Corporations Flashcards
Corporations - Defined
Legal entity distinct from its owners. Requires filing certain docs w/ state, & running a corp gneerally requires more formaliity than required for most biz orgs
Corps generally have the following characteristics:
- Limited liability for owners, directors, and officers,
- Centralized mgmt
- Free transferability of ownership
- Continuity of life
Formation
Created by statute - complying w/ LBCA- One person can form a corporation
(1) Articles of Incorporation must include:
- Name of the corporation
- Address of initial registered office
- Address of initial principal office if different
- Name and address of initial registered agent
- Number of shares corporation is authorized to issue
- Name and address of each incorporator
(2) Affidavit of Acceptance
Name
Must include it’s a corporation
Can’t signal something that it’s not
Must be unique
Promoter
Promoter personally liable to 3P: when 3P knew corp not yet in existence
Corp liable to 3P: when adopts/ratifies. Promoter remains personally liable unless 3P discharges promoter
Third Parties
Promotor = person who actually does things before the corporation exists for the corporation (ex: signing contracts
De Facto Corporation Doctrine = if you make GF effort to incorporate and only exercise corporate authority, only the corporation will be responsible
Corporation by Estoppel Doctrine = when 3rd party relies only on corporation’s name and assets to enter into contract, only the corporation will be liable
Reporting
Annual Report
- Corp terminated if fails to file for 90 days
- Secretary give 30 day notice then file cert. of termination
- Corp can reinstate within 5 years of termin.
- Retroactive to term.
- Deliver articles of reinstatement & annual report to sec.
Agreement
Voting Trust (SH)
- Trustee exercises the rights of the SH (transfer of ownership_
- Trustee receives dividends & distrib to beenf in accord w/ agreement
- Formed before 2015 - no max term
- Before 2015 - max term 15 yrs - can extend for add 10 yrs
Unanimous Governance Agreement (SH)
- Must: state that it is an unan gov agree + in writing + file
- Eliminate BOD or restrict BOD powers
- Govern auth of distribution
- Establish directors/officers, terms/condition of office, m anner of selection/removal
- Transfer to SH the authority to exercise powers or manage business & affairs of corp
Voting
Shareholders: majority vote (by share)
- Vote by proxy (default: revocable)
- Revoke by: writing; showing up to meeting to vote; or appointing new proxy
- Electing Directors
- Plurality of vote (straight voting)
- But, can be cumulative voting
- Express in articles
-
Quorum: majority of shares (can alter but not less than 25% shares)
- Once share present at meeting, deemed present for quorum even if leaves
BOD: majority vote (by head)
- CANNOT vote by proxy
- Unless stated in articles & proxy must be diff. director + only for 1 meeting
- Quorum: majority of BOD (can alter but not less than 1/3 BOD)
Managment
Shareholders
- No direct control
- Elect/remove directors, amend bylaws, amend articles, major structure changes (alienate all/ sub all assets), merger, dissolution
Directors
- General responsibility for management & affairs
- Adopt bylaws, amend bylaws, elect officers, declare distributions
Officers
- Day-to-day management, mandatary, prepare minutes, maintain records
- MUST have Secy
- 1 yr term; must be in articles to be longer (3 yr max)
Meetings
Annual Shareholder Meeting
- Must have annually
- Called by BOD – if not within 18 months, any SH may demand secretary to call
- SH waives defect in notice if:
- Signed writing before/after meeting
- Must object to notice at beginning of meeting, or waived
Financial Structure
Equity securities (shares)
- Authorized shares stated in articles
- Can only sell those authorized
- Can have different classes of shares (must be in articles)
- Shares must be represented by certificate (see exceptions)
Must have share certificates
- Name of corp & organized under LA law
- Name of person issued to
- # , class, series of shares
Contribution
Anything of value
(cash, services, promissory note)
Mandatary
Duly authorized officer/employee → mandatary
NOT shareholder or director
Rights of Shareholder
Shareholder
- Inspect Books
- 5% voting power + owned for 6+ months → give 5 day written notice + purpose
- Articles, bylaws, board resolutions regarding classification of shares, past 3 year minutes of SH meetings, past 3 yearcorp communication to SH, names/addy of directors and officers, most recent annual report, unanimous governance agreement
Preemptive Right
- Purchase new shares to maintain proportion
- Must opt into in articles
Derivative Action
Derivative Suit
Can be brought when the corp: (1) declares unlawful dividends when insolvent, or (2) when breaching fiduciary duties:
- Any SH can bring suit on behalf of the corp\against the D/O
- Must be a shareholder when the breach occurred
Universal Demand Requirement—must have written demand to the Board that the Board bring the claim on behalf of the corp
- If Board doesn’t bring claim within 90 days, SH can bring the claim
- Independent directors can dismiss derivative suit
- Settlement of derivative suit requires court approval
