Agency and business entity Flashcards
Business Entity Registration w/Secretary of State (gral) - NAB
- Name (assumed, of reps, of people carrying)
- Address
- Business activity of applicant
Cause of rejection of Registration w/Secretary of State (2)
1) name non distinguishable from registered/reserved/person name
2) With the intention to create confusion
Cause of Revocation of Registration w/Secretary of State
Intentional creation of confusion
Cause of Cancellation of Registration w/Secretary of State (2)
1) Domestic corp = if disolved
2) Foreign Corp = if authority to transact in state revoked
Cause of amendment of Registration w/Secretary of State (2)
1) Change of name/address/ID of reps-persons carrying out activity
2) Change in location of address of ppal place of business OR new/different counties than originally stated
Agency concept
- Fiduciary relationship
- 1 persons (agent) consents to act on behalf of another (the ppal)
- affecting legal relations with 3rd parties.
Agency - Authority formation (6)
1) Express
2) Implied/Inherent
3) Apparent
4) Estoppel
5) Ratification
6) Necessity
Agency - Examples of SOF for express authority
1) Real Estate
2) For over 1 year
3) “At will” contract
4) Sales rep compensation
Agency- Effects of ratification (2)
1) Cures lack of authority 2) Relates back to time of original contract
Agency - Reqs for valid ratification (4)
1) Ppal w/knowledge of all material facts of action 2) Agent represent he was acting on behalf of ppal 3) Ppal exist at time of contract 4) Once ratified - binding for ppal and for 3rd party (no withdrawal - unilateral rescission)
Agency - Contract Liability of Agent (4)
1) Ppal undisclosed/unidentified/lacked capacity 2) Misrepresentation of scope of authority 3) Deals for himself 4) Del credere agent
Agency - Contract Liability of Ppal (2)
1) Agent with authority 2) Ratification
Agency - Tort Liability of Ppal
Respondeat Superior - if within scope/course of agency
Agency - Tort Liability of Ppal - Contractors Rule
Ppal not liable if no control/supervision on means/manners/details of work UNLESS - dangerous activities.
Agency - Agent duties
1) Fiduciary duties 2) Reasonable care standard 3) Shop rights doctrine
Agent Fiduciary duties to act in good faith
1) HOLT 2) Full disclosure to ppal 3) Avoid conflict of interest and delegation of duties w/o permission
Agent Fiduciary duties - HOLT
- Honest dealing - Obedience - Loyalty - Trust of ppal is followed
Agency - Ppal duties (4)
1) Reimburse business expenses 2) Indemnify for liability arisen from following instructions (includes follow servant rule and not assumption of risk) 3) Compensation 4) Maintain safe work-place
Agency - Voluntary causes of termination (4)
1) Completion of job/task - expiration of date 2) Terms of agreement - breach 3) Revocation by ppal 4) Renunciation by agent - including “at-will” employees
Agency - Involuntary causes of termination (4) - ISIS
- Incapacity / death of ppal - Source of agency supply destroyed - Illegality of agency agreement (bc of susbsequent legislation) - Subject Matter of agency destroyed
Irrevocable agency when (2)
1) written + 2) coupled with interest in property
Agency termination - Notices to avoid liability
1) Actual: to 3rd parties w/ past dealings 2) Constructive: gral 3rd parties - publication
Partnership - gral concept
- Association of 2 or more persons - W/intention to carry/manage as co-owners - Business for profit
PSX - Gral Rule on interests/ loss allocation/distrubiton
Similar unless agreed differently
Types of PSX on duration
1) For definite term 2) For particular undertaking (joint venture) 3) At-will (not time limit - default)
PSX Optional Statement of PSX Authority content
1) name of psx 2) address of CEO 3) office 4) List of partners 5) Special authority to transfer real estate
PSX Formation methods (3)
1) Express (oral/written if SOF) 2) Implied (by share of profits or other) 3) Estoppel (presents himself as partner OR allows use of name in psx trade name)
PSX rule of type of contribution
Any type (services, cash, promissory notes, etc)
Content of partner ownership interest
1) Share of profits/loses 2) Right to receive distributions (Can be subject to Charging Order by individual creditor to partner after judgment)
Partner Fiduciary duty of loyalty - CAP
- Competition prohibited - Avoid Adverse Interests - Psx accounting for benefits
Modern view of conveyance of partner’s ownership interest
