Corporations Flashcards
1
Q
Promoter liablity exceptions
A
- 3rd party knows the C doesn’t exist but promises to look to C only for liability
- Novation w/ 3rd party
2
Q
Corporate liability for pre-incorporation agmts
A
Not liable, unless:
- Express adoption
- Implied adoption
- w/ full K of K, accepts bennies
3
Q
Lack of good faith effort to incorporate
A
You are a promoter and personalyl liable
4
Q
De Facto Corp.
A
- Good faith effort
- Operate as if it were a corp
- Not know that incorp reqs failed
5
Q
Piercing the corporate veil
A
“Necessary to prevent fraud, illegality, or acheive equity”
- Excessive domination
- Personal vs corporate gain
- illegal biz or fraud
- No corporate formalities
- Inadequate capitalization
6
Q
Amending the certificate of incorp
A
Majority of SHs
7
Q
Amending by-laws
A
- SHs via majority vote
- BOD if in articles of incorp
8
Q
SHs entitled to vote on . . .
A
- directors
- Amendments to articles of incorp
- sale of all or substantially all of assets
- Mergers and consolidations
- Dissolution
9
Q
Adversely affect a class?
A
They get to vote as a class
10
Q
Revoking a proxy vote
A
- request in writing
- turning in another proxy
- attending mtg in person
- Death/Incompetence only if written notice received before proxy vote
11
Q
Irrevocable proxy
A
- State so
- Given to someone w/ a coupled interest
12
Q
Inspection of records
A
- During normal biz hours
- 5 days written notice
- proper purpose
NY limits records to:
- MInutes of SH mtgs
- List of SHs of record
13
Q
Demand upon bd
A
Not required if:
- Futile
- self interest or otherwise harming the corp
14
Q
Removing a director
A
- For cause by SH
- self- dealing
- waste
- usurping corp opps
- W/o cause by SH
- if allowed in articles or SH approved by-law
- Directors for cause
- if allowed in SH by laws
15
Q
Fidiciary Duties
A
- DUty of care
- Duty of loyalty
- self-dealing
- usurpation
- entrenchment
16
Q
NY Interested director cleansing statute
A
- Conflict disclosed and approved (via normal process) by bd w/o counting interested Ds
- Conflict disclosed and disinterested Ds approved unanimously
- Conflict disclosed to SHs, and they approve by majority
17
Q
Saving an interested Director deal
A
- NY saving statute
- Otherwise fair and reasonable
- look to see if corp received something of comparable value
18
Q
Usupration of corp opp
A
- Tangible expectancy test
- existing interest
- expectancy
- actively seeking - Line of business test
- broader
- w/n current/expected line of business
19
Q
Director indemnification
A
- Mandatory
- successful defense
- ct ordered - Permissive -
- good faith
- no reasonable belief that conduct was unlawful - Probited -
SH derivative suit
20
Q
Procedure for merger
A
- Boards of each corp must approve
- SHs of each corp must approve
- certificate of merger delivered to NY Dept of State
21
Q
SH approval for merger/asset sale
A
- Before 2/22/1998 –> 2/3 of shares
- After 2/22/98 –> majority
22
Q
Short form merger
A
If parent owns 90% or more –> merger w/o approval of subsidiary
23
Q
When a buyer becomes liable for seller corp’s liabilities
A
Four situations:
- Expressly assumes
- when asset sale = de facto merger
- mere continuation
- designed to defraud seller’s creditors
24
Q
Dissenting SH right of appraisal
A
Three situations:
- Dissent in merger/consolidation
- Sale of all or sub all of assets
- Amendment to article where such amend materially and adversely affects SH
25
Voluntary Corporate Termination
* SH authorization
- Corp formed B4 2/22/98 --\> 2/3 SJ vote
- formed after 2/22/98 --\> majority of SH
* Occurence of event w/n articles
26
Involuntary Corporate Dissolution
* State
* SHs
* Directors
27
Involuntary corp termination by state
* formation was based on fraud
* engages in illegal or fraudulent business
* abuse of corp power
* fails to pay fees/taxes
28
SH involuntary termination of corporation
* Insufficient assets
* Beneficial action
* Deadlock
* Requires at least 50%
* Oppressive conduct
* closely-held corp
* minority SH owns at least 20%
* "substantially defeats the reasonable expectations of the minority SH
* Controlling SHs may "buy out" minority at reasonable price
29
Director involuntary termination of corp
* Insufficient assets
* Beneficial action
30
Types of stock
1. Common
2. Preferred (only if articles authorize)
31
Preferred stock liquadation preference
valid only after all creditors of corp (employee wages have priority over outside creditors)
32
SH preemptive rights
Before 2/22/98 --\> yes
After --\> No
33
Distribution of dividends
At discretion of board of directors, unless:
- abuse of discretion
- bad faith
34
NY Legal Capital Rule
Before distribution of dividends:
1. Insolvency determination (unable to pay debts)
2. Surplus/Net Profits determination
* Surplus? max distribution is that surplus
* Zero/negative? max distribution is net profits of that year or previous year
35
Close Corps
1. Not traded publicly
2. Directors = Officers usually
3. Alienation of shares restricted
4. 10 largest SHs = personally liable for all debts/wages owed to emps but not ICs
36
Futile
1. when the board is comprised of a majority of interested directors,
2. controlled by an interested director, or
3. the terms of the deal are so egregious that the Board must not have made a valid inquiry into the deal in the first place.
