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Cali Bar > Business Associations > Flashcards

Business Associations Flashcards

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1
Q

What are the requirements of an irrevocable proxy?

A
  1. Must be labeled as such and coupled with an interest
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2
Q

How long does a proxy agreement last?

A

11 months unless otherwise agreed

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3
Q

When may a self-dealing transaction be permitted?

A

Where there is full disclosure and independent ratification

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4
Q

What must a corporation do before making a fundamental change?

A
  1. Hold a special meeting
  2. Notice shareholders with time date place and reason for meeting

No other business discussed at special meeting

Meeting gives rise to appraisal and dissenters rights

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5
Q

What are the requirements for the establishment of a valid proxy agreement?

A
  1. Writing
  2. Signed
  3. Delivered to corp’s secretary
  4. State they are delegating authority to vote
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6
Q

What constitutes a fundamental corporate change?

A
  1. Merger
  2. Consolidation
  3. Amendments to AOI
  4. Sale of all or substantially all business assets
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7
Q

How much a decision by a board of directors be approved?

A
  1. At a board meeting, with quorum met and a majority vote

2. Unanimous written agreement of the board

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8
Q

What happens if a director enters into a transaction where there is a conflict or no approval?

A

The transaction can be rescinded and the director be liable for losses to the shareholders.

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9
Q

What is a de jure corporation?

A

One that meets requirements, articles of incorporation include

# of shares 
Propose of Corp
Register agents name and address 
Incorporators name and address 
Name of Corp

A pain

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10
Q

When is there a de facto corporation?

A

Corporation could have legally been formed
Attempt at incorporation
Use of corporate power

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11
Q

What is a corporation by estoppel?

A

A person who deals with a business believing it to be a corporation may be estopped from denying corporation status

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12
Q

What kind of case does corporation by estoppel apply in?

A

Contracts

Not torts

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13
Q

When can the corporate veil be pierced?

A

Alter ego
Undercapitalization
Fraud
Estoppel

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14
Q

When may the corporate veil be pierced under the fraud theory?

A

Corp exists for shareholders to avoid existing obligations

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15
Q

When may the corporate veil be pierced pursuant to estoppel?

A

Shareholder represents he will be personally liable for corporate debts

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16
Q

What is the deep rock doctrine?

A

When corporation is insolvent, shareholder claims subordinate to creditors claims

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17
Q

What is an ultra vires act?

A

Corporation acting outside it’s stated propose.

Uv acts generally enforceable.

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18
Q

Modernly, when is an ultra vires act at issue?

A

State moves for dissolution
Corporation sues officer
Shareholder sues to enjoin an act

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19
Q

What is a stock subscription agreement?

A

Subscriber agrees in writing to buy a specified number of stock

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20
Q

What is the effect of a post incorporation subscription?

A

Immediately binds both parties

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21
Q

What is the effect of a pre-incorporation subscription?

A

Irrevocable for six months

Must be accepted by Corp to be valid

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22
Q

What must a Corp do before issuing different classes of stock?

A

Identify limitations of various classes of stock before issuance

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23
Q

What type of consideration is not permitted for the exchange of stock?

A
  1. Future services
  2. Pre-incorporation services
  3. Unsecured debt
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24
Q

What is par value?

A

Minimum issuance price of a stock

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25
Q

What are preemptive rights?

A

Shareholder can maintain percentage ownership when new stock are issued.

Modernly shareholders do not have preemptive rights.

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26
Q

What do promoters do?

A

Before incorporation, they raise capital, contract for a location, materials, equipment

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27
Q

Are promoters liable for pre incorporation contracts?

A

Yes unless parties didn’t intend for it, or there has been a novation

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28
Q

Under what theories do promoters have the right to reimbursement?

A

implied adoption

quasi contract

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29
Q

When is a corporation liable for preincorporation contracts?

A

It adopts the contract

Accepts benefits of the contract

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30
Q

What are promoter duties?

A

Fiduciary
Good faith
No secret profits

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31
Q

Must corporations have a director?

A

At least one, may have more

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32
Q

How are board of directors elected?

A

Initially stated in aoi

Vacancy filled by shareholder vote

33
Q

How are officers chosen?

A

Appointed by board

34
Q

What is officer authority?

A

Act on behalf of corporation pursuant to agency law

35
Q

How may a director be removed?

A

Majority shareholder vote, with or without cause

36
Q

How may an officer be removed?

A

By the board with or without cause

37
Q

When may a bod take action?

A

Majority directors present

Properly noticed meeting

38
Q

How must quorum be achieved?

A

Majority of disinterested directors present

39
Q

How may a director break quorum?

A

Withdrawing from a meeting

40
Q

May bod vote by proxy?