- Assignee receives share of profit and loss - Assignee does not receive mgmt rights or rights to inspect psx books or info/accounts of transactions
Exceptions to gral rule of no compensation for partners on psx activties
1) “wind down” activities 2) extraordinary efforts 3) reimbursement for expenditures and personal obligations from ordinary/proper cause of business
Mgmt rule for psx
All partners by majority rule (out of ordinary decision by unanimous decision)
Psx liability gral rule
All partners personally joint and several liable (except for entering partner liable only for extent of contribution for psx torts/contractual obligation prior to admission)
Entering partner exception to liability
entering partner liable only for extent of contribution for psx torts/contractual obligation prior to admission UNLESS - waiver of liability shield - express assumption of responsibility beyond
Psx agency liability
All partners are agents (same rules)
Transfer of psx property under psx’ name rule
By any agent authorized - if not psx can recover from 3rd party knowing of lack of authoirty
Transfer of psx property under partner’s name rule
Only by partner under whose name - if not psx can recover from 3rd party knowing of lack of authoirty
Effects of dissociation of partner from psx
1) partner looses right to manage/conduct business 2) Duty of loyalty survives only for pre-dissociation matters 3) Psx doesn’t terminate - UNLESS partner at will who dissociates by express will 4) Entitled to current value of interest
Psx events of dissociation
1) Express will - anytime unless agreement on contrary 2) Expulsion : by partners/ judicial / Insolvency
Psx dissociation by partners
- unanimously w/ or w/o reason for limited reasons
Psx dissociation by judicial
- wrongful action - material breach of agreement/fiduciary duty - making it impracticable to continue business with that partner
Psx dissociation bc of insolvency (unless vacated within 90 days)
- petition for bankruptcy or appointment of bankruptcy trustee - assignment of essential rights to creditor - court “charging order” on interest
Price for dissociated partner’s interest
Pro-rata share of net assets (or as agreed) - any dx are offset against it.
Dissociated partner liability
- For 2 years- for lingering authority UNLESS Statement of Dissociation (90 days) - For obligation prior to dissociation (also with right to indemnification)
Psx dissolution causes (4)
1) Decided by half of remaining partners 2) Terminating event in psx agreement 3) Illegality 4) Judicial determination bc of economic frustration / equitability of dissolution / impractical continuation with current partners.
Statement of psx authority cancellation
By filing Statement of dissolution - as constructive notice after 90 days
Psx termination - Liquidation distribution priority (CPU)
- Creditors (including partner creditors) - Partners for capital account contribution - Undistributed profits equally among partners (unless agreed differently)
LP partners/liability/management
1) Gral partner: manager - joint-several liable 2) Ltd partner: no manager (OK under ULPA), liable only for amount of contributed capital (Similar rights for voting, receive financial state, inspect records)
LP - Effect of failure to file Certificate with secretary of state
LP turns into grl psx - no cut off point of joint and several liability
LP - Exception to restricted exposure of ltd partners to 3rd party liaiblity
1) Use of name in trade name + lack of knowledge of thrid party he is not gral partner 2) Hold out as gral partner (estoppel)
LP - Gral rule on distribution of loss/profits
Pro rata to capital contribution according to LP certificate
PSX- Conversion/merger rigths with dissenter partner
Right to fair value of interest
LP - Gral partner duties
1) Fiduciary duty 2) Authority to present derivative action (if refusal ltd partner entitled)
LP - Dissolution
1) Any partner demand decree of dissolution 2) Last gral partner dies/withdraws (cure w/appointment in 90 days) 3) ULPA - any last partner withdraws (cure w/appointment in 90 days)
LLP - creation
Filing of application + statement on qualification
LLP - partners status/liability
As shareholders - liability to amount of shares and/or from own torts/tort from someone directly supervised subordinate.
Corps - Incorporator’s liability
Personally liable for all pre-formation contracts if if:
- act as or on behalf of non-existing corp
- Doesnt disclose not yet existence of corp to 3rd party
Unless later Corp : accepts benefit, implied/express adoption, ratification.
