3) Directors + Officers

Question 1

powers of indiv board members

Answer 1

board must act collectively – unless otherwise authorized by articles or prior board decs, indiv directors do not have power to set policy or act as agent

Question 2

board: basic rule

Answer 2

management of business + exercise of corp power must be by/under direction of board of directors (acting collectively)
(subject to limits in articles)

Question 3

ways board can act

Answer 3

1) meeting w quorum

2) unanimous written consent, signed by all members

Question 4

quorum: def

Answer 4

• -default: 50%+

- -as defined in bylaws. BUT, bylaws can’t make it less than 1/3 or less than 2 total

Question 5

at meeting w quorum how many must approve?

Answer 5

majority (unless bylaws/arts require more)

Question 6

ultra vires: remedy

Answer 6

1) shareholder can sue for injunction to stop the business
2) shareholder can bring derivative suit against directors or officers for violating authority
(doesn’t mean can undo past activities – but can enjoin, maybe get damages)

Question 7

ultra vires: not a remedy

Answer 7

3rd parties – ex. can’t use it to get out of a k company made

Question 8

ultra vires: rship w board

Answer 8

the purpose statement defines scope of board’s authority

Question 9

how to remove a board member

Answer 9

1) majority of voting shareholders (w/ or w/o cause)
2) removed by rest of board, IF: adjudicated of unsound mind, or convicted of felony
3) removed by superior court if: suit by 10%+ share, and diretor has acted fraud/dishonest, or grossly abused authority/discretion, WRT THE CORP

Question 10

officer: powers

Answer 10

--of an agent
can enter any transaction for which authorized by: 
--articles
--bylaws
--employment k
--board res

Question 11

officer’s power authorization can be

Answer 11

1) express

2) implied (reasonably related to performing duties for which they are resp)

Question 12

even if acted w/o authority, might be binding if

Answer 12

1) acted with APPARENT authority

2) later ratified by board (impliedly or expressly)

Question 13

result if officer acts outside scope of authority

Answer 13

corp is still bound, but may be a claim agaisnt officer for acting outside scope

Question 14

duties of directors and officers

Answer 14

1) care

2) loyalty

Question 15

duty of care: def

Answer 15

dir + officers must do duties:

1) in good faith
2) w the care that an ordinarily prudent person in a like position would exercise under similar circs
3) in a manner they reasonably believe is in best interests of corp

Question 16

business judgment rule

Answer 16

rebuttable presumption that when making business decision, directors have acted:

1) on informed basis
2) in good faith
3) w honest belief that dec was in corp’s best interest

Question 17

duty of loyalty: generally

Answer 17

be loyal to corp, not promote own interests in way injurious to corp

Question 18

duty of loyalty arises when

Answer 18

1) transact business w the corp (self-dealing)
2) usurp a corporate opportunity
3) directly compete w the corp

Question 19

usurping an opportunity: how to avoid duty of loyalty problem

Answer 19

• -full disclosure of all the material facts
• -give corp first opportunity to pursue
• -corp declined or was unable to take advantage of opportunity

Question 20

when does opportunity belong to the corp? factors

Answer 20

1) indiv became aware of opportunity while acting in capacity as director/officer
2) business w the op is closely related to corp
3) board has expressed interest/expectancy in acquiring that ko business
4) opportunity is inc orp’s line of business
5) corp funds or facilities used in discovering or developing op

Question 21

“conflict of interest transaction” not effective unless

Answer 21

after full disclosure
non-interested directors vote to authorize or approve
(otherwise, voidable)

Question 22

result if director/officer violates duty of loyalty or care (or takes unauthorized action)

Answer 22

liable to the corp!

Question 23

remedies for usurping of opportunity

Answer 23

1) damages

2) court can order the director/officer to give all the profit/income/etc from the misappropriation to the corp.