Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

UBE > Corporations > Flashcards

Corporations Flashcards

You may prefer our related Brainscape-certified flashcards:
MBE flashcards
1
Q

Corporation Characteristics

A
  1. Centralized Mngmt – BOD delegates day to day mngmt to officicers
  2. Limited –only corp is subject to L
  3. Transferability of ownership – SHs can freely transfer their ownership interests (ie shares), unless prohibited by AIC or bylaws
  4. Continuity -changes in ownership do not affect the corp’s existence
  5. Personhood –corps considered ppl re: constitutional protections
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

Articles of Incorporation

A

Formation: when AIC filed with SOS

AIC must include:
1. Name – corp name (LLP, co, inc)
2. Shares – max # of authorized shares
3. Incorporator – name & address
4. Registered Agent – name & address

*some states require statement of purpose; most use boilerplate language

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

Bylaws

A

written rules for managing the corp–– provides for ordinary business conduct

EX:
- election of BOD
- meeting times

If bylaws conflict with AIC –> AIC trumps

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

Promoter

A

acts on behalf of a corp before incorporation to get capital commitments; usually by forming Ks with parties interested in becoming SHs

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

Promoter L

A

personally L for Ks entered into on behalf of the corp –> remains L after formation

Exception: Novation & indemnification

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

Novation

A

agreement btw parties releasing promoter & substituting corp

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

Indemnification

A

promoter may be indemnified by the corp if he is held L on the K after formation

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

Pre-Incorporation: Corp’s L

A

GR: no L based on pre-incorp K entered into by promoters

Exception: adoption of the K

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

Subscription Agreement

A

Agreement where one agrees to buy specified # of shares from a corp at a given notice

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

Ultra Vires Acts

A

Consequence for when a corp acts outside of its stated purpose (as stated in AIC)

Three Possible Consequences:
1. SH Suit – to enjoin the UVA
2. Corp Suit –sue for damages
3. State Action – action to dissolve corp

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

De Facto Corp

A

Defective corp that may still be treated as properly formed corp

  1. Good Faith Effort ––Owner must make a good-faith effort to comply with the incorporation requirements;
  2. Operate w/o Knowledge––owner operates the business as a corp w/o knowing that these reqs have not been met.

Result: owner, as de facto SH, is shielded from personal L for obligations incurred in the purported corporation’s name.

NOTE: RMBCA has abolished this doctrine

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

Corp by Estoppel

A

Person who deals with an entity as if it were a corp is estopped/barred from denying its existence and is thereby prevented from seeking the personal L of the business owner.

Limited to L agreements.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

Piercing the Corp Veil

A

GR: SHs, Directors, Officers not L for corp obligations

PCV: once pierced, all persons composing the corp may be personally L––but usually just those in active mngmt

Why Pierce?
1. ignoring corp formalities
2. Undercapitalization
3. Fraud or illegality

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

PCV: Ignoring Corp Formalities

A

Where a SH dominates the corp to the extent that the corp is not being treated as a separate entity

corp is used as an “alter ego” or a “mere instrumentality” to the SH

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

PCV: Undercapitaliztion

A

Corp was undercapitalized/underfunded at time of incorporation

TIP: look for insolvency right after formation–> prime indicator of this factor!

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

PCV: Fraud or Illegality

A
  1. Corp may be disregarded if there is fraud;
  2. to prevent fraud or other illegality; or
  3. to prevent SH from using corp to avoid existing personal L
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

Debt Securities

A

aka BONDS

corp borrows funds from an outside creditor and promises to repay creditor

Holders of bonds have no ownership interest

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

Equity Securities

A

aka STOCKS

instrument that represents investment in the corp––holders become part owners of the corp

Types of stocks:
1. Authorized
2. Issued
3. Outstanding
4. Reacquired/Buy back

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

Authorized Shares

A

max # of shares a corp may issue

this is # authorized in AIC

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q

Outstanding Stock

A

Shares issued & in possession by SH

Outstanding shares is what is voted on!!

