Corporations Flashcards
T/F
Shareholders of a corporation are liable for the debts of the corporation
False
Corporations must file their ____ with the Secretary of State
Articles of Incorporation
What 5 pieces of information must be included when a corp. files their AOI?
- Name of Corporation
- Name of Initial Registered Agent
- Name and Address of Each Incorporater
- Street and Mailing Address of Corp.
- Number of Shares Authorized to Issue
T/F
Bylaws prevail over Articles of Incorporation
False
Articles prevail
A ___ ___ corporation is formed when the S.O.S ACCEPTS a corporation’s A.O.I
de jure
What happens when proprietors of a corp. come close to forming a de jure corporation?
A de facto corporation is formed
T/F
A corporation is liable for its own debts when a de jure corporation is formed, but not when a de facto corporation is formed.
False
At either point, a corporation is liable for its own debts
What may, but not must, be included when a corp. files their AOI?
- Purpose of Corp.
- Defining, limiting and regulating powers of the corp.
- Liability of Shareholders
- Limitation of duration
Provisions limiting or eliminating the personal liability of directors will not have effect in cases of:
(4)
- acts or omissions that the director knew conflicted w/ best interest of the corp.
- unlawful distributions
- transaction where the director derived a personal benefit
- act or omission prior to the date the provision became effective
Name the 4 abbreviations a corp. can include in their name?
Corporation (Corp.)
Company (Co.)
Incorporated (Inc.)
Limited (Ltd.)
T/F:
A corp. is required to have one or more shareholder
False
When filing a corp.’s AOI, the documents can include a delayed effective date, but it may not be later than the ____ day after the date it is filed
(this is a number)
90th Day
What time are the Articles of Incorporation effective if there is a delayed effective date but no time specified?
11:59:59 pm on the delayed effective date
T/F
Bylaws are publically held information, accessible by anyone
False
Bylaws are strictly an internal document
T/F
Bylaws can be different from the AOI, but AOI prevail
False
Bylaws CANNOT be inconsistent with AOI and Articles ALWAYS prevail
What happens if a corp. does not adopt bylaws?
The corp may not be invalidated but it may leave them vulnerable to piercing the veil
Should a corporation list all their powers in the AOI? Why or why not?
No
This may limit the powers to those listed instead of the broader reach that the statute (MBCA 3.02) allows
Under a ___ ___ corporation, good faith is required and the person bringing the action must be ____ that the incorporation was defective
de facto
unaware
Under ____ ____ ___, if someone reasnoably belives that a corporation has effectively incorporated and treats it as such, they cannot be estopped from denying it
Corporation by estoppel
Which document governs the amount of shares a corporation can issue?
AOI
Issued shares are considered ___ until they are reacquired, redeemed, converted or canceled
outstanding
If there are outstanding shares, there must be one or more shares that together have ____ voting rights
unlimited
___ shares are the shares a corp. has not issued
Authorized
___ shares are the shares a corp. has issued
Issued
___ shares are shares held by the corp. itself but unowned.
Treasury
A corporation cannot vote these shares
Each share of common stock is worth ___ share
One
___ stock is designed to appeal to high value investors
Preferred
Why is preferred stock more appealing to high value investors?
Because this type of stock has preference in payments of dividend or rights to corporate
__ ___ is the lowest value for issuing stock
Par value
T/F
A corporation has the authority to issue shares for less than par value
False
T/F
A shareholder is personally liable for the acts or debts of the corp.
False,
A shareholder can only become liable for his own act or conduct or through piercing the corporate veil
If a shareholder acts ___the scope of authority, they can be personally liable for the acts or debts of a corp.
Outside
T/F
The laws in the state where the corporation was incorporated governs the internal affairs
True
A shareholder is considered to have “pierced the corporate veil” when they fail to respect the ___ or ___ of the corp.
Rules
Formalities
T/F
To be held liable under piercing the corporate veil, it must be proven that the shareholder was acting fraudulently
False
Evidence of fraud is not necessary
T/F
Directors have the power to act individually
False,
Directors only act as a group
Directors (are/are not) agents of the corporation
Are NOT
MCBA 3.01
Through the use of (directors/officers), shareholders can exert their influence and control over the management
Directors
Through the use of ___, the board can make management decisions
Officers
Officers (are/are not) agents of the corporation
ARE,
Officers can bind the corp. to acts done on its behalf
(MCBA 8.41)
Inside directors (are/are not) officers of the corporation
ARE
Inside directors can bind the corp. to acts done on its behalf
Outside directors (are/are not) officers of the corporation
ARE NOT
A ___ is the minimum number of members of a corp. that must be present at any of its meetings for the directors to act
Quorum
Unless the articles provide otherwise, a quorum consists of a _____ of the directors
Majority
T/F:
Notice is required for ALL meetings, regular or special
False,
Notice is only required for all special meetings
The ____ determines who gets to vote at an upcoming shareholder meeting
Record Date
A proxy votes on the behalf of someone else as an ____
Agent
In the absence of __, __, or ___, courts (will/will not) disturb good faith business judgments of corporations w/o evidence of a breach of fiduciary duty
fraud, illegality, or self dealing
will not
Who elects the board of directors?
Shareholders
Generally, shareholders (do/ do not) owe fiduciary duties to the corporation or to each other
do not
Generally, directors (do/do not) owe the duty of care and loyalty to the corporation
Do
Generally, officers (do/do not) owe the duty of care and loyalty to the corporation
do
T/F
Shareholders are an agent and fiduciary of the corporation
False
T/F
Directors are an agent and fiduciary of the corporation
True
T/F
Officers are an agent and fiduciary of the corporation
True `
The duty of ___ is the duty to act with the care that a person in a like position would reasonably believe appropriate under similar circumstances
Care
The duty of ___ is the duty to act in a manner that the director reasonably believes is in the best interest of the corporation
Loyalty
must not place own interests ahead of the corporation
What are the 2 common defenses to the allegation of self-dealing?
1) the decision to self-deal was properly ratified
2) the decision to self-deal was fair to the corporation
Director voting agreements are more enforceable in ____ because the directors usually have less freedom to sell their shares and leave
close corporation
A corporation may enjoy de facto corporation status if they ____
1.
2.
3.
- attempted to incorporate in good faith
- is otherwise eligible to incorporate
- subsequently acted like a corporation in good faith.
A corporation (may / may not) be liable for the actions of its agents if the agents are acting within the scope of their employement
may
The only time a shareholder will be liable is if a plaintiff is able to __ __ __ __
pierce the corporate veil.
