can someone help me do the IRAC for this topic Dodge v. Ford Motor Co. 170 N.W. 668 (Mich. 1919) below is attached the chapter and the entire case.

513/23, 11:05 AM Distributions to Shareholders Distributions to Shareholders During the life of a corporation, shareholders may receive distributions of the corporation's assets. Most people are familiar with one type of distribution dividendsbut there are other important types of distributions to shareholders, including payments to shareholders upon the corporation's repurchase of its shares. There is one crucial similarity among all the types of distributions to shareholders: Corporate assets are transferred to shareholders. Consequently, an asset transfer to shareholders may harm the corporation's creditors and others with claims against the corporation's assets. For example, a distribution of assets may impair a corporation's ability to pay its creditors. In addition, a distribution to one class of shareholders may harm another class of shareholders that has a liquidation priority over the class of shareholders receiving the distribution. The existence of these potential harms has resulted in corporation law that restricts the ability of corporations to make some distributions to shareholders. https:llprod.readerui.prodmheducation.comlepublsn_8f833ldatauuid95d5d1617e0843c082541aa2ed1724d? 1/12 513/23, 11:05 AM Distributions to Shareholders Dividends A critical objective of a business corporation is to make a prot. Shareholders invest in a corporation primarily to share in the expected prot either through appreciation of the value of their shares or through dividends. There are two types of dividends: cash or property dividends and share dividends. Only cash or property dividends are distributions of the corporation's assets. Share dividends are not distributions. https:llprod.readerui.prodmheducation.comlepubt'sn_8f833/datauuid95d5d1617e0543c082541a228d1724d? 2I12 513/23, 11:05 AM Distributions to Shareholders Cash or Property Dividends Dividends are usually paid in cash. However, other assets of the corporationsuch as airline discount coupons or shares of another corporationmay also be distributed as dividends. Cash or property dividends are declared by the board of directors and paid by the corporation on the date stated by the directors. Once declared, dividends are debts of the corporation, and shareholders may sue to force payment of the dividends. The board's dividend declaration, including the amount of dividend and whether to declare a dividend, is protected by the business judgment rule. Preferred shares nearly always have a set dividend rate stated in the articles of incorporation. Even so, unless the preferred dividend is mandatory, the board has discretion to determine Whether to pay a preferred dividend and what amount to pay. Most preferred shares are cumulative preferred shares on which unpaid dividends cumulate. The entire accumulation must be paid before common shareholders may receive any dividend. Even when preferred shares are noncumulative, the current dividend must be paid to preferred before any dividend may be paid to common shareholders. The following Dodge v. Ford case is one of the few cases in which a court ordered the payment of a dividend to common shareholders. The court found that Henry Ford had the wrong motives for causing Ford Motor Company to refuse to pay a dividend. Page 44-17 httpszllprod.readerui.prodmheducation.comlepubl5n_8f833ldatauuid95d5d1617e0543c082541a328d1724d? 3I12 5/3/23, 11:05 AM Distributions to Shareholders Dodge v. Ford Motor Co. 170 N. W. 668 (Mich. 1919) https://prod.reader-ui.prod.mheducation.com/epub/sn_8f833/data-uuid-95d5d1617e0843c082541aa2ed1724d7 1/125l3l23, 11:05 AM Distributions to Shareholders In 1916, brothers John and Horace Dodge owned 10 percent of the common shares of the Ford Motor Company. Henry Ford owned 58 percent of the outstanding common shares and controlled the corporation and its board of directors. Starting in 1911, the corporation paid a regular annual dividend of $ 1.2 million, which was 60 percent of its capital stock of $2 million but only about 1 percent of its total equity of $114 million. In addition, from 1911 to 1915, the corporation paid special dividends totaling $41 million. The policy of the corporation was to reduce the selling price of its cars each year. In June 1915, the board and oicers agreed to increase production by constructing new plants )!' $10 million, acquiring land for $3 million, and erecting an $11 million smelter. To nance the planned expansion, the board decided not to reduce the selling price ofcars beginning in August 1915 and to accumulate a large surplus. A year later, the board reduced the selling price of cars by $80 per car. The corporation was able to produce 600,000 cars annually, all of which, and more, could have been sold for $440 instead of the new $360 price, a forgone revenue of$48 million. At the same time, the corporation announced a new dividend policy of paying no special dividend. Instead, it would reinvest all earnings except the regular dividend of $1.2 million. Henry Ford announced his justication for the new dividend policy in a press release: "My ambition is to employ still more men, to spread the benets of this industrial system to the greatest possible number, to help them build up their lives and their homes. " The corporation had a $112 million surplus, expected prots of $60 million, total liabilities of $18 million, $52.5 million in cash on hand, and municipal bonds worth $1.3 million. The Dodge brothers sued the corporation and the directors to force them to declare a special dividend. The trial court ordered the board to declare a dividend of $19.3 million. Ford Motor Company