Corporations

Question 1

Shareholder Liability

Answer 1

As a general rule, a corporation will be looked upon as a separate legal entity, distinct from its shareholders. SH are generally not personally liable for the debts and obligations of the corporation and the creditors of the corp are limited in recovery of any claim to the assets of the corp

Question 2

Piercing the Corporate Veil

Answer 2

Even if a corporation is properly formed, a court may disregard its separate entity and hold SH or affiliated corps liable on corporate obligations, known as piercing the corp veil. To PTCV, a ct will look at factors like:
1. the extent to which the corp is undercapitalized;
2. extend to which the corp formalities have not been honored or observed;
3. extent to which corp and personal funds have been commingled, and
4, extent to which the corp entity is no more than the alter ago of its sh (cannot separate b from p)

Question 3

Formation of a Corp

Answer 3

A corp is formed when art of inc are filed with SOS.\
The AOI must include
1. corp name
2. shares
3. incorporators info (name and addresses)
4. registered office & agent

bylaws are also neded

Question 4

De Jure and De Facto Corp

Answer 4

A corp formed in accordance w applicable law is a de jure corp.
A defacto corp exists were a corp’s formation fails to adhere to proper formalities but it carries itself as a corp (law it can be under exists, made good faith effort to comply w state’s inc., and entity acted like a corp.)

Question 5

Corp by Estoppel

Answer 5

Persons who treat an entity as a corp are estopped from denying the entity is a corp, particularly in order to avoid liability

Question 6

Liability of Promoters

Answer 6

A promoter is personally liable for Ks he enters into on behalf of the corp and remains liable after formation. But a promoter is not personally liable where

a. novation – agreement between parties releasing promoter and substituting the corp OR
b. indemnification – promoter may be indemnified by the corp if he is held liable on the K after formation

Question 7

Shareholder Authority to Amend Bylaws

Answer 7

Under the MBCA sh may amend a corp’s bylaws. Bylaws may include any provisions for regulation and management of corporation that are not inconsistent with law or arts of inc. Bylaws may contain a requirement that the corporation include in its proxy materials one or more individuals nominated by a sh,

Question 8

Preemption of bylaws

Answer 8

Both the BOD and SH have the power to amend bylaws. Power belongs exclusively to SH if 1) corps arts reserve that power exclusively to SH or 2) SH in amending, repealing, or adopting a bylaw expressly provide that BOD may not amend, repeal, or reinstate that bylaw.

SH-approved bylaw provisions can amend or repeal existing bylaw provisions

Question 9

Direct and derivative suits by SH

Answer 9

A direct suit is one in which a SH sues on his own behalf to redress an injury to his interest as a SH. A derivative suit is one in which a SH sues on behalf of the corp to redress a wrong to the corp when it fails to enforce its right, usually a breach of fd. A SH bringing a derivative suit must first attempt to persuade the BOD to enforce the corp’s rt by making a written demand upon the board. Whether a claim is direct or derivative often turns on who is injured and who will receive the relief sought by the p.