Corporations 16-30 Flashcards
Who has the power to issue dividends and make distributions in a corporation?
Only the Board of Directors have the power to issue dividends/distributions.
*Once declared, the SH has a legal right to that distribution.
Priority: Low
A shareholder DOES NOT have the right to compel a corporation to issue a distribution, but when may a court interfere with the board’s discretion?
They WILL interfere and order a distribution upon a showing of:
Bad faith or dishonest purpose; AND
That funds were available for the dividend/distribution.
Priority: Low
A shareholder may vote shares at a meeting without physically attending through use of a proxy.
What is required for a validproxy?
It must be signed on:
An appointment form; OR
An electronic transmission.
(oral proxy is invalid)
A proxy must be accepted by the corp. if on its face there are no reasonable grounds to deny its genuineness and authenticity.
Priority: Low
Are proxy agreements freely revocable by the shareholder?
YES, even if the proxy states that it is irrevocable.
One exception to this rule is a proxy coupled with an interest or legal right, which is irrevocable if the proxy expressly states as such.
*A proxy is only valid for 11 months (unless it states otherwise).
Priority: Low
What is a Shareholder Voting Agreement?
An agreement (with no durational limit) providing how shareholders will vote their shares. It is specifically enforceable and must be in writing and signed by all parties.
*CANNOT remove the shareholder’s right to elect or remove directors.
Priority: Medium
How is a voting trustdifferent from a voting agreement?
A voting trust is more formal. It can only last for 10 years and requires:
Legal ownership of the shares to be transferred to the trust; AND
The shareholders provide the trust agreement to the Secretary of the corporation.
Priority: Medium
When can the Board of Directors act or vote?
A quorum must be present at the time when the vote is being taken.
Quorum = a majority of the Board of Directors unless otherwise stated in the Articles of Incorporation (however at minimum one third must be present).
Priority: Low
The Board of Directors is allowed to determine the compensation of Directors and Officers.
What duty do they have concerning this?
A duty to set compensation in accordance with reasonable parameters, taking into account the needs of the corporation and ensuring they don’t waste assets.
Priority: Medium
How may a Director be removed from the Board of Directors?
By a vote of the majority of shareholders for or without cause (unless stated otherwise in the Articles of Incorporation).
Priority: Medium
When can an Officer be removed from their position in the corporation?
At ANY time, with or without cause, by:
The Board of Directors;
The Officer who appointed such officer; OR
By any other Officer (if authorized).
*Removal does NOT affect their contract rights.
Priority: Medium
What is an Officer’s actual or apparent authority?
Actual authority: to act consistently with their duties as outlined by the bylaws OR as provided by the Board of Directors.
Apparent authority: to bind the corporation when a third-party reasonably believes the officer has authority to act on behalf of the corporation AND that belief is traceable to the corporation’s manifestations.
Priority: Low
What is the implied authorityof the President of a corporation?
He has the implied authority to bind the corporation for matters within its ordinary course of business (normal and necessary for managing the business),
BUT does not have authority to bind the corporation for extraordinary acts.
Priority: Low
What is a Director’s duty of care to the corporation?
They must discharge their duties:
In good faith;
In a manner they reasonably believe to be in the best interest of the corporation; AND
With the care that a person in a like position would reasonably believe appropriate under similar circumstances.
*If duty is breached, they will be liable.
Priority: HIGH
May a Director rely on the advice of advisors?
Yes, when such reliance was reasonable AND the advisor or committee was qualifiedto provide such advice.
*Directors must be reasonably informed on the decisions that they make, and can be held liable for breach of this duty.
Priority: HIGH
What does the Duty of Loyalty require of a Director/Officer?
That in his dealings with the corporation, he must act in the best interests of the corporation AND without personal conflict.
Priority: HIGH