Outstanding = (issued - treasury)

Most important one

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
21
Q

Reacquired Shares

A

those that the corp buys back

aka treasury shares

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
22
Q

Issued Shares

A

Number of shares issued from the authorized pool that the directors have actually sold

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
23
Q

Classes of Shares

A

corps can have diff classes of stock shares; each class can have diff rights (voting, economic)

AIC must authorize:
1. # of shares of each class
2. Name/distinguishing designation of each class
3. Rights/preferences/ limitations per class

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
24
Q

Distribution of Rights

A

corp can distribute assets via:
- dividends
- redemption of shares
- liquidating distributions upon dissolution

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
25
Q

Who can demand distribution of assets?

A

ONLY BOD

SH have no right to demand this

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
26
Q

Consideration for Shares

A

shares can be issued by the corp in exchange for any property or benefit to the corp

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
27
Q

Preemptive Right

A

Right to acquire stock to maintain the % of the ownership any time new shares are issued

GR: no preemptive right for SHs, unless in AIC or negotiated

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
28
Q

SH’s Power

A

SHs can exert control over the corp via power to:
- elect/remove directors
- amend bylaws
- approve fundamental changes (merges, sale of assets, dissolution)

29
Q

SH Rights to Records

A

Right to inspect books/records for any purpose upon written notice

Proper Purpose – reasonably related to interest as SH

Notice – 5 days written notice

30
Q

What can a SH always inspect w/o proper notice

A

SH can always inspect these w/o proper notice:
1. AIC
2. Bylaws
3. Annual reports
4. Meeting minutes
5. BOD resultions re share classification
5. Corp comm to SH

31
Q

SH Meeting

A

2 types: annual & spcial

Annual –> corp must hold annual meetings for election of directors & other special matters

Special Meeting –> called to conduct business that requires SH approval

***MUST HAVE NOTICE

32
Q

SH – Notice of Special Meeting

A

Notice REQ:
1. Must be given between < 10, but 60 >, days before meeting date
2. time
3. date
4. location
5. Purpose of meeting

SH may waive notice either in writing or by attending the meeting.

33
Q

SH Voting Requirements

A

Unless AIC says otherwise, each outstanding share is entitled to 1 vote

REQ:
1. Quorum must be present (maj of outstanding shares_
2. Vote effective if:
- votes in favor
- exceed
- votes against

34
Q

SH Voting – Proxies

A

SH can use proxies to vote

Writing needed

35
Q

Types of SH Suits

A
  1. Direct Suit
  2. Derivative Suit
36
Q

Direct Suit

A

SH suing in the SH’s own name for damages –> damages go directly to SH

37
Q

SH Approval – Quorum

A

For vote to be effective

  1. Quorum of corp’s shares (NOT SHs)
  2. Represented at meeting (in person or proxy)
38
Q

Quorum Def

A

majority of the corp’s outstanding shares represented at the start of the meeting

39
Q

Derivative Suit

A

SH suing on behalf of the corp–alleged harm harms the corp as a whole

  1. Standing –– must have been a SH at time of the harm
  2. Recovery –– goes to corp; but SH can recover atty fees
  3. Written Demand Requried
    - SH must make a written demand on the corp –> wait 90 days before filing suit; unless:
    (a) corp rejected demand; or
    (b) irreparable injury to corp will happen if wait 90 days
40
Q

When do derivative suits often arise

A

on essays when wrong committed by an officer or director –> asks to ID whether a breach has occurred & what SH remedies available

41
Q

BOD Characteristics

A

Responsible for corp affairs & mngmt

of Ds ––at least one required; bylaws or AIC can dictate a #

Election –– SH elect Ds at annual meeting

Removal ––can remove w/ or w/o cause by SHs, unless AIC provide otherwise
—–> EXCEPTION: Staggerd Board

42
Q

BOD Meeting

A

Types: regular & special

Notice –– no notice needed for regular meetings; 2-day notice needed for special meeting

Quorum –– majority of Ds, unless AIC says otherwise

Action w/o Meeting –– can happen only if all Ds give written consent describing action taken

43
Q

Staggered Board

A

Class of Ds elected at diff times

44
Q

BOD – Delegating Authority

A

BOD delegates mgmt to officers & executives

Committes –– BOD can create committees; have <1 one D w/ power to oversee corp affairs

Committee cannot make major corp decision that needs all BOD consent

BOD entitled to rely on expertise of the committee, or other officers/experts/employees

