Corporations Flashcards
How is a corporation formed?
by filing articles of incorporation
bylaws
internal rules that specify how the corporation will operate
what needs to be in the articles of incorporation
- name
- how many shares the corp may issue
- each incorporators name and address
- address of the corporate office
- corp’s agent for service and process
priority of conflicts with corp rules
- state law
- articles
- bylaws
How is an LLC formed
organizers must file a certificate of organization
operating agreement
LLC’s bylaws
de facto corporation
courts will recognize limited corporate liability if there was a colorable, good-faith attempt to incorporate and actual use of the corporate form (ex. contracting in the corporate name)
incorporation by estoppel
courts will recognize limited corporate liability if a third party deals solely with the purported corporation and has not relied on the promoter’s personal assets
piercing the corporate veil factors
- commingling funds
- undercapitalizing
- disregard for corporate formalities
- using corporate funds as their your own
- using corporate form to facilitate fraud or crime
- grossly failing to maintain records
- concentrating stock ownership in one person or very few persons
alter-ego theory
courts will pierce the corporate veil if a stockholder controls the corp to such an extent that the corporation is merely an extension of the shareholders will. Requires
1. shareholder disregards the corporate form
2. this disregard worked some unfair harm or injustice
subscription agreement
an agreement with a pre-corporation to purchase stock once they become available
common stock
receive periodic dividends and have voting rights
preferred stock
no voting rights but higher dividends than common stock
preemptive rights
a shareholders right to buy a percentage of newly issued stock equal to her current ownership percentage in the corporation and to do so before the stock is offered to the public
record date
A record date is a cut-off date set by a company to determine who is eligible to participate in a transaction or receive a distribution. Must be within 70 days of a shareholder meeting
who can call a special meeting?
- the board of directors
- anyone designated by the bylaws
- or a shareholder holding at least 10% of shares entitled to vote on a matter and he delivers a signed, written demand to the corporation
when must notice of a shareholder meeting be provided?
10-60 days before the meeting
voting trust
shareholders transfer their shares to a trustee and the trustee has the right to vote the shares
voting agreement
MUST BE IN WRITING
parties agree to vote in a certain way
Proxy
person appointed by a shareholder to vote their shares. Must be a written agreement submitted to the officer in charge of vote counting
Close corporation
a corporation with fewer than a specified number of shareholders (State law will specify) and stock that is not publicly traded
share-transfer restrictions
must be reasonable and cannot totally ban transfers
Buy-sell agreement
a commitment between corporation and shareholders that the corp will buy a shareholders shares if a certain event occurs
Third-party intervention
judicial way to defeat deadlock within a corp. Court may appoint custodian to solve the deadlock
appraisal rights
right to have your shares purchased by the corp if you dissent to an extraordinary corporate action, like a merger
Direct litigation
shareholder sues to vindicate their own personal interest
Derivative litigation
shareholder asserts a claim on behalf of the corporation or the shareholders at large
class action
