Corporations Flashcards
De facto Corporation
- Statute under which entity could have been validly incorporated
- Colorable compliance with the statute and good faith attempt to comply
- Conduct of business in corporate name and exercise of corporate privileges
Corporation by estoppel
People who have dealt with the corp as if it were a corp estopped from denying corporations existence
Piercing corporate veil
- Ignoring corporate formalities( alter ego/ mere instrumentality)and injustice has occurred
- Inadequate capitalization at time of formation
- Necessary to prevent fraud
Capital structure
- Debt securities- borrowed funds promises to repay
- Equity securities- shares
Give ownership interest
Share types
- Authorized shares
- Issued and outstanding shares
- Authorized but unissued
Classification
- Common shares
- Different classes of shares
Promoters
Duties
1. Fair disclosure and good faith
Pre incorporation agreements
- Promoter jointly and severally liable for ore incorporation obligations
- Personally liable on contracts
- Released only by novation
- Right to reimbursement if corp benefits
- Corp only bound by adoption
Shareholder control over management
- Directors manage
2. Shareholders have power to elect board
Meetings
- Annual shareholder meeting at end of fiscal year or within 15 mos of last meeting
- Special meetings-
A. Called by directors or people with 1/10 shares - Must have notice of meetings between 10-60days
Notice must have tine, place, date of meeting and purpose for special meetings
Shareholders of record can vote
- As of record date
2. Default record date is date of notice sent out
Proxies
- 11 months unless otherwise
2. Revocable unless consideration
Quorum
Majority of outstanding shares
Cant be broken
Cumulative voting
Each shareholder gets as many votes per share as are directors being elected
Shareholder suits
1. Direct A. Who suffered immediate direct damage B. To whom did defendants duty run? C. Recovery is for shareholder 2. Derivative A. Asserting corps rights B. Recovery to corp C. Standing- ownership at time of wrong D. Dismissed if not in corps best interest
Duty if care/ business judgment rule
- Good faith
- With care of ordinarily prudent person in like position
- In manner reasonably believe to be in best interest
Burden on challenger
Duty of loyalty
No conflicting transactions
- Party to transaction
- Has a beneficial financial interest
- Is a director/ agent of another business
Ok interested transaction
- Approved by majority of directors without interest and all material facts disclosed
- Approved by majority of shareholders without conflicting interest
- Judged fair to corp
Dissolution
- By incorporators or initial directors -> articles of dissolution to state
- Dissolution by corporate act
- Effect
Winding up
May revoke dissolution - Administrative dissolution
- Judicial dissolution
Improper meeting notice
Can nullify meeting action
Director meetingd
- In person or by tech( no proxies)
- No notice needed for regular meetings
- Special meetings require two days notice
- Quorum of directors must be present when vote happens
- Majority of director affirmative vote required
Business judgment rule
- Good faith
- Ordinary care
- Believed to be best interest of corp
Officers
- appointed/ removed by board of directors
2. Has authority given by by laws or board
Fundamental corp changes
- Board resolution
- Notice to shareholders
- Shareholder approval
- Articles of change filed with state
Dissenters appraisal remedy
- Notice of demand for appraisal
- Vote against change
- Demand payment after change approved
Purchase shares at fair price