A

No, some states allow teleconferencing

41
Q

May bod have voting agreements?

A

No

42
Q

When may a bod action be valid without a meeting?

A

Unanimous written consent

43
Q

What duties to directors and officers owe a corporation?

A

Loyalty
Care
Disclosure

44
Q

What is the bjr?

A

Directors and officers operate in good faith and best interests of the corporation

45
Q

When may a director or officer act personally on a business opportunity?

A

First offering it to corp
Full disclosure
Good faith rejection

46
Q

What is the remedy for usurping a corporate opportunity?

A

Disgorgement of profits

47
Q

What are the rights of directors and officers?

A

Compensation
Indemnification
Inspection

48
Q

What are general meetings?

A

Occur 1x year

Most shareholder voting occurs then

49
Q

What are special meetings?

A

Called upon reasonable notice of

Time
Place
Business tone discussed

50
Q

What are the two types of stock a shareholder can have?

A

Common

Preferred

51
Q

If articles do not specify, which class of stock has voting rights?

A

Both common and preferred

52
Q

What is a revocable proxy?

A

An agency relationship between shareholder and proxy

53
Q

How is shareholder quorum established?

A

Majority of outstanding shares represented, in person or by proxy

54
Q

How may a shareholder action pass?

A

Quorum

Majority of votes cast

55
Q

How may a shareholder vote pass for a fundamental corporate change?

A

Majority vote of all outstanding shares

56
Q

What is straight voting?

A

Each shareholder casts one vote per share held.

Shareholder with more than 50% vote controls

57
Q

What is cumulative voting?

A

Shareholder multiplies # of shares by number of directors to be elected, may cast all votes for one or more directors

58
Q

When may a shareholder inspect corporate books?

A

Upon showing of proper cause

59
Q

What are dividends?

A

Distribution of cash, property or stock from the corp to the shareholder

60
Q

What are discretionary dividends?

A

Given at board’s discretion

Can’t be given if leads to insolvency or if not allowed by aoi

61
Q

What is a voting trust?

A

When a shareholder agrees in writing to transfer shares to a trustee who votes and distributes dividends in accordance with trust

62
Q

When are restrictions on stock transfers upheld?

A

Where they are reasonable, like right of first refusal

Absolute restrictions not reasonable

Third party bound if had knowledge or restriction conspicuously noted

63
Q

What kind of lawsuits can shareholders bring?

A

Direct suit

Derivative suit

64
Q

What is a direct suit?

A

Shareholder brings suit for breach of fiduciary duty to shareholder

65
Q

What is a derivative suit?

A

Shareholder brings action on behalf of Corp for harm done to Corp

Corp gets recovery, shareholder gets expenses of litigation

66
Q

What qualifies a shareholder to bring a derivative suit?

A

Own stock at time claim arose and throughout litigation

Make a demand on directors to bring suit or redress injury and demand is rejected or would be futile

67
Q

What duty do shareholders owe to corporations?

A

Generally, none.

Modernly, controlling shareholders owe a fiduciary duty and minority shareholders owe duty of care and loyalty.

68
Q

What restrictions on a controlling shareholder selling shares to a looter?

A

Controlling shareholders can’t sell shares to looters if they know buyer intends to harm company

69
Q

May a controlling shareholder sell shares at a premium?

A

Yes so long as good faith and fair.

Controlling shareholder may not sell controlling shares and receive a personal benefit for the sale of a corporate asset or office

70
Q

Are shareholders liable for the actions of corporations?

A

No

71
Q

What is a short swing profit?

A

An insider receives a profit from trading within a six month period.

Applies where corp

  1. Listed on national exchange
  2. Has $10 mil in assets and 500 shareholders
72
Q

What happens to short swing profits?

A

Disgorged to the corporation

73
Q

Who is a corporate insider?

A

Officers
Directors
Shareholders who hold 10% stock

74
Q

What does 10b5 prohibit?

A

Trading based on non public, corporate information

75
Q

What are the elements of securities fraud?

A 
Intent to defraud
Material misrepresentation or omission 
Reliance 
Purchase or sale of securities 
Interstate commerce
76
Q

How may 10b5 be violated?

A

Direct trading by insider
Tippers sharing info for personal gain
Tippees
Misappropriators

77
Q

How may an insider avoid a 10b5 violation?

A

Disclose material, non public information

Or refrain from trading

78
Q

How may a tipper violate 10b5?

A

Share inside info for personal gain

Need not do the trading himself

79
Q

When is a tippee liable for a 10b5 violation?

A

Tipper breached fiduciary duty

Tippee knee of breach (scienter)

Cali Bar (8 decks)

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