appealed. https:llprod.readerui.prodmheducation.comlepubl5n_8f833ldatauuid95d5d1617e0543c082541a328d1724d? 5l12 513/23, 11:05 AM Distributions to Shareholders Ostrander, Chief Justice It is a well-recognized principle of law that the directors of a corporation, and they alone, have the power to declare a dividend of the earnings of the corporation, and to determine its amount. Courts will not interfere in the management of the directors unless it is clearly made to appear that they are guilty of fraud or misappropriation of the corporate funds, or they refuse to declare a dividend when the corporation has a surplus of net prots which it can, without detriment to the business, divide among its stockholders, and when a refusal to do so would amount to such an abuse of discretion as would constitute a fraud, or breach of that good faith that they are bound to exercise towards the shareholders. The testimony of Mr. Ford convinces this court that he has to some extent the attitude towards shareholders of one who has dispensed and distributed to them large gains and that they should be content to take what he chooses to give. His testimony creates the impression that he thinks the Ford Motor Company has made too much money, has had too large prots, and that, although large prots might be still earned, a sharing of them with the public, by reducing the price of the output of the company, ought to be undertaken. We have no doubt that certain sentiments, philanthropic and altruistic, creditable to Mr. Ford, had large inuence in determining the policy to be pursued by the Ford Motor Company. There should be no confusion of the duties that Mr. Ford conceives that he and the shareholders owe to the general public and the duties that in law he and his codirectors owe to protesting, minority shareholders. A business corporation is organized and carried on primarily for the prot of the shareholders. The powers of the directors are to be employed for that end. We are not, however, persuaded that we should interfere with the proposed expansion of the Ford Motor Company. In view of the fact that the selling price of products may be increased at any time, the ultimate results of the https:llprod.readerui.prodmheducation.comlepublsn_8f833ldatauuid95d5d1617e0843c082541aa2ed1724d? 6/12 513/23, 11:05 AM Distributions to Shareholders larger business cannot be certainly estimated. The judges are not business experts. It is recognized that plans must often be made for a long future, for expected competition, for a continuing as well as an immediately protable venture. We are not satised that the alleged motives of the directors, in so far as they are reected in the conduct of the business, menace the interests of shareholders. Assuming the general plan and policy of expansion were for the best ultimate interest of the company and therefore of its shareholders, what does it amount to in justication of a refusal to declare and pay a special dividend? The Ford Motor Company was able to estimate with nicety its income and prot. It could sell more cars than it could make. The prot upon each car depended upon the selling price. That being xed, the yearly income and prot was determinable, and, within slight variations, was certain. There was appropriated for the smelter $11 million. Assuming that the plans required an expenditure sooner or later of $10 million for duplication of the plant, and for land $3 million, the total is $24 million. The company was a cash business. If the total cost of proposed expenditures had been withdrawn in cash from the cash surplus on hand August 1, 1916, there would have remained $30 million. The directors of Ford Motor Company say, and it is true, that a considerable cash balance must be at all times carried by such a concern. But there was a large daily, weekly, monthly receipt of cash. The output was practically continuous and was continuously, and within a few days, turned into cash. Moreover, the contemplated expenditures were not to be immediately made. The large sum appropriated for the smelter plant was payable over a considerable period of time. So that, without going further, it would appear that, accepting and approving the plan of the directors, it was their duty to distribute on and near the 1st of August 1916, a very large sum of money to stockholders. https:llprod.readerui.prodmheducation.comlepublsn_8f8331datauuid95d5d1617e0843c082541aa2ed1724d? 7112 5/3/23, 11:05 AM Distributions to Shareholders Judgment for the Dodge brothers affirmed. [Note: Dodge v. Ford may be the most famous lawsuit in the history of American corporate law. Academics, judges, and legal and business practitioners have used it-and misused it-for many purposes, likely because it touches on so many fundamental aspects of corporate law. The case also has a fascinating backstory that will be appreciated by anyone interested in law, business, or entrepreneurship. See M. Todd Henderson, Everything Old Is New Again: Lessons from Dodge v. Ford Motor Company, University of Chicago Law & Economics, Olin Working Paper (2007).] To protect the claims of the corporation's creditors, all of the Page 44-18 corporation statutes limit the extent to which dividends may be paid. The MBCA imposes two limits: (1) the solvency test and (2) the balance sheet test. https://prod.reader-ui.prod.mheducation.com/epub/sn_8f833/data-uuid-95d5d1617e0843c082541aa2ed1724d7 3/12513/23, 11:05 AM Distributions to Shareholders Solvency Test A dividend may not make a corporation insolvent; that is, unable to pay its debts as they come due in the usual course of business. This means that a corporation may pay a dividend to the extent it has excess solvencythat is, liquidity that it does not need to pay its currently maturing obligations. This requirement protects creditors, Who are concerned primarily with the