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Utah Essay Bar Studies > Corp > Flashcards

Corp Flashcards

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1
Q

Pre-Incorporation Contracts

A

Entered into by promoter to bring corp into existence

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2
Q

Promoter

A

Fiduciary to corp and enters into contracts on its behalf prior to incorporation

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3
Q

Liability of Promoter

A

Personally liable for knowingly acting on behalf of corp before incorp and
jointly and severally liable for actions even after corp comes into existence unless subsequent novation
Actual knowledge corp not in existence necessary for liability

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4
Q

Novation of Pre Incorp K

A

Agreement that moves liability
From promoter to corp
Based upon agreement between all 3

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5
Q

Adoption of Pre Incorp K

A 
Corp can be liable when 
Corp adopts the k
Occurs when corp accepts
Benefits of transaction or 
Gives express acceptance
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6
Q

Corp Formation

A

Articles of incorporation or charter

Must be filed with state

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7
Q

De Jure Corp

A

All statutory requirements satisfied

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8
Q

Ultra Vires

A 
When corp has narrow purpose but 
Subsequently engages in activities 
Outside stated purpose. 
3rd party involved 
Cannot assert corp acted outside to 
Escape liability
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9
Q

Mod Business Purpose

A

Corp allowed to engage
In any legitimate business purpose and
Not allowed to void k on ultra vires

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10
Q

Situations to Challenge Ultra Vires

A

Shareholder can enjoin
Corp can take action against who engages
State may initiate proceedings

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11
Q

De Facto Corp

A

Owner makes good-faith effort to comply and
Operates business as corp without
Knowing requirements not met

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12
Q

Corp by Estoppel

A

Person who deals as if corp
Estopped from denying its existence and
Cannot seek liability of owner

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13
Q

Securities for Corp

A

Ways corp secures financing

Board of directors must generally authorize issuance

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14
Q

Preferred Stock

A

Get distribution over general

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15
Q

Value of Stock

A

Board of directors must determine
Consideration received for stock
Adequate and not subject to challenge

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16
Q

Par Value Stock

A

Assigned to stock but
Does not need to be market value
Corp required to receive minimum that value

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17
Q

Watered Stock

A

Issued for less than par value

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18
Q

Preemptive Stock Rights

A 
Gives right to purchase shares when
Board of directors issue new shares
To maintain their proportional ownership
CL right automatic 
ML articles of incorporation must include
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19
Q

Exceptions to Preemptive Rights

A

Stocks issued as compensation
Authorized in articles of incorpor and
Within 6 months from the effective date
Stocks sold for payment other than money

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20
Q

Distribution of Stock

A

Generally in form of dividend
Shareholder generally cannot compel to authorize distribution because discretionary UNLESS board acts in bad faith or abuses its discretion

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21
Q

Exceptions to distribution of Stock

A

May not make a distribution if insolvent or would cause corp to be insolvent
Two Tests:
Equity test and balance-sheet test

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22
Q

10b-5

A

Plaintiff purchased or sold security
Transaction involved use of interstate commerce
Engaged in fraudulent or deceptive conduct: opinions and predictions not false unless made statement without reasonable basis or in bad faith
Related to material information
Acted with scienter
Plaintiff relied on defendant’s conduct
Suffered harm because of conduct

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23
Q

Types of Insiders

A

Insider
Constructive
Tippees
Misappropriators

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24
Q

Insider

A

Director, officer, or employee who uses nonpublic information for personal gain

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25
Q

Constructive Insider

A

Person with relationship to corp that gives them access to info not available to public

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26
Q

Tippees

A

Person given info by insider or constructive insider with expectation will be used to trade securities
Tipper must receive personal benefit from disclosure or intend to make gift
Tippee must have known info in violation of tipper’s duties

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27
Q

Misappropriators

A

Person who uses confidential info

Generally when trader has fiduciary duty

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28
Q

16(b)

A

Corp must be traded on national exchange OR
Assets of more than $10 million and more than 500 shareholders
Only against corp directors, officers, shareholders who hold more than 10 percent
During six month period
Corp insider who both buys and sells stock
Required to report change in stock to SEC

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29
Q

Shareholders

A

Annual and special meetings
Notice no fewer than 10 days and no more than 60 days
Notice can be waived by attending

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30
Q

Voting of Shareholders

A

Ownership of stock entitles vote
All outstanding stock has voting right when stock sold or transferred
Record date owner has vote

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31
Q

Quorum Voting

A

Majority of shares present

Then must be majority for action to pass

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32
Q

Right to Elect and Remove Directors

A

Shareholders

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33
Q

Cumulative Voting

A

Cast all votes for one candidate to allow minority shareholders to elect

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34
Q

Fundamental Corp Change

A

Includes transfer of all corp’s assets
Sale or Merger
Special meeting with purpose specified
Must be voted on by shareholders

