Corporations Flashcards
Owners of a corp
Shareholders
Group in charge of mgmt?
Board of directors
Agents of corp to carry out policy?
Officers
Limited liability for owners, directors, officers
Generally, only corp itself is liable for corp obligations! Owners risk their investment in purchasing shares
What is the RMBCA?
Revised Model Business Corporation Act
Ownership interests are freely transferable unless provided otherwise
C corp
Taxed as entity distinct from shareholders; double taxation :( taxed at corp level then taxed as income
S corp
Taxed like p/ship; Restricted model! 1) stock held by no more than 100 ppl 2) SH must generally be individuals 3) only 1 class of stock
De jure corporation
Corp formed in accordance with law
De facto corp
Corp laws have not been followed but may be recognized through estoppel
De jure corp creation
Person, paper, act!
De jure person
Person: one or more persons known and incorporators - execute/deliver Arts of Incorp. to sec of state. May be person or entity. Do not have to be state citz
De jure paper
Articles of incorporation:
- name of corp
- name/addy of incorporator
- registered agent and addy of registered office
- stock info (stock class, voting rights, limitations of stock, etc)
- biz purpose (presumed lawful)
Ultra vires act
Outside of biz purpose; under the MBCA, generally enforceable. UV nature of act can only be raised in 3 scenarios:
- Shareholder may sue to enjoin proposed UV act
- Corp may sue officer/director for damages for approving UV act;
- State may bring action to dissolve corp for committing UV act
De jure act
Incorporators have notarized articles delivered to sec of state/pay fees
Filing is conclusive proof of corp existence
Organizational mtg
If initial directors names, board holds org mtg.
If not named, incorporators hold mtg.
Purpose: complete org of corp - adopt bylaws and appoint officers
Bylaws
Internal doc- org’s operating manual
If conflict b/w articles and bylaws, articles control.
Amendment/repeal? Board or SH
Internal affairs doctrine
IA governed by law of state of incorporation
Entity status
Corp has entity status upon formation - legal person!
Benefit Corp/ B corp
Formed for profit and also to pursue some benefit to broader social policy cause
- must be noted in articles
- files annual benefit report assessing how it’s pursued social mission
- decision makers must consider SH and broader community
Limited liability
Generally SH liable only to pay for their stock, not corp debts.
One exception!
Defectively incorporation
If incorporators thought they formed corp but didn’t, they’d be personally liable for biz debts (p/ship is formed instead).
Two doctrines may save them - 1) de facto corp and 2) corporation by estoppel
ANYONE ASSERTING EITHER DOCTRINE ^ MUST BE UNAWARE OF FAILURE TO FORM A DE JURE CORP.
De facto corp characteristics and requirements
1) Must be a relevant incorporation statute (auto met)
2) parties made a good faith attempt to comply with the statute, and
3) there has been some exercise of corporate privileges (parties thought there was a corp)
IF 3/3 satisfied, biz treated as a corporation for all actions except vs state.
Limitation: only defense to person who was unaware no valid incorporation. People who know there was no properly formed corp = jointly and severally liable if they are active members of the corp.
NB: abolished in most states.
Corp by estoppel
Persons who have dealt with the entity as if it were a corp will be estopped from denying the corp’s existence.
Prevents K recession/corp from avoiding liability.
*Applies only in K cases; NOT to tort cases.
NB: abolished in most states.