Corps - Articles of incorporation mandatory content (RINS)
- Registered office + agent - Incorporator(s) - Name (corp, company, ltd, inc, co) - Stock info: nr of sahres / types of class
Corps - Articles of incorporation optional content - Restrictions to director indemnification (FICE)
- Fiduciary duty breach - Intentional wrong doing - Criminal Act - Excess distribution to shareholders
Corp - Articles ammendment
1) Minor matters - by BOD 2) Significant changes - by majority of shareholders
Corp- Organization Meeting required mattters (post filing) (3)
1) Stock subscription 2) Distribution of shares 3) Initial board election - adopt by-laws + ratify/adopt pre-formation contracts
Corp - By-laws content
1) Corporate governance rules 2) Define number of directors
Corp - Report obligations
1) Initial report filed with secretary of state with info on officers, directors, registered agent+address, description of nature of business 2) Annual report - with info above + total of authorized/issued/outstanding shares 3) license fee paymern
Corp - Factors to determine if company “transacting business” in the state (foreign/domestic) (4)
Nexus - activities permanent/substantial/continuous - Not enough: one time, sales by mail , passive website, own property, appear as D in court
Corp- Effects of being foreign corp
1) Incorporate / registrate 2) Obtain local license/ certificate of authority 3) Pay tax 4) Appoint in-state agent 5) Application of long-arm statutes for jdx -Failure to: Copr cant suit in state court (contracts unenforceable)
Corp Liability - Gral Rule
1) Contractual: contracts by officer/agent w/authority or later ratified 2) Vicarious tort liability - respondeat superior
Corp - Ultra Vires Doctrine
Defense available for shareholders, corps, attorney gral arguing that contracts beyond scope of corporate power is illegal
Corp - Agency rule
- Officer- agent - BOD: Only if express in corp articles
Corp- BOD -removals
1) By shareholders: w/ or w/o cause in special meeting + prior notice 2) By court: when finding fraudulent conduct / gross abuse of position / intentional inflection of harm / for the interest of corp
Corp - Rule on dividends
Sole power of BOD - potential liability if causes insolvency
Corp - Exceptions to director’s deemed assent when present in BOD meeting (3)
1) Dissent/object at beggining of meeting 2) Dissent/object into minutes 3) Deliver written dissent within reasonable time
Corp- Notice for special BOD meeting
Gral rule: 2 days in written.
Corp- Fiduciary duty of directors/officers - Conflicts of interest (CUT)
1) Compete w/corp during their term (“self dealing”) 2) Usurp corp opportunity UNLESS corp rejected it first + after full disclosure of opp + intent 3) Trade secret opp
Corp- Fiduciary duty of directors/officers - Conditions for Interested Transactions
1) Disclosed + recorded in minutes 2) Market price 3) Fair reasonable terms 4) Approved by majority of non-interested directors/shareholders
Corp - Officer appointment/removal
By BOD
Business Judgment Rule
Presumption that directors/officers have acted with due care and good faith - under “prudent business person”. - Limits personal liability - Usually court upholds when fraud, illegal, self dealing
Business Judgment Rule - Prudent Business Person Standard - RIS
1) Reasonable at time - based on reliance on info by officers, employees, committees, expert opinions 2) In good faith 3) Supported by rational basis after appropriate investigation given the importance of the matter (Protects from honest mistake)
Corp - Indemnization Agreement
- Corp to pay dx, legal fees, attorney fees of officer/director/employees personally named as party in suits. - Judgment on the merits
Corp - Exceptions to Indemnization Agreement (FICE)
- Fiduciary duty breach - Intentional wrong doing - Criminal act - Excess distribution to shareholder
Corp - Stock shares Price
Decided by board
Corp - Stock shares transfer
Completed with presentation of endorsed stock certificate to corp
Corp - Preemptive Rights
- To maintain proportional ownership interest - On issuance of new shares = shareholder entitled to purchase pro-rata shares - Under RMCBA: not unless specified in articles / Other unless provide contrary
Corp - Types of shares
1) Preferred 2) Authorized 3) outstanding 4) Redeemed
Corp- Shareholders Special Meetings
- Called by board OR 10% of shareholders w/written demand w/specific purpose OR Court bc of shareholder seeking remedy because disregard of request for meeting or not holding annual meeting
Corp- Shareholders Meetings Notices
- No less than 10 days no more than 60 days - No less than 20 for significant changes - No more than 70 to define whom gets notice
Corp- Shareholders Quorums
- Gral Rule: Simple Majority
Corp- Shareholders Voting trust reqs
written +max 10 years
Corp- Legal Remedies (2)
1) Direct Action: corp w/direct negative effect in personal finances of shareholder 2) Derivative Action: corp bc boards fails to enforce corporate right - dx for corp
Corp- Distribution of dividends
- Discretion of BOD - Once declared is corporate obligation - Unless agreed = for = class
Corp- Shareholder Liability Gral Rule
Not liable beyond investment in shares - UNLESS: - “pierce of corporate veil” - Statutory liability
Corp- Shareholder Statutory Liability (3) (very narrow exceptions to gral rule)
1) Subscription agreement set amount for liability 2) Equitable Insolvency of corp 3) Balance Sheet Test: post-distribution liabilities exceed assets.