corporation's ability to pay debts as they mature. Balance Sheet Test After the dividend has been paid, the corporation's assets must be sufcient to cover its liabilities and the liquidation preference of shareholders having a priority in liquidation over the shareholders receiving the dividend. This means that a corporation may pay a dividend to the extent it has excess assetsthat is, assets it does not need to cover its liabilities and the liquidation preferences of shareholders having a priority in liquidation over the shareholders receiving the dividends. This requirement protects not only creditors but also preferred shareholders. It prevents a corporation from paying to common shareholders a dividend that will impair the liquidation rights of preferred shareholders. https:llprod.readerui.prodmheducation.comlepubt'sn_8f833/datauuid95d5d1617e0543c082541a328d1724d? 9I12 513/23, 11:05 AM Distributions to Shareholders Share Dividends and Share Splits Corporations sometimes distribute additional shares of the corporation to their shareholders. Often, this is done in order to give shareholders something instead of a cash dividend so that the cash can be retained and reinvested in the business. Such an action may be called either a share dividend or a share split. A share dividend of a specied percentage of outstanding shares is declared by the board of directors. For example, the board may declare a 10 percent share dividend. As a result, each shareholder will receive 10 percent more shares than she currently owns. A share dividend is paid on outstanding shares only. Unlike a cash or property dividend, a share dividend may be revoked by the board after it has been declared. A share 5pm results in shareholders receiving a specied number of shares in exchange for each share that they currently own. For example, shares may be split two for one. Each shareholder will now have two shares for each share that he previously owned. A holder of 50 shares will now have 100 shares instead of 50. The MBCA recognizes that a share split or a share dividend in the same class of shares does not affect the value of the corporation or the shareholders' wealth because no assets have been transferred from the corporation to the shareholders. The effect is like that produced by taking a pie with four pieces and dividing each piece in half. Each person may receive twice as many pieces of the pie, but each piece is worth only half as much. The total amount received by each person is unchanged. Therefore, the MBCA permits share splits and share dividends of the same class of shares to be made merely by action of the directors. The directors merely have the corporation issue to the shareholders the number of shares needed to effect the share dividend or split. The corporation must have a sufcient number of authorized, unissued shares to effect the share split or dividend; when it does not, its articles must be amended to create the required number of additional authorized shares. https:llprod.readerui.prodmheducation.comp'epubl5n_8f833ldatauuid95d5d1617e0543c082541a328d1724d? 10I12 513/23, 11:05 AM Distributions to Shareholders Reverse Share Split A reverse share split is a decrease in the number of shares of a class such that, for example, two shares become one share. Most of the state corporation statutes require shareholder action to amend the articles to effect a reverse share split because the number of authorized shares is reduced. The purpose of a reverse share split is usually to increase the market price of the shares. A reverse share split may also be used to freeze out minority shareholders. By the setting of a high reverse split ratio, a majority shareholder will be left with whole shares while minority shareholders will have only fractional shares. Corporation law allows a corporation to repurchase fractional shares without the consent of the fractional shareholders. https:llprod.readerui.prodmheducation.comp'epubl5n_8f833/datauuid95d5d1617e0543c082541a328d1724d? 11I12 513/23, 11:05 AM Distributions to Shareholders Share Repurchases Declaring a cash or property dividend is only one of the ways in which a corporation may distribute its assets. A corporation may also distribute its assets by repurchasing its shares from its shareholders. Such a repurchase may be either a redemption or an open-market repurchase. The right of redemption (or a call) is usually a right of the corporation to force an involuntary sale by a shareholder at a xed price. The shareholder must sell the shares to the corporation at the corporation's request; in most states, the shareholder cannot force the corporation to redeem the shares. Under the MBCA, the right of redemption must appear in the articles of incorporation. It is common for a corporation to issue preferred shares subject to redemption at the corporation's option. Usually, common shares are not redeemable. In addition, a corporation may repurchase its shares on the open market. A corporation is empowered to purchase its shares from any shareholder who is willing to sell them. Such repurchases are usually voluntary on the shareholder's part, requiring the corporation to pay a current market price to entice the shareholder to sell. However, a corporation may force a shareholder with a fractional share to sell that fractional share back to the corporation. A corporation's repurchase of its shares may harm creditors and other Page 44'\" shareholders. The MBCA requires a corporation repurchasing shares to meet tests that are the same as its cash and property dividend rules, recognizing that nancially a repurchase of shares is no different from a dividend or any other distribution of assets to shareholders. https:llprod.readerui.prodmheducation.comlepubl5n_8f833ldatauuid95d5d1617e0543c082541a328d1724d? 12I12