Corporations

Question 1

Power to issue dividends

Answer 1

Board of directors

Question 2

Valid board vote

Answer 2

To be valid, board needs a quorum of directors present (simple majority of all directors), and assent of the majority of the directors that are present

Question 3

Quorum

Answer 3

Majority of all directors in office, unless higher or lower number is required by articles of incorporation or bylaws

Question 4

Right to Inspection

Answer 4

Shareholder has a right to inspect and copy corporate records upon 5 days written notice. Must demonstrate a proper purpose before inspecting

Question 5

Proper purpose

Answer 5

One that relates to the shareholders interest in the corporation

Question 6

Shareholder Direct Action

Answer 6

Direct action to enforce shareholder’s rights, the shareholder sued the corporation for breach of fiduciary duty. Any recovery goes to the shareholder

Question 7

Compelling Dividend rights

Answer 7

To prevail in a suit to compel DR
Must prove existence of
1) funds available at time of dividend payment
2) bad faith on part of directors in their refusal to pay

Question 8

Shareholder derivative suit

Answer 8

Suit on behalf of corporation for harm suffered by corporation, recovery goes to corporation.

Standing requires P was shareholder:
1) At time of filing action and
2) When the act occurred that caused the harm.

Must first make written demand to BOD 90 days before filing suit

Question 9

Duty of Care

Answer 9

Directors have duty to act with care of ordinary prudent person in a like position and similar circumstances and make decisions in good faith

Question 10

Business judgment rule

Answer 10

Rebuttable presumption that insulates directors from liability for decisions made in good faith and best interests of corporation

Question 11

Safe-harbor rules

Answer 11

Director engaging in self-dealing avoids breaching duty of loyalty if

1) provided disclosure of all material facts and the transaction was approved by a majority vote of disinterested directors or disinterested shareholders. OR
2) director can show transaction was substantially and procedurally fair to corporation

Question 12

De Jure Corporation

Answer 12

Form in accordance with law. To be valid, articles of incorporation must be filed with appropriate state office. Comes into existence upon filing, unless there is a future start date specified

Question 13

Promoter liability

Answer 13

Personally liable for the contracts it knowingly enters regardless of if it was for the benefit of the corp

Question 14

Novation

Answer 14

Releases party from liability (promoter). Signed by all 3 parties

Question 15

Express adoption

Answer 15

Corporation may adopt contract expressly or impliedly. Either by expressly assuming liability or impliedly by accepting benefits of the transaction

Question 16

Corporation by Estoppel

Answer 16

One dealing with a business as a corporation may be estopped from denying its corporate status. (Signed with corp name not personal name, should be estopped from suing person instead of corp)

Question 17

Corporate liability for pre-incorporation agreements

Answer 17

Not liable unless the contract is expressly or impliedly adopted by the corporation once the corporation is validly formed

Question 18

Piercing corporate veil

Answer 18

Totality if circumstances to determine if veil should be pierced
1. Alter ego
2. Inadequate capitalization
3. Fraud

Question 19

Inadequate Capitalization at time of formation

Answer 19

If corporation didn’t have enough unencumbered capital to reasonably cover prospective liabilities, the court may pierce the corporate veil

Question 20

Alter ego

Answer 20

Corporation lacks separate identity from an individual or shareholder (are they having meetings and acting as a corporation)

Question 21

Partner liability

Answer 21

Partners are jointly and severally liable for the partnerships contracts that are entered into within the scope of the partnership business

Question 22

Misrepresentation

Answer 22

Requires a false representation, knowledge, intent to induce, causation, justifiable reliance, and damages

Fucker knew I’d consent JD