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35
Q

Approval of Fund Corp Change

A

Merger requires board of directors
And shareholders vote
For asset transfer
Only transferor corp entitled to vote

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36
Q

Proxy Voting

A 
Must be executed in writing and 
Delivered to corporation or its agent 
Without more, valid for 11 months
Revocable unless specified otherwise and
Appointment of proxy is coupled with interest
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37
Q

Appointment of proxy is coupled with interest

A

Depends on whether proxy holder
Has property right in shares or
Security interest given to him to protect him
From any obligations he incurred

38
Q

Shareholder Agreements

A

May enter into binding voting agreements for how they will vote
Does not need to be filed with corp and no time limit
Agreement between directors is unenforceable because expected to use independent judgment

39
Q

Management Agreement

A

May agree to alter the way corp managed so long as
in articles of incorp or bylaws and approved by all shareholders at time of agreement
Written agreement signed by all shareholders at time of agreement and is made known to corp

40
Q

Inspection by Shareholder

A

Right to inspect and copy corp records

Upon 5 days’ written notice stating proper purpose

41
Q

Proper purpose for Inspection by Shareholder

A

Relates to shareholder’s interest in corp

Improper purposes include harassment, acquiring corporate secrets, or idle curiosity

42
Q

Direct shareholder actions

A

Action to enforce shareholder rights or

Non-shareholder action i.e. tort

43
Q

Derivative Shareholder Actions

A

Shareholder suing on behalf of corp

Recovery goes to the corporation

44
Q

Standing for Derivative Actions

A

Must be shareholder at time of act at the time the action is filed, and continuing through litigation, and make written demand upon board of directors

45
Q

Futility for Derivative

A

Only in some states when demand would be futile
Determined by factors including whether directors are disinterested and whether transaction was product of valid exercise of business judgment
Not allowed in states that have adopted RMBCA

46
Q

Pierce the Veil

A

When plaintiff can reach through corp and hold shareholders liable

47
Q

Factors to Pierce the Veil

A

Undercapitalization at formation
Disregard of corporate formalities
Use of corp assets as own assets
Self dealing with corp
Siphoning of corp funds
Use of corp form to avoid legal obligations
Impermissible control or domination over corp
Wrongful, misleading, or fraudulent dealings

48
Q

Exceptions to Veil Piercing

A

Shareholder not involved with daily operations

Not held liable

49
Q

Controlling Shareholders

A

One shareholder holds high enough percentage
To enact highest level
Anyone controlling 50% plus one is automatically

50
Q

Duty to Minority of Controlling Shareholders

A 
Selling interest to outsider
Seeking to eliminate other shareholders
Receiving distribution denied to others
Duty to disclose info reasonable person 
Would consider important in deciding how to vote
51
Q

Board of Directors

A

Manages and directs management of corp business
Only one director required modernly
Must be a natural person (no corporations)

52
Q

Selection of Board of Directors

A

By shareholders at annual meeting
Generally serve for one-year term
May serve longer if terms are staggered
May serve after expiration until replacement

53
Q

Removal of Board of Directors Req

A

Meeting called for purpose of removing director and must state in notice
If elected by a particular class, only be removed by same class

54
Q

CL Removal of Board of Director

A

could only be removed for cause based on substantial grounds

55
Q

ML Removal of Board of Director

A

Can be removed with or without cause unless the articles of incorp state otherwise

56
Q

Replacement of Board of Directors

A

When vacancy or new directors, either shareholders OR directors may fill

57
Q

Voting of Board of Directors

A

Must be quorum of directors present

58
Q

Dissent for Vote of Board of Directors

A

May avoid liability for actions taken by board if
(1) He promptly objects to holding meeting, (2) ensure his dissent or abstention is noted and (3) deliver written notice before adjournment or to corp immediately after

59
Q

Duty of Care BoD and Officers

A

Act with care person in like position would
Reasonably believe appropriate under circumstances
Entitled to rely on others retained by corp

60
Q

BJR

A

Rebuttable presumption that director
Reasonably believed in good faith
His actions were in best interests of corp

61
Q

Rebutting BJR

A

Not act in good faith
Not informed to extent director reasonably believed necessary before making decision
Not show objectivity from director’s relation to or control by another having material interest
Sustained failure by director to devote
Attention to an ongoing oversight
Failed to timely investigate a matter
Received financial benefit not entitled to

62
Q

Duty of Loyalty BoD and Officers

A

Act in manner reasonably believes in
Best interests of the corp
If places own interests before corp

63
Q

Self Dealing

A

Transaction between director and corp that normally requires approval of board of directors and of such financial significance to director that would reasonably be expected to influence director’s vote on the transaction
Applies to any persons related to director

64
Q

Safe Harbor of Self Deaing

A

Transaction may still be upheld if:
Ratification by board of directors
Ratification by shareholders, or
Entire fairness to the corp

