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Bar Exam > Corporations > Flashcards

Corporations Flashcards

1
Q

Who is in charge of management?

A

Board of directors

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2
Q

Agents that carry out corporations policy

A

officers

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3
Q

Requirements of a corporation

A

person - incorporator
paper - articles of incorporations
act - deliver articles w/ requires fees to SOS
(once accepted - FORMED)

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4
Q

What must the paper (articles of incorporation include?)

A

-magic words - corporation, company, incorporation, limited
-name & address of registered agent & address of office
- info re: stock (authorized stock)

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5
Q

Organizational meeting

A
  1. adopt bylaws (internal docs - board/shareholders can amend)
  2. appoint officers
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6
Q

Consequences of forming a corporation

A

Limited liability - shareholders generally only liable for their stock.
double taxation
entity status
internal affairs rule - law governed by state of incorporation

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7
Q

Corp borrows money?

A

Bond

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8
Q

Corp sells ownership interest

A

stock

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9
Q

requirements for directors

A
  • adult natural persons
  • one or more
  • initial directors names in articles/elected by incorporators
  • shareholders elect thereafter
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10
Q

methods of board action

A
  • unanimous agreement in writing
  • at a meeting
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11
Q

notice for meetings?

A

regular meeting? no notice
special - 2 days written notice, time, place, date

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12
Q

Meeting requirements

A

Quorum - majority of all directors
majority of those present required to pass resolution

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13
Q

fiduciary duties of directors to corporation

A
  • Duty of loyalty
  • Duty of care
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14
Q

Duty of loyalty

A

discharge duties in good faith and reasonable belief that actions are in best interest of the corp.
- self-dealing/interested director transaction
- competing ventures
- corporate opportunity (expectancy)
Usurp - tell board and wait for them to reject.

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15
Q

duty of care

A

burden on the plaintiff
- nonfeasance - director does nothing (liable only if hurt corporation…causation must be shown)
- misfeasance - board makes decision that hurts corp.
use the care that a person in the like position would reasonably believe appropriate under circumstances

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16
Q

Can corp make a loan to director?

A

only if reasonably believe for it to benefit corp.

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17
Q

Can one person hold multiple positions

A

yes

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18
Q

officers are selected and removed by

A

the board

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19
Q

who hires and fires directors

A

shareholders

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20
Q

indemnification*

A

(1) corp cannot indemnify (D/O) held liable to corp or improper benefit
(2) corp must indemnify (D/O) successful in defending merits otherwise
(3) corp may indemnify (D/O) shows acted in good faith.
- Articles can eliminate d/o liability only for duty of care cases.

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21
Q

When can shareholders manage?

A

Closely help (close) corp.
- Small # of shareholders
- stock not publicly traded
- shareholders can manage directly
- special duty - utmost good faith (shareholders to other shareholders)

22
Q

Professional corporation

A

pc, ca
- corp where directors, officers & shareholders are licensed professionals
- not liable for each others malpractice.

23
Q

Gen rule for shareholder liability to debt

A

shareholder not liable for corporation debt unless piecing the corporate veil!

24
Q

Piercing the corporate veil*

A

only for close corp.
- shareholders have abused privilege of inc.
- fairness requires holding them liable/

2 common fact patterns
- alter ego
- undercapitalization
(courts may be more willing to piece the veil for tort victim than for a contract claimant).

25
Q

derivative suit

A

shareholder sues to enforce corporations claim

26
Q

derivative suit outcome if plaintiff wins

A

money goes to corporation
plaintiff recovers costs and fees only

27
Q

requirements to bring a derivative suit

A

stock ownership when claim arose
adequate representation on corp’s interest
written demand on corp.
ct. approval required to settle or dismiss.

28
Q

authorized stock

A

max number of shares a corp can sell

29
Q

issued stock

A

number of shares corp. actually sells

30
Q

outstanding stock

A

shares issued & not reacquired

31
Q

record shareholder

A

person shown as stock owner in corporate records

32
Q

record date

A

voter eligibility cutoff date

33
Q

when do you have a vote?

A

when you own a stock on record date.

34
Q

Proxy

A

writing authorizing another to vote the shares (11 month generally)

revoked by - writing or attend meeting and vote.

35
Q

irrevocable proxy

A

must say
interest in stock other than voting

36
Q

voting trust

A

req.

  • writtten agreement controlling how shares will be voted
  • give copy of agmt. to corp.
  • transfer legal title to voting trustee
  • give og shareholders trust certificates
37
Q

voting (pooling) agreements

A

in writing & signed

38
Q

shareholder voting

A

mtg (req)
unanimous vote

39
Q

notice for shareholders

A

writing delivered by 10-60 days before
special - purpose

40
Q

How they vote? shareholders

A

Quorum - majority of shares
- not broken
- to elect director (plurality)
- remove director (majority)

41
Q

cumulative voting

A

method to give small shareholders better chance of electing someone to the board.
- number of shares x number of directors to be elected

42
Q

are restrictions on stock transfer allowed

A

yes if not an absolute restraint on alienation

43
Q

right to inspect

A

shareholders right to review corp’s books and records on written demand

44
Q

distributions

A

payments from corp. to shareholders (in boards disctrtion)
- corp cannot do if it would render corp insolvent

45
Q

who is liable for impropert distribution

A

directors and corp. joint and several.

exception - good faith

46
Q

Fundamental corporate changes

A

-amending articles
- mergers and consolidations
- transfer of all or substantially all assets
- conversion
- voluntary dissolution

47
Q

Requirements of fundamental corporate changes

A
  1. board action
  2. written notice to shareholders
  3. shareholder approval.
48
Q

dissenting shareholders right of appraisal

A

right to force corp to buy stock at fmv
- exists in close corporatios

49
Q

fundamental corp changes

A

includes amending articles
- requires a majority of shares (entitled to vote)
Mergers & consolodations
-merger - one corp absorbed into another
-consolidation - 2 corps become one new corp.
Conversion - corp converts into another business entity
dissolution - voluntary req. board action and shareholder approval.
Involuntary? req. ct. order

50
Q

successor liability

A

corps creditors can sue survivor

51
Q

winding up

A

written notice.

Bar Exam (9 decks)

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