Corporations Flashcards
Business Judgment Rule (“BJR”)
The BJR is a presumption that a director’s decision may not be challenged if the director acted in good faith, with the care that an ordinarily prudent person would exercise in a life position, and in a manner the director reasonably believed to be in the best interest of the corporation.
BJR will not protect a director who has a personal interest in the transaction.
What is an exculpatory provision?
A corporation’s articles of incorporation may limit or eliminate directors’ personal liability for money damages to the shareholders or corporation for actions taken, EXCEPT to the extent that the director received a benefit to which he was not entitled, intentionally inflicted harm on the corporation or its shareholders, approved unlawful distributions, or intentionally committed a crime.
What determines the vote requirements for approval of a proposal at an annual shareholders’ meeting?
The articles of incorporation or the corporation’s by-laws.
What happens if the articles of incorporation and the by-laws conflict?
The articles of incorporation control.
Who can vote a shareholder’s meeting?
A shareholder of record may show up personally and vote in person.
They may also give a written and signed proxy giving another person the right to vote the shares.
What is a vote by proxy?
Allows a shareholder to vote without physically attending the shareholder’s meeting by authorizing another person to vote her shares on her behalf.
A valid proxy must exist in the form or a verifiable electronic transmission or a signed written appointment form.
Are proxies revocable?
Proxies are generally revocable unless they say that they are irrevocable and are coupled with an interest (situation in which the proxy holder essentially pays for the right to be a proxy).
How can proxies be revoked?
If revocable, proxies can be revoked by a subsequent instrument or by the shareholder of record showing up tp vote in person.
What types of share may be voted during a shareholders’ meeting?
Only outstanding shares (i.e., treasury stock cannot be voted).
What is treasury stock?
Shares that were issued and were outstanding but the corporation repurchased them – thus no longer outstanding. These cannot be counted in a shareholder vote.
