board of directors (corporations) Flashcards
can a director voted to a ten year term be voted out of office. if so, when and how/
yes, sitting directors can be voted out of office. ordinarily unless the articles or bylaws provide otherwise, the term of a director is one year. if nothing in articles or bylaws do not provide for any other term, and it can never be more than five, then they can be voted out.
ordinarily how are the directors of a corporation elected and removed and by what vote?
first directors are usually named in the initial or supplemental report. after this, they are elected by the shareholders. this is done by majority vote and can be done via a straight vote or cumulative voting. shareholders may dismiss a director with or without cause by a vote of “majority of total voting power at any special meeting called for the purpose”… (majority vote of all shareholders) must be done at a special meeting
ordinarily how are the officers of a corporation elected and removed and by what vote?
a president, secretary, and treasurer must be elected by the board of directors. Other officers or agents may be appointed by the board or in some other manner specified in the articles or by laws. The board has the power to remove an officer at any time, with or without cause; but this is limited by any rights the officer may have under an employment contract.
if a corporation is created, do they have to elect officers and directors? if so, how many of each?
a corporation, through shareholders, is required to elect board of directors with one or more members. The board is then required to elect three officers, a president, secretary, and treasurer (although two may be combined and held by a single person)
explain the legal duty owed by officers and directors to a corporation
a fiduciary duty of loyalty and reasonable care. The duty of loyalty requires the director or officer always act in the best interest of the corporation as he sees it and put the interest of the corporation before his own (act in good faith) the duty of reasonable care requires him to discharge the duties of his posistion with the diligence, care, judgment and skill which ordinary prudent men would exercise under similar circumstances in like position, but a director or officer will not be found to have violated this duty unless he acted in gross negligence or worse
do directors have authority to bind a contract in a corporation?
no. no director or shareholder has any mandatary/ agency authoirty in their capacity as a director or shareholder to act for or bind the corporation with third parties
do officers have authority to bind contract?
yes. officers actions can bind the corporation if they acted with actual or apparent authoirty, or if the corporation ratified the action later. however, the corporation can recover any liability it incurs due to the officers action that exceeded their authority
do directors face legal liability for improper issuance of dividends?
when a board of directors does not approve dividend, but it is issued anyone no one can be held liable as a director for the unlawful payment to the shareholders. only directors who voted for it can be held liable.
if directors held liable, would they have indemnity claim against anyone for amount paid? why or why not?
yes, any director held liable for the payment of an illegal dividend has a right of indemnification against each shareholder who received a dividend for the amount of that dividend
Explain dividends
- Solely within discretion of board
- Directors voting in favor of an unlawful dividend will be liable to the corporation/ creditors (unless directors relied on financial statements prepared by qualified accountants or corporate records)
- shareholders liable for any illegal dividends received by them. There is no defense of not having knowledge of illegality. If a director is determined liable for improper dividends, he may sue the ultimately liable shareholders within 2 years for indemnification.
who may be held liable for unlawful dividends issued by a corporation? when may the action be brought?
shareholders who received unlawful dividends, and any directors who voted in favor of unlawful dividends, unless they relied on qualified accountants reports or on corporate records. must be brought within 2 years of payment.
when are dividend payments unlawful?
when it would render a corporation insolvent. They may only be paid out of surplus or net profits (must be able to pay debts or they are unlawful)
Is a director of a corporation automatically entitled to reimbursement from the corporation for the attorneys fees he/ she incurs in successfully defending a suit brought by a third party by virtue of status as director?
yes, such reimbursement is expressly provided for by louisiana business corporation laws
ordinarily, which of the following is liable for the debts and liabilities of a corporation; shareholders, directors, officers, employees?
none of them is ordinarily liable for debts of corporation. the corporation is a juridical person, separately and solely liable for its own debts
which of the following have a direct ownership interest in assets of a corporation: shareholders, directors, officers, employees
the shareholders are the equity owners of the corporation but the ownership interest they have is in the corporation itself, not any specific assets belonging to the corporation. directors, officers, and emplolyees do not have an ownership interest in the corporation or the assets of the corporation, but nothing precludes them from also being shareholders