65
Q

Corp Opportunity Doctrine

A

Usurping corp opportunity rather than offering opportunity to corp
ML financial inability of corp to take advantage is not adequate defense

66
Q

Two Tests for Corp Opportunity Doctrine

A

Interest or Expectancy

Line of Business

67
Q

Interest or Expectancy

A

Whether corp has existing interest or

Expectancy arising from existing right

68
Q

Line of Business

A

Whether opportunity within corp’s

Current or prospective line of business

69
Q

Officers of Corp

A

Consist of president, secretary, and treasurer
Elected by the board of directors
Agent Authority

70
Q

Liability of Officers of Corp

A

Not incur liability to 3rd parties merely for performance of duties for corp
Can liable if acted in personal capacity

71
Q

Voluntary Dissolution Prior to Issue Stock

A

Corp may voluntarily dissolve by majority vote

72
Q

Voluntary Dissolution After Issue Stock

A

Corp may voluntarily dissolve if board of directors adopts proposal and
Majority of shareholders approve

73
Q

Winding up Corp

A 
May continue to exist as corp for 
Limited purpose of winding up including:
Collecting assets
Disposing of property
Discharging liabilities, and 
Distributing property among shareholders
74
Q

Distribution of Corp

A

Creditors of corp
Obligations owed to shareholders
Shareholders of stock preferences in liquidation
Shareholders of other stock

75
Q

Involuntary Dissolution Shareholder

A

Corp assets being misapplied or wasted
Directors acting illegally, oppressively, or fraudulently
Directors deadlocked in management of corp, or
Shareholders deadlocked in voting and failed to elect successors

76
Q

Involuntary Dissolution Creditor

A

If the corporation is insolvent

77
Q

Closely Held Corp

A

Few shareholders and

More relaxed style of governance

78
Q

S Corp

A

Elects to avoid double taxation
Income and expenses of corp passed through shareholders
Corp cannot have more than 100 shareholders and
No more than one class of stock
Each shareholder must consent to S corporation

79
Q

LLC

A

Entity distinct from its members that enjoys
Pass-through tax advantage of a partnership but
Limited liability of corp

80
Q

Management of LLC

A

Defaulted to member management

Unless operating agreement otherwise

81
Q

Liability of members of LLC

A

A member is generally not liable for an LLC’s obligations but many states allow a piercing of the veil of an LLC by showing (1) undercapitalization, (2) commingling of assets, (3) confusion of business affairs, or (4) deception to creditors.

82
Q

Pierce the Veil LLC

A

Mere Instrumentality:
Members dominated entity such had no will of its own
Members used domination to commit fraud or wrong
Control and wrongful action proximately caused injury
Unity of Interest and Ownership:
Unity of interest and ownership between
Entity and members that LLC did not have
Existence independent of members and
Failure to pierce veil would be unjust or inequitable

83
Q

Duties of Members of LLC

A

Care and Loyalty

84
Q

Dissolution of LLC

A

Consent of all members
Passage of 90 consecutive days without members
Court order or
Event causing dissolution per operating agreement

85
Q

Board of Directors Notice of Meeting

A

Directors are entitled to notice of a special meeting. The notice must be provided at least two days prior to the meeting and should state the date, time, and place of the meeting. The notice does not need to describe the purpose.

86
Q

Waiver of Notice Board of Directors

A

A director’s attendance of the meeting waives notice of the meeting unless the director promptly objects to lack of notice.

87
Q

LLC Derivative Suit

A

Like a corporation, an LLC is a legally recognized business entity. As such, it has the right to sue and be sued. Members of an LLC may bring a derivative action on behalf of the LLC to enforce rights of the LLC. To do so, demand must be made on the other members to bring an action if the member fails to do so, unless such demand would be futile.

88
Q

LLC Direct Suit

A

In some circumstances, members may also bring a direct action against the LLC and other members. Although a member may do this to enforce the member’s rights, members do not have the right to maintain a direct action against the manager of the LLC when the alleged misconduct caused harm only to the LLC.

89
Q

LLC Duty of Loyalty

A

The duty of loyalty in a member-managed LLC includes the duty to account to the company for any benefit derived by the member related to the company’s activities or property. A member’s duty of care is subject to the business judgment rule.

90
Q

Shareholder Voting By Laws

A

Shareholders have power to amend
Corporation’s bylaws
Enforceable if do not conflict with state law or articles of incorporation
Can amend or repeal existing bylaw provisions
Even if they were added by BOD

91
Q

Board of Director By Law

A

Can amend bylaws unless
Articles of incorporation or
Vote by shareholders limits this power

92
Q

Board of Director Amending Shareholder Voted By Laws

A

Shareholder-approved bylaw dealing with
Director nominations may not
Limit board’s power to amend, add, or repeal
To ensure an orderly process

Utah Essay Bar Studies (16 decks)

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