Corporations

Question 1

What is a De Facto Corporation?

Answer 1

Must be relevant statute.
parties made a good faith, colorable attempt to comply with the statute (tried to form corporation)
There has been some exercise of corporate privileges (acting like corporation).

Question 2

Corporation by Estoppel?

Answer 2

Doctrine applies in contract to prevent the corporate entity and parties who have dealt with the entity as if it were a corporation from backing out of their contracts.

Only contracts.

Question 3

Standard of fiduciary duties owed to corporation

Answer 3

A director must discharge her duties in good faith and with the reasonable belief that her actions are in the best interest of the corporation.(duty of loyalty) she must also use the care that person in a like position would reasonably believe appropriate under the circumstances.(duty of care)

Question 4

Direct vs. Derivative suits?

Answer 4

Direct suit is appropriate when the wrong done amounts to a breach of duty owed to the indvidiual personally.

Derivative suit is appropriate when the injury is caused to the corporation and shareholder is trying to enforce the corporations rights.
Must have 3 requirements to file – standing to bring lawsuit, adequacy(shareholder represents the interests of the corporation), and demand(must give 90 days before filing a suit)

Question 5

What is the Business Judgement Rule and how does it work?

Answer 5

Simply – duty of care. Presumption is that in making a business decision the directors acted on an informed basis, in good faith, and in the honest belief that the action taken was in the best interest of the company.

Claiming party has duty of proof.