Corporations Flashcards
What is the business judgment rule?
The business judgment rule is a presumption that a director’s decision may not be challenged if the director (i) acted in good faith, (ii) with the care that an ordinarily prudent person would exercise in a like position, and (iii) in a manner the director reasonably believed to be in the best interest of the corporation.
When is a director with personal interest in a transaction protected from personal liability?
A transaction cannot be set aside merely because a director had a personal interest in the transaction if (i) the director disclosed the material facts of the transaction to disinterested members of the board [or the shareholders], who approved the transaction, OR (ii) the transaction was fair to the corporation.
When can a corporation’s articles of incorporation limit or eliminate personal liability for money damages to the shareholders or corporation for actions taken (exculpatory provision) AND when can personal liability not be eliminated?
A corporation’s articles of incorporation may limit or eliminate directors’ personal liability for money damages to the shareholders or corporation for actions taken. Liability cannot be eliminated to the extent that the director (i) received a benefit to which he was not entitled, (ii) intentionally inflicted harm on the corporation or its shareholders, (iii) approved unlawful distributions, or (iv) intentionally committed a crime.
Shareholder Voting: What is required for a valid shareholder vote?
Notice (annual or special meeting), Quorum present (majority of the outstanding voting shares), Approval (if quorum present, action approved if votes cast in favor exceed votes cast against)
Shareholder Voting: How can votes required at a shareholder meeting be set?
The vote required at a meeting can be set in the articles of incorporation or bylaws. When the articles and bylaws conflict, the articles control.
Shareholder Voting: Who may vote at a shareholder meeting?
Only shareholders of record on the record date may vote at a shareholder’s meeting. Shareholders may give another a written and signed proxy giving the other the right to vote the shares (written proxies valid for 11 months and generally revocable by express revocation or attendance).
Shareholder Voting: When are shareholder proxies revocable?
Proxies generally are revocable unless they say that they are irrevocable and are coupled with an interest. Proxies are coupled with an interest if the proxy holder essentially pays for the right to be a proxy, such as where the proxy holder has purchased the underlying shares from the owner of record. Proxies may be revoked by a subsequent instrument or by the shareholder or record showing up to vote in person.