Corp- Equitable Veil Piercing reqs (2)
1) Corp used to avoid payment duty and intentionally grossly undercapitalized 2) Disregard of corp form to prevent aiding fraud/wrong suffered by innocent injured party
Corp liability for debts of other corps (4)
1) Concurrent affiliates (integration + cross finances) 2) Successor Affiliates 3) “Mere sham”: alter ego: fraud/failure to separate 4) Estoppel: intentional + fraudulent mislead of 3rd party
Stock-for-stock Statutory Merger
Company absorbs all merging entities
Merger - Reqs
1) BOD disclosure + notice by both boards 2) Approval by target corp shareholder 3) File Articles of Merger with Secretary of State 4) Fundamental change - appraisal right for dissenting shareholders
Corp-Consolidation
New corp created, old corps cease to exist
Corp - Takeover - Reqs for non-hostile
1) Equality: same price per share offered to all shareholders 2) Procedure: bona fide written proposal - BOD recommends or not to shareholders 3) Highest Price duty for BOD
Corp - Dissolution Causes (3)
1) Voluntary 2) Administrative - by sec of state 3) Judicial: possible appointment of receiver, custodian
Corp - Voluntary Dissolution
1) Shares not issued: By BOD discretionary 2) Shares issued: BOD proposal to shareholders - majority vote - submit Articles of Dissolution to Secretary of States - then wind up
Corp - Voluntary Dissolution - Deadline for creditors to present claim
-120 days since since notice of dissolution (Rejected: 90 days to file suit). - 3 years since publication notice for unknown claims.
Corp - Administrative Dissolution by Sec of State - Reason (3)
1) Non-filing of annual report 2) Non payment of license fees 3) Failure to maintain registered agent/office
Corp - Judicial Dissolution - Possible P’s (2)
1) Shareholder 2) Creditor unsatisfied after default judgment.
Corp - Judicial Dissolution - Cause for shareholder’s action FOWD
- Fraud/ Illegal activities by officers/directors - Oppression of minority shareholders - Waste of assets - Deadlock on BOD/among shareholders - risk of irreparable harm.
Professional Services Corporation (PSC) Requirements
1) Only for licensed professionals (legally qualified in at least 1 state) 2) Have corp provision (in articles or by-laws) to buy out in case of disqualification
PSC - Idle funds rule
Can be invested in anything not necessarily related with the required professional purpose of PSC
PSC effect of death of partner
Corp/shareholder required to purchase share at fair value
PSC - Shareholder liability rule
No personal liability for malpractice of other professionals, ONLY for own N and of those under supervision
LLC - Formation
File with Secretary of state: - Articles - Certificate of formation (failure to file: treated as gral psx)
LLC- Articles content NOMAD
- Name - trade name LLC - not use copr, inc, psx, ltd, etc. - Organizer name + address - Manager or member managed - Address + Register Agent - Date of dissolution or statement of perpetual nature
LLC - Management rules
- Operating agreement (as by-laws) - Authority: 1) Managing member / 2) All members
LLC - Member Manager
- designated by articles (elected/removed by majority rule) - Resignation w/notice: dissolution if not replace within 90 days
LLC - All members mgmt
- In proportion to membership interest - Dissociation doesn’t dissolve LLC (new member requires unanimous approval to be able to engage in mgmt)
LLC - Distribution Allocation
Manager decision when assets exceeds liabilities and other funds
LLC - member rights
1) Inspection/copy of records 2) Similar rights to mgmt 3) Gral rule of majority vote
LLC - Mgmt fiduciary duties (2)
1) Loyalty - account, old property, appropriation of property, competing 2) Due Care: refrain from grossly N, intentional misconduct, knowingly violation of law
LLC- Agency
Members not with automatic authority
LLC- Derivative actions (4)
1) Breach of contract 2) Use of proprietary info 3) Breach of fiduciary duty 4) Distribution when knowing it will cause LLC insolvency
LLC - Dissociation Causes WIDE
- Withdrawal - w/notice and w/o right to have interest purchased - Insolvency: bankruptcy / appointment of trustee, receiver, liquidator - Death or Incapacity - Expulsion: judicial order / breach of operating agreement / unanimous vote by other members
LLC - Dissolution
- In gral similar to Corp - Possible term/event in agreement - Consent by all members - Dissociation of last mast members (90 days to continue by assignee)
LLC - Dissolution - Asset Distribution Gral Rule
Pro rata of shares of each class + no contribution requirement
LLC - Dissolution - Asset Distribution - Priority
1) Creditors 2) Members/former members owed distribution 3) Return of member’s contribution 4) Shares of profits to members
