Corporations

Question 1

Powers of a Corporation

Answer 1

All things necessary or convenient to carry out its business and affairs, including:
- sue/be sued
- own, lease or convey property
- contract
- borrow, lend and make investments
- own or be involved with another business
- fix compensation of and lend money to directors, officers and employees
- charitable donations or those that further business of company
- lobby

Question 2

Foreign Corporation

Answer 2

Incorporated under laws of another state or jurisdiction. Those govern internal affairs and interest holder liability.

Must deliver Foreign Registration Statement to SOS in state it wants to do business. Must be:
- signed by corporation; and
- list name, jurisdiction of formation, address of principal and registered office, name of registered agent, names and business addresses of directors and principals, and nature of business to be conducted in state.

Question 3

Consideration in Exchange for Shares

Answer 3

May be issued for almost any type of consideration, including money, property, past service to corporation, and future promises of service.

Board determines value of any non-monetary consideration given; absent fraud or bad faith, their decision is conclusive.

Question 4

Proposed Resolution of Shareholder

Answer 4

Generally accepted, but can be excluded if improper under state law.

• Only non-binding or predatory (wish or request) are proper.
  Binding on corporation or Board is improper unless it is a resolution requiring corporate action by amending the Bylaws.

Question 5

Formation of LLC

Answer 5

Articles of Organization properly filed with SOS, and at least one member.

Question 6

Shareholders may sign an agreement providing how they will vote their shares. What are the requirements and limits? How is it enforced?

Answer 6

Requirements:
- In writing
- Signed by participating shareholders

Agreement cannot:
- Remove right to elect/remove directors
- Concern management by BoD

Enforcement:
- Governed by contract law
- May also provide own enforcement mechanism

Question 7

Shareholder Voting Trusts

Answer 7

• More formal than voting agreement.
• Legal ownership of shares transferred to trust; all aspects of beneficial ownership other than voting retained by shareholders.
• Trustee must provide corp. Agreement and list of names/addresses of participating shareholders.

Question 8

Shareholder Management Agreements

Answer 8

• May make virtually any agreement governing exercise of corp. powers, management, and/or relationships between shareholders, directors, corp.
• Must be in Articles or bylaws, or written agreement of all shareholders (whether have voting rights or not).
• Must be noted conspicuously on each share certificate or Info Statement when shares issued without certificates.
• If purchased without knowledge of agreement, purchaser has right to rescind.

Question 9

SH fiduciary duties

Answer 9

• SH generally does not owe fellow SH
• Close corp. exception: majority owe loyalty, good faith/fair dealing to minority SH
• Controlling SH exception: owe other SH/corp’s partially owned subsidiaries

Question 10

Internal affairs doctrine

Answer 10

Duties of directors to corp. and SHs determined by state of incorporation