Corporations Flashcards
Shareholders are generally not personally liable for the liabilities of the corporation except when…
There is
* undercapitalization (i.e., not having sufficient capital) at the time of formation
* disregard of corporate formalities
* use of corporate assets as the shareholders’ own assets
* self-dealing with the corporation and many more.
How may a director of a corporation be removed by shareholders?
When the stated purpose of the meeting is the removal of the director.
Also, a directory may ONLY be removed by the shareholders, NOT other directors.
A corporation may not be involuntarily dissolved by motion of a shareholder under what circumstance?
When the** directors refuse to make a distribution.**
CAN be dissolved when:
* the shareholders are deadlocked in voting power and have failed to elect successors to the directors whose terms have expired
* the corporate assets are being misapplied or wasted, causing material injury to the corporation
* the directors or those in control of the corporation have acted, are acting, or are reasonably expected to act illegally or fraudulently
Do members of an LLC have to buy out a withdrawing member’s interest?
No, they are not required to do so.
True or False?
A corporation is required to indemnify a director for reasonable expenses incurred in the wholly successful defense of a proceeding against the director.
True, the indemnification must be made if the director is successful.
How does quorum work?
Quorum exists when a majority of the total number of directors is present. (13 out of 20 would be fine).
Then, a majority vote of THAT quorum would be necessary to pass a resolution of a corporation’s board of directors. (7 out of that 13 would suffice).
How are dividends distributed?
Combine capital contributions and income and substract expenses and that figure is the maximum amount of legally distributable dividends. Debts must first be paid, and liabilities cannot exceed assets.
As to enforceable voting agreements, who may enter them, shareholders or directors?
Shareholders may enter them, directors may NOT enter them.
If an LLC is silent as to distirbution of profits and losses then how are they distributed?
They are allocated based on each member’s contributions to the LLC.
True or False?
Directors may vote by proxy.
False, directors may not vote by proxy.
