Close Corp

Question 1

Close Corp Definition

Answer 1

-refers to a corporation with only a few shareholders and a more relaxed style of governance.

Question 2

Characteristics

Answer 2

• may be managed according to a shareholders’ agreement rather than by a board of directors or bylaws.
• often shareholders serve as both directors and officers of the corporation.
• stock is not publicly traded.
• shareholders may agree to limit the conditions under which shares may be transferred or sold, apportion profits and losses in a specific manner, or set terms and conditions for ownership or management positions.
• may operate without a BoD

Question 3

Requirements to Form

Answer 3

• File CoF with SOS
• Once the certificate is signed, filed with the secretary of state, and approved, the certificate of incorporation is issued to the corporation.
• Corp existence begins with the issuance of this certificate.
• Once certificate is issued, an organizational meeting of the board of directors (if any) should be called.

Question 4

Need to have in the CoF

Answer 4

(1) name of the corporation;
(2) the nature of the business and the purpose for which it was organized;
(3) the number of shares of stock that the corporation is authorized to issue;
(4) duration of the corporation;
(5) name and address of the corporate agent; (6) corporate office’s;
(7) names and addresses of all the organizers; and
(8) the number of initial directors (if any), their names, and their addresses

Question 5

Agreements

Answer 5

• shareholders may adopt agreements to guide the corporation’s actions.
• Each shareholder must execute the shareholder agreement, regardless of whether he has voting power

Question 6

Shareholder Agreement-file with State

Answer 6

Texas requires that any close corporation operating under a shareholders’ agreement file a statement of operation with the Secretary of State, stating: (1) the name of the corp; (2) that the corp is being operated under a shareholders’ agreement; and (3) the date the corp commenced operations. This statement of operation must be executed by an officer on behalf of the corporation