45
Q

BOD – Duties

A

Duty of Care

Duty of Loyalty

46
Q

BOD – Duty of Care

A

Fiduciary duty

Standard ––D must act w/ care that a person in a like position would reasonable believe appropriate under similar circumstances

Courts apply the Business Judgment Rule to determine if duty of care breached

47
Q

BJR

A

Business Judgment Rule –> Officers/ BOD

Ds protected from legal L if decision was made:
1. in good faith
2. w/ care of RPP in like position would
3. in manner director/officer reasonably believed to be in the best interest of the corp

If breached duty –> can be personally L for damages
–Note: AIC can limit personal L

48
Q

BOD – Duty of Loyalty

A

GR: cannot receive a benefit to the detriment of the corp w/o effective disclosure & ratification

Includes:
- self dealing
- usurping or stealing corp opp

49
Q

Duty of Loyalty – insulation from L

A

A self-interested transaction may be upheld if it is (1) disclosed and (2) ratified by:

(a) maj of interested directors; or
(b) maj of disinterested SH

50
Q

Duty of Loyalty – COI

A

when an officer/director has a personal interest in a transaction and knows that a he or a family member is:

  1. party to transaction
  2. has beneficial interest or closely linked to transaction –> can influence how direcotr/officer votes
  3. affiliated w/ another entity to the transactions
51
Q

Merger

A

2+ corps blend into a new corp; or when a corp absorbs other corps

REQ FOR APPROVAL:
1. BOD vote ––either maj, or whatever AIC stips
2. SH vote ––majoirty

52
Q

Short Form Merger

A

parent corp owns < 90% stock of subsidiary –> subsidiary can be merged into parent corp w/o approval of SH

53
Q

Mergers – Dissenter’s rights

A

dissenting SH can challenge merger or demand payment for their shares at FMV

Mutual Notice REQUIRED –before vote is taken:
1. corp must give notice to SH –>
2. SH must give notice of intent to demand payment

54
Q

Dissolution

A

Termination of corp’s existence

Effect: corp continues to exist while it winds up and liquidates its affairs ––but no other business allowed to continue

Types:
1. Voluntary Dissolution
2. Administrative Dissolution
3. Judicial Dissolution

55
Q

Voluntary Dissolution

A

considered a fundamental change

REQ:
1. BOD approval
2. SH approval

56
Q

Administrative Dissolution

A

action brought by state to dissolve corp

usually due to failure to adhere to statutory requirements or formalities

57
Q

Judicial Dissolution

A

Action by AG or SHs

Attorny General – can act to dissolve corp on the ground that it abused its authority, committed fraud

SH –– can seek judicial dissolution where:
1. BOD deadlocks or SH threaten irreparable harm
2. corp abandoned business and failed to dissolve
3. corp assets are wasted for non corp use

58
Q

Disposition of Property

A

where corp sells, leases, otherwise disposes of all or substantially all property outside the reg court of business

Fundamental change –> BOD & SH approval needed

59
Q

LLC

A

Taxed like a PS
Limited L like a corp
Owners considered memebrs/managers

60
Q

LLC Formation

A

certification of formation filed with state

REQ:
1. name of LLC
2. address of registered office
3. Name/address of registered agent

61
Q

LLC Operating K

A

similar to bylaws; govern doc

62
Q

LLC Management

A

presumption all members manage,

but can also have several managers and members

63
Q

LLC voting

A

members/managers may have equal voting rights; or

vote in proportion to ownership depending on operating K

64
Q

LLC Distribuiton Rights

A

like a corp

Operating K dictates how LLC will be managed, and how profits will be distributed

65
Q

LLC Duties

A

Depends if member or manager managed

member mnged –> all members owe DoC & DoL

Manager mnged –> only managers owe DoC & DoL

66
Q

LLC Good Faith & Fair Dealing

A

all members and managers have an obligation of good faith & fair dealing

67
Q

Good faith fair dealing def

A

Good faith and fair dealing are legal principles that govern contractual relationships and require the parties to act honestly, fairly, and in a manner that upholds the reasonable expectations of the parties.

68
Q

Record Date

A

Holder of the outstanding shares as of the record date (as set by BOD) is entitled to vote

UBE (14 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions