Bus. Structure: Corporations

Question 1

Under the Model Business Corporation Act, under what circumstances can a corporation’s board of directors amend the articles of incorporation without shareholder approval?

Answer 1

To increase the number of authorized shares of the class to the extent necessary to permit the issuance of shares as a share dividend.

Question 2

Under the Model Business Corporation Act, what types of shares must a corporation issue?

Answer 2

1. One or more classes or series of shares that together have unlimited voting rights,
2. AND, one or more classes or series of shares (voting or nonvoting) that together are entitled to receive the net assets of the corporation upon dissolution.

Question 3

Articles of Incorporation must include…

Answer 3

1. Corp. name.
2. Name and address of a registered agent
3. Names of the incorporators.

Question 4

registered agent

Answer 4

person or entity who is authorized to accept service of process and official notices on behalf of the corporation

Question 5

additional items the Articles of Incorporation may include…

Answer 5

Articles of Incorporation may also include names of the initial directors, the purpose of the corporation, par value of stock as well as other information.

Question 6

W/regards to pre-employment screening…

Answer 6

1. Drug testing is permissible;
2. Psychometric testing (measurement of attitudes and personality traits) is often utilized.
3. Background checks are also routine in many instances.

Question 7

Under the Business Judgment rule, are officers and directors liable?

Answer 7

Officers and directors will not be liable for acts which involve their business judgment as long as they acted in good faith and were not grossly negligent.

Question 8

Can a corporation’s shareholders amend or repeal the corporation’s bylaws? In addition, a corporation’s board of directors may amend or repeal the corporation’s bylaws, unless: (1) the articles of incorporation or section 10.21 reserve that power exclusively to the shareholders in whole or part; or (2) the shareholders in amending, repealing, or adopting a bylaw expressly provide that the board of directors may not amend, repeal, or reinstate that bylaw. - See more at: http://www.cpareviewforfree.com/exams.cfm?name=question&test_id=3550298#sthash.8kocUAxe.dpuf

Answer 8

Yes.

Question 9

A corp’s BOD may amend or repeal the corp’s bylaws unless:

Answer 9

1. The articles of incorporation or Section 10.21 reserve that power exclusively to the shareholders in whole or part.
2. OR, the shareholders in amending, repealing, or adopting a bylaw expressly provide that the board of directors may not amend, repeal, or reinstate that bylaw.

Question 10

The Model Business Corp. Act and share issuance:

Answer 10

The Model Business Corporation Act permits the authorization of stocks with varying degrees of dividend rights, voting rights, and rights to assets on dissolution.

Question 11

amending the Articles of Incorporation

Answer 11

1. A shareholder of the corporation does NOT have a vested property right resulting from any provision in the articles of incorporation, including provisions relating to management, control or dividend entitlement.
2. If a corporation has not yet issued shares, its BOD or its incorporates may adopt one or more amendments to the corporation’s articles of incorporation.

Question 12

derivative proceeding

Answer 12

a civil suit in the right of a domestic corporation.

Question 13

A shareholder may not commence or maintain a derivative proceeding unless the shareholder:

Answer 13

1. Was a shareholder of the corporation at the time of the act or omission complained.
2. AND, fairly and adequately represents the interests of the corporation.

Question 14

No shareholder can commence a derivative proceeding unless:

Answer 14

1. A written demand has been made upon the corporation to take suitable action.
2. AND, 90 days have expired from the date the demand was made unless:
3. The shareholder has earlier been notified that the demand has been rejected by the corporation.
4. OR, unless irreparable injury to the corporation would result by waiting for the expiration of the 90 day period.

Question 15

W/regards to a merger, in which A absorbs B…

Answer 15

majority approval of both companies’ shareholders is required.

Question 16

How much authority does a silent partner (50% ownership) have over the selection of directors?

Answer 16

Equal authority as the other 50% shareholder who runs day-to-day operations.

Question 17

MBCA and the shareholders’ meeting

Answer 17

1. A corporation must hold a meeting of shareholders annually at a time stated in or fixed in accordance with the bylaws.
2. A corporation must notify shareholders of the date, time, and place of each annual and special shareholders’ meeting no fewer than 10 nor more than 60 days before the meeting date.
3. Unless the Act or the articles of incorporation require otherwise, the corporation is required to give notice only to shareholders entitled to vote at the meeting.
4. A shareholder may waive any notice required by the Act, the articles of incorporation, or bylaws before or after the date and time stated in the notice.
5. The waiver must be in writing, be signed by the shareholder entitled to the notice, and be delivered to the corporation for inclusion in the minutes or filing with the corporate records.

Question 18

proxy voting

Answer 18

A shareholder may vote his shares in person or by proxy. An appointment is valid for 11 months unless a longer period is expressly provided in the appointment form.

Question 19

When is the appointment of a proxy effective?

Answer 19

An appointment of a proxy is effective when a signed appointment form or an electronic transmission of the appointment is received by the inspector of election or the officer or agent of the corporation authorized to tabulate votes.

Question 20

Is the appointment of a proxy revocable? If so, when?

Answer 20

An appointment of a proxy is revocable unless the appointment form or electronic transmission states that:

1. It is irrevocable.
2. AND, the appointment is coupled with an interest.

Question 21

The MBCA provides that a corp. will be dissolved when:

Answer 21

1. the corporation obtained its articles of incorporation through fraud;
2. OR, the corporation has continued to exceed or abuse the authority conferred upon it by law,
3. if corp. directors are in a deadlock, judicial dissolution may be warranted.

Question 22

dividends

Answer 22

1. Do not have to be declared.
2. Are declared by directors.
3. Restrictions on dividends may apply.
4. No dividends may be distributed if they will severely impede the company’s ability to pay its debts.

Question 23

When can a director abdicate his/her fiduciary duty to Company A in order to start Company B?

Answer 23

If the director first resigns from A, then starts B.

Question 24

A president of a corporation is subject to personal liability if…

Answer 24

s/he undercapitalized the corporation.

1. This is a red flag that the corp. was started as a sham.

Question 25

criteria to elect treatment as an S Corp:

Answer 25

1. Have 1 class of stock.

Question 26

par value and liability

Answer 26

1. A purchaser of stock which has been assigned a par value must pay at least par, or be liable to creditors for the difference.
2. One who purchases stock knowing that par has not been paid will similarly be liable.

Question 27

Does a corp with only one shareholder automatically terminate when that shareholder dies?

Answer 27

No.

Question 28

Articles of Incorporation must authorize:

Answer 28

1. One or more classes or series of shares that together have unlimited voting rights.
2. One or more classes or series of shares (which may be the same class or classes as those with voting rights) that together are entitled to receive the net assets of the corporation upon dissolution.

Question 29

Can a corp change its registered office?

Answer 29

Yes. A corporation may change its registered office or its registered agent at any time, but must must properly file such change with the Secretary of the Corporation Commission.

Question 30

MBCA and parameters for pre-incorporation stock subscriptions:

Answer 30

1. A subscription for shares entered into before incorporation is irrevocable for six months unless the subscription agreement provides a longer or shorter period.
2. The board of directors may determine the payment terms of subscription for shares that were entered into before incorporation unless the subscription agreement specifies them.
3. A call for payment by the board of directors must be uniform as to all shares of the same class.
4. If a subscriber defaults in payment of money or property under a subscription agreement, the corporation may collect the amount owed as any other debt.

Question 31

power of shareholders over directors

Answer 31

Shareholders can hire/fire directors, but cannot set director compensation.