BE (CORPORATIONS) Flashcards
De Jure vs De Facto Corporation
formed in accordance with law = De Jure
laws not followed = De Facto
LBCA
Louisiana Business Corporation Act
Ultra Vires Acts
corporation includes a narrow business purpose, activities beyond the scope of the stated business purpose are Ultra Vires
can be raised by
1. Shareholder
2. Corporation
3. The State
Formation of Corporation
incorporators must file ARTICLES OF INCORPORATION and an affidavit of acceptance of the corporation’s registered agent with the secretary of state
Articles of inorporation Requirements
must contain:
1. The name of the corporation
2. number of shares that corporation is authorized to issue
3. Name and Address of registered agent
4. name and address of each incorporator
May also include any other provision regarding operation of the corporation that is not inconsistent with the law
Existence of Corporation
Begins upon filing by the state
Post Filing of Articles
there will be an organizational meeting to:
- elect directors
- appoint officers
- adopt bylaws
Bylaws
generally adopted by directors, but may be modified or repealed by majority vote of either the directors or shareholders
Piercing the Corporate Veil
- business not conducted in proper form (no shareholder or board meetings, acting outside duty)
- assets are commingled
- corporation is undercapitalized
- Thinly capitalized
Creditors may pierce the veil
Equity Securities (shares)
shares that have been sold = issued and outstanding
reacquired by corporation = authorized but unissued
Share Certificates
unless specific exception
shares must be represented by a certificate:
1. name of issuing corporation and organized under this state’s law
2. name of person to who it is issued
3. number and class of shares and designation of series if any
4. must be signed by president and secretary OR 2 officers designated
no certificate if = Direct Registration System of the Depository Trust & Clearing Corporation (public corporations)
Classification of Shares
Common Shares = equal ownership right
Classes or series within a class = varying ownership rights
MUST be described in articles of incorporation
Stock Subscriptions
promises to buy stock in corporation
Preincorporation = Under LCBA irrevocable for 6 months unless provided
Payment = upon demand by the board failure to pay may be penalized by state
Consideration for Shares
LCBA states may be paid with any tangible or intangible property or benefit to the corporation
Promoters
before corporation is formed promoters procure commitments for capital and other instrumentalities
Promoters in relation to each other
Absent an agreement, promoters are joint venturers who occupy a fiduciary relationship with each other
Breached if they pursue personal gain at the expense of their fellow promoters
Promoters Relationship with Corporation
fiduciary duty to the corporation is one of fair disclosure and good faith
Promoters Relationship with 3ps
personally liable for preincorporation contract with 3p if promoter knew the corporation had not yet come into existence
Corporation is liable (Promoters)
if it ratifies or adopts the contract after coming into existence either explicitly or implicitly
Immovable Property and Preincorporation
property acquired by anyone acting on behalf of a corporation that is not yet incorporated, but becomes incorporated later, corporate existence will be retroactively to date of acquisition of that property
FOR PURPOSES of establishing the corporation’s ownership of the property DOES NOT prejudice rights of 3ps acquired in the interim
De Facto Corporation Doctrine
promoter will NOT be personally liable if in good faith to incorporate exercised corporate authority
Corporation by Estoppel Doctrine
party signing contract may not enforce it against the promoter if that party had relied only on the corporation’s name and assets and NOT the promoters
Shareholder’s Meeting
Corporation’s MUST hold annual shareholders’ meetings
if no meeting period of 18 months, any shareholder may by notice to secretary demand that the secretary call a meeting at corporation’s principal office OR if none its registered office
secretary MUST call meeting and provide notice within 30 days after shareholder’s demand
Special Meetings
may be called by the board of directors, holders of 1/10 or more of all shares entitled to be cast at the meeting, or other persons authorized in articles or bylaws
Place of meetings
held within or outside the state
Notice for Meetings
Shareholders MUST be notified NOT LESS than 10 or MORE than 60 days before the meeting
must state date, time, and place
for special meetings must also state the purpose
Notice may be waived by writing or by attendance
Eligibility to Vote
shareholders of record on the record date may vote at the meeting
record date is fixed by the board MAY NOT BE more than 70 days before the meeting
If no record date deemed to be the day the notice of the meeting is mailed to the shareholders
Power of Vote
unless otherwise provided each share is entitled to one vote
Proxies
shareholder may vote in person or by proxy (EXECUTED IN WRITING)
valid for 11 months unless provided otherwise
generally revocable by shareholder and revoked by shareholder attending meeting in person to vote themselves
only irrevocable if stated so and coupled with an interest or given as security
Quorum
usually a majority of OUTSTANDING SHARES ENTITLED TO VOTE
unless articles require different number (CANNOT be less than 25% of shares entitled to vote)
once quorum is present cannot be broken by withdrawal of shares from the meeting
Less than a quorum may adjourn the meeting
Passing Vote
if quorum is present shareholders will be deemed to have approved a matter if votes cast in favor EXCEED THE VOTES CAST AGAINST
UNLESS articles require a greater proportion
Director Elections
unless provided otherwise elected by a plurality of the votes cast
Cumulative Voting
each shareholder is entitled to a number of votes EQUAL to number of his voting shares multiplied by number of directors to be elected
May divided among the candidates or cast all for one
Class Voting on Article Amendments
if amendment affects only one class of stock, that class has a right to vote EVEN if they don’t otherwise have voting rights
Shareholders Act w/o meeeting
May take action without a meeting by the unanimous written consent of ALL shareholders entitled to vote on the action
Voting Trust
written agreement of shareholders under which all of the shares owned by parties are transferred to a trustee
trustee votes the shares and distributes the dividends in accordance with the agreement
copy of trust, names and addresses of beneficial owners MUST be given to the corporation
Voting Agreement
written and signed agreement providing manner in which they will vote their shares
specifically enforceable (unless provided otherwise)
does not need to be filed with corporation
Unanimous Governance Agreements
agreement amongst shareholders regarding almost any aspect of the exercise of corporate power
must be set forth in the articles or bylaws and must be set forth in a written agreement approved by all persons who are shareholders at time of adoption
valid for 20 years (unless provided otherwise) terminate if listed on public trading market
Restriction on Transfer of Stock
must be reasonable
3p is bound
1. restrictions existence is conspicuously noted on the certificate OR
2. 3p had knowledge of the restriction at time of purchase
Shareholder’s Qualified Right for Inspection
Under LBCA shareholder may inspect corporation’s books, papers, accounting records, shareholder records
with 5 days written notice stating a proper purpose for the inspection
may send attorney or accountant or other agent to inspect
Shareholder’s Unqualified Right for Certain Records
LBCA includes an exception to the general rule any shareholder may inspect the following records REGARDLESS of purpose:
- corporations articles and bylaws
- board resolutions regarding classification of shares
- Minutes of shareholder’s meetings from past three years
- communications sent by corporation to shareholders over past three years
- list of the names and business addresses of current director’s and officers
- Copy of the corporations most recent annual report
