Corporations

Question 1

De Facto Corporation

Answer 1

(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

Question 2

Corporation by Estoppel

Answer 2

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

Question 3

Promotor

Answer 3

Person acting on behalf of a corporation not yet formed

Question 4

Promotor liability

Answer 4

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.

Question 5

Corporation liability

Answer 5

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

Question 6

Subscription

Answer 6

Written offer to buy stock

Question 7

Removal of directors

Answer 7

Can be removed by shareholders with or without cause (unless staggered)

Question 8

Board meeting notice

Answer 8

For regular meetings, notice is not required and for special meetings, at least 2 days required

Question 9

Board meeting quorum

Answer 9

Majority of all directors

Question 10

Board meeting approval

Answer 10

Majority of those present

Question 11

Director and Officer Fiduciary Duty Standard

Answer 11

“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.”

Question 12

BJR

Answer 12

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.

Question 13

Upholding conflicting interest transactions

Answer 13

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.

Question 14

Category 1 - No Indemnification

Answer 14

A corp. cannot indemnify a director who is held liable to the corp. or held to have received an improper benefit

Question 15

Category 2 - Mandatory Indemnification

Answer 15

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.

Question 16

Category 3 - Permissive Indemnification

Answer 16

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.

Question 17

Special meetings of shareholders can be called by

Answer 17

(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

Question 18

Shareholders meeting notice

Answer 18

Must be no fewer than 10 days and no more than 60 days and must be written

Question 19

Shareholders quorum

Answer 19

Majority of the outstanding shares entitled to vote (cannot be broken)

Question 20

Shareholders approval

Answer 20

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

Question 21

Fundamental corporate change approval

Answer 21

1. BOD adopting a resolution
2. BOD submits the resolution to the shareholders with written notice and
3. shareholder approval (majority of the shares entitled to vote)

Question 22

Short Form Merger

Answer 22

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