Corporations Flashcards
De Facto Corporation
(1) relevant incorporation statute
(2) the parties made a good faith, colorable attempt to comply with the statute and
(3) there has been some exercise of corporate privileges
Corporation by Estoppel
Persons who have dealt with the entity as if it were a corporation will be estopped from denying the corporation’s existence - applies in contract cases only
Promotor
Person acting on behalf of a corporation not yet formed
Promotor liability
Promotor is personally liable for contracts entered on behalf of a corporation knowing it is not in existence. Continues after the corp. is formed and will only be released with express or implied novation.
Corporation liability
Not bound unless it expressly or impliedly adopts
expressly = the board takes an action adopting the contract
implied = the corporation accepts a benefit of the contract
Subscription
Written offer to buy stock
Removal of directors
Can be removed by shareholders with or without cause (unless staggered)
Board meeting notice
For regular meetings, notice is not required and for special meetings, at least 2 days required
Board meeting quorum
Majority of all directors
Board meeting approval
Majority of those present
Director and Officer Fiduciary Duty Standard
“A director must discharge her duties in good faith and with the reasonable belief that her actions are in the best interest of the corporation. She must also use the care that a person in like position would reasonably believe appropriate under the circumstances.”
BJR
A presumption that when the BOD acted, it did appropriate homework, meaning it acted with good faith, was informed, and had a rational basis.
A director is entitled to rely on information, opinions, reports, or statements by corporate officers or employees, legal counsel or other professionals, or a committee of the BOD.
Upholding conflicting interest transactions
Will not be set aside if:
(1) it was approved by a majority (at least 2) of the disinterested directors and all material facts were disclosed OR
(2) it was approved by a majority of votes entitled to be cast by disinterested shareholders and all material facts were disclosed OR
(3) it was fair to the corporation.
Category 1 - No Indemnification
A corp. cannot indemnify a director who is held liable to the corp. or held to have received an improper benefit
Category 2 - Mandatory Indemnification
A corp. must indemnify a director or officer who was successful in defending a proceeding on the merits or otherwise for attorneys fees, expenses, etc.
Category 3 - Permissive Indemnification
A corp. may indemnify a director for reasonable litigation expenses incurred in unsuccessfully defending a suit brought against the director if the director (1) acted in good faith and (2) believed that her conduct was in the best interests of the corp.
Special meetings of shareholders can be called by
(1) the BOD, (2) the president, (3) the holders of at least 10 percent of the outstanding shares or (4) anyone else authorized to do so
Shareholders meeting notice
Must be no fewer than 10 days and no more than 60 days and must be written
Shareholders quorum
Majority of the outstanding shares entitled to vote (cannot be broken)
Shareholders approval
Votes cast in favor exceed the votes cast against the matter
To elect a director - plurality
approve fundamental change - majority of the shares entitled to vote
remove a director - majority of the shares entitled to vote
other matters - majority of the shares that actually vote
Fundamental corporate change approval
- BOD adopting a resolution
- BOD submits the resolution to the shareholders with written notice and
- shareholder approval (majority of the shares entitled to vote)
Short Form Merger
A parent corporation owning at least 90% of the outstanding shares of each class of a subsidiary may merge without the approval of the shareholders or directors of the subsidiary
