Business Ass'n Flashcards
Can shareholders amend the bylaws?
Yes, and the board shares this power with the shareholders unless the articles reserve the power specifically to the shareholders 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 (shareholder-approved bylaw provisions can amend or repeal existing bylaw provisions,
whether originally approved by the board or by shareholders)
For a derivative suit, how long must the SH wait after the demand on the board?
90 days
Derivative v. Direct Suit
Turns on who was injured; If the injury was due to a breach of fiduciary duties, it is derivative; If the claim is to vindicate SH rights, it is direct
What remedies can a partner bring for another partner’s breach of their fiduciary duties?
1) Direct Action
2) Accounting Action (sue the partner to return any money they wrongfully took from the partnership)
There are NO derivative actions for partnerships
Does the president have inherent power to act for the corporation?
Most states presume yes so long as the matter is within the scope of its ordinary business (ex. hiring an attorney is w/i the ordinary business although some states say the president may only bring suit to preserve corporate assets or prevent dissipation)
What is necessary for a valid proxy?
Must make the appointment through a signed form or a verifiable electronic transmission (orally isn’t sufficient)
What does a limited partner have the right to inspect?
Information relating to the business and financial condition of the partnership, a copy of federal, state, and local income tax returns, and other information regarding the affairs of the partnership as is just and reasonable
Are limited partners liable for participating in control in the partnership?
Yes but under the Uniform Limited Partnership Act says they are never personally liable even if participating in control
Proposing or voting solely for the removal of a general partner is not participation in control
Can members of an LLC bring a direct action against a manager? Derivative action?
Yes for a breach of a contractual duty obligation to the members but not for mismanagement
Derivative: first requires a demand to comply unless the demand is futile
Managers generally are not liable for mere negligence of the duty of care (in the states that do allow, they are not liable for acting in good faith in business decisions)
Can a creditor of an individual partner pursue that partner’s interest?
Yes but they must first reduce the claim to judgment and then may seek a charging order against that partner’s financial interest (share of profits and losses, and right to receive distributions)
Can a corporation’s articles shield directors from liability for breach of a fiduciary duty?
Yes as to money damages for the failure to exercise adequate care in the performance of their duties
No as to breach of duty of loyalty or for interested transactions/improper personal benefit
Limited Partnership: Certificate of Limited Partnership
Must be signed by the general partner and filed with the secretary of state
What is a proper purpose for a shareholder to have the right to inspect?
A purpose reasonably related to a person’s interest as a shareholder; ex. valuation of shares
Also to address economic risks to the corporation if they offer credible evidence that there was mismanagement or other improper conduct
How can a shareholder prevail in a suit to compel payment of a dividend?
The shareholder must prove that there are funds legally available for the payment and the directors acted in bad faith in their refusal to pay (ex. directed to personal interests of the directors rather than corporate welfare)
(A good faith decision to retain corporate earnings for business expansion is an appropriate exercise of business judgment)
Can a corporation change the effective date in the Articles?
The corporation can state a delayed effective date, but not an earlier date
Wrongful Dissociation
A partner can dissociate at any time regardless of whether the partnership agreement states otherwise; If wrongful, the partner is liable to the partnership and the partners for damages and they cannot participate in the winding up process
Wrongful dissociation does not cause the dissolution of the partnership if the remaining partners waive the right to terminate (if the partnership continues, it must purchase the wrongfully dissociating partner’s interest)
Can a partnership agreement waive the right to dissociate?
No except to require a written notice
Rightful Dissociation
The partnership must be dissolved and wound up and that partner can participate in the winding up
If the partner does not have a controlling interest, they cannot force immediate cessation of operations and sale of the partnership assets
Is a dissociating partner (rightful or wrongful) liable for partnership debts?
Yes, including partnership debts incurred during winding up
Can shareholders remove directors without cause?
Under common law, no; Most modern statutes allow
How can a proxy be irrevocable?
If it states so AND it is coupled with an interest (must have a charge, lien, or property right in the shares themselves, or a security interest given to protect the proxy holder for money advanced or obligations incurred)
How can a director elected through cumulative voting be removed?
They may not be removed if the number of votes sufficient to elect them under cumulative voting is voted against their removal
For appraisal rights, can a shareholder demand more than the corporation offers to pay?
Yes if it is a fair value; If the shareholder and the corporation cannot agree on the fair value, the court will decide
Can a principle terminate the agency in violation of the contract?
Yes, they can terminate at any time but they can still be liable for damages for termination of employment unless the employee first committed a material breach
Does dissociation of a member cause the LLC to dissolve?
No, dissolution requires agreement of all members
What happens when an LLC member dissociates?
They lose rights to participate in the LLC and to distributions; They have no right to payment for their interest unless the operating agreement states otherwise
If an agent acts within their apparent authority, is the principal bound if the agent did not disclose the principal?
Yes, the principal is always bound by express authority even if the agent fails to disclose the agency or the principal
