthy entrepreneur to be involved with creative decisions in their business projects. To accommodate their desired arrangements, a new corporation was registered with the Securities and Exchange Commission. In this corporation, the wealthy entrepreneur held preferred, non-voting shares, while the others held common, voting shares. By the middle of 2020, it became clear that the software was going to be highly profitable. Unlike other facial recognition software, theirs would be able to identify a person even with low-resolution cameras found in most smartphones. It could also identify persons even if they wore facemasks. Mindful of its profitability, a Chinese corporation offered to buy all the assets of the corporation for USD10,000,000,000.00. Everyone wanted to close the deal except the wealthy entrepreneur, who insisted that they should not sell all corporate assets, but instead enter into software licensing arrangements, as these would be more profitable. Under the Revised Corporation Code, are the white hat hacker, software engineer, gamer, ophthalmologist, and computer engineer required to allow the wealthy entrepreneur, who holds preferred shares, to vote on whether they can sell all the corporate assets? Explain briefly.
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