Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

Bar Exam > Corporations > Flashcards

Corporations Flashcards

You may prefer our related Brainscape-certified flashcards:
MBE flashcards
1
Q

Key players

A

Shareholders
board of directors
officers

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

Shareholders

A

Owners of corp

no fiduciary duties

no direct control in management

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

Board of directors

A

In charge of management

adult natural persons
do not have to be shareholders

must have one or more

initial - name in articles otherwise elected at organizational meeting
- after that, shareholders elect annually at shareholder’s meeting

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

Officers

A

Agents of the corporation appointed to carry out the corp’s policies

delegated day to day management by BoD

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

Formation

A

De jure - in accordance with law
De facto - law not followed
estoppel - law not followed

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

De jure

A

Need person, paper act

person - incorporator
- execute and deliver articles of incorp to secretary of state
- need not be a citizen of the state of incorp

Paper - articles
- name or corp
- name and address of incorporators
- registered agent and registered office
- corporate stock information

act - corporate existence begins on filing
- notarized articles delivered to secretary of state and pay fees

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

Business purpose

A

Any lawful purpose if not restricted

ultra vires if outside of scop of business purpose
cl - void
mbca - not void
- shareholder can sue to enjoin
- corp can sue officer or director for damages
- state can bring action to dissolve corp

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

Internal affairs doctrine

A

internal affairs of the corp are governed by the law of the state of incorporation

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

De facto corporation

A

Relevant incorporation statute - all states have one

parties made a good faith, colorable attempt to comply

some exercise of corporate privileges - acting as a corp

must be unaware of failure to form a de jure corp

  • business is treated as a corp except in an action by the state

applies equally on all contract and tort claims

abolished in most stated but still apply in essay

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

Corporation by estoppel

A

Persons who have dealt with the entity as if it were a corporation will be estopped from denying the corporation’s existence

only in contract cases
case by case basis

abolished in most stated but still apply in essay

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

Pre incorporation contracts

A

Promoters entering into contracts

to each other and corp
- promoters are fiduciaries to each other and to corp

  • liable for fraud and may be liable for profit of selling property to corp

to third parties
- corp not bound by contracts because did not exist unless adopt - express or accepts benefit
- promoter personally liable unless novation
- if agreement expressly relieves promoter of liability - not a contract, only an revocable offer to corp when formed

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

Foreign corporations

A

Corporations from different state

must register and pay fee to transact in the state

transact - regular course of intrastate business activity - not enough to be sporadic or own property in the state

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

Bond

A

debt security

holder is a creditor

if unsecured - called a debenture

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

stock

A

equity
Ownership interest

authorized share - shares they can distribute
issued and outstanding - sold
authorized and unissued - reacquired b corp - treasury

subscription - written offers to buy stock from corp
- preincorp subscriptions are irrevocable for 6 months unless agreement states otherwise or all subscribers consent to revocation
- post incorp - revocable until accepted

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

Consideration for stcok

A

Any tangible or intangible property or benefit to the corp including services already performed or future services

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

Par value

A

minimum issue price

mbca approach - no mar par value - board’s valuation is conclusive if made in good faith

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

Watered stock

A

par value stock issued for less than par value

directors liable if knowingly authorized issuance at less than par
person buying is liable if on notice of pay value
transferred to third party- not liable if good faith

can sell to third party for less than par because not an issuance - issuance is only when corporation sells

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

Preemptive right

A

right of an existing shareholder of common stock to maintain percentage of ownership by buying stock whenever there is a new issuance of stock FOR MONEY

Right must be provided for in articles of incorp

limitations - no right if shares issued
- for consideration other than cash
- within 6 months after incorp
- without voting rights but having a distribution preference

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

removal of directors

A

shareholders can remove with or without cause

if staggered board - only with cause

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q

Vacancies on board

A

Board or shareholders select person who fills in

if shareholders create the vacancy, only shareholders can replace

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
21
Q

Board action

A

can only act as a group
- unanimous agreement in writing
- at a meeting which satisfies quorum and voting

acn ratify defective corporate actions

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
22
Q

Board meetings

A

regular meetings - no notice
special meetings - 2 days written notice of date, time and place
- failure to give notice - actions voidable or void unless directors who were not notified waived in writing or by attending and not objecting
- no proxies

quorum
- majority of directors but no fewer than 1/3 if changed in bylaws
0 can be lost if people elave

voting
- marjoity of those present

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
23
Q

Committees

A

board can create and appoint members of the board to serve

can act for the board by board must supervise

cannot declare distribution, fill a board vacancy, or recommend a fundamental change to shareholders

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
24
Q

Standard of directors duties

A

“a director must discharge her duties in good faith and with the reasonable belief that her actions are in the best interest of the corporation. She must also use the care that a person in like position would reasonably believe appropriate under the circumstances.”

  1. duty of loyalty
  2. duty of care
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
25
Q

Duty of care

A

burden on challenger to prove breach

nonfeasance
- director does nothing - lazy director
- liable only if breach causes a loss to the corporation - difficult to show that nonaction caused a loss

misfeasance
- board makes a decision that hurts the business
- causation is clear because participated in decision

Business judgment rule
- not liable for decisions that in hindsight were poor
- presumption that when the board took an act it did appropriate homework
- will not second guess decisions made in good faith, informed, and rational basis

can rely on reports, opinions, statements

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
26
Q

Duty of loyalty

A

conflicts of interest - Business judgment rule does not apply

burden on defendant to prove no breach

cannot compete

transaction between corporation and
- one of the directors
- director’s close relative
- a business of the director

not a breach if
- approved by majority of disinterested directors or majority of disinterested shares after disclosure of all material facts
- it was fair to the corporation

even if approved - can still be breach if waste of corporate assets - may also need to show fairness

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
27
Q

Fairness

A

adequacy of consideration
corp need to enter transaction
financial position of the corp
available alternatives

28
Q

Director compensation

A

Directors can set
must be reasonable and in good faith
otherwise breach of loyalty

29
Q

Usurpation of corporate opportunity

A

breach of loyalty
must first give corporation an opportunity to act

corp must have an interest or expectancy or in business line

lack of financial ability not a defense

remedies
- constructive trust
- compel transfer at price she paid
- profit if sold

30
Q

Duty to disclose

A

material corporate info to other members of the board

31
Q

Loans

A

Corp can make a loan to director if reasonable expected to benefit the corp

32
Q

What directors are liable

A

Director presumed to concur with board action unless her dissent or abstention is noted in writing on the corp records
- the minutes
- delivered to presiding officer at the meeting
- written dissent immediately after meeting

cannot dissent if voted for resolution in meeting

not liable if absent from the board meeting

33
Q

Officers roles and duties

A

Agents of the corporation

trad - needed president, secretary, treasurer
now - do not need any particular
- one person can serve more than one office simultaneously

duties - same care and loyalty as directors

34
Q

Officer selections and removal

A

By board who also sets compensation
- with or without cause
-if breach of contract- right to damages

shareholders only hire and fire directors, not officers

35
Q

Indemnification of officers, directors, employees

A

No indemnification
- held liable to the corp
- received improper benefits

Mandatory unless limited by articles
- successful in defending a proceeding on the merits

permissive - and catch all
- unsuccessfully defending and director acted in good faith and believed actions were in the best interest of the corp

36
Q

Determination of indemnification

A

Disinterested majority of board
if no disinterested quorum, majority of a disinterested committee or independent legal counsel or shareholders

37
Q

Elimination of liability to corporation for damages

A

can not eliminate duty of loyalty, can for duty of care

38
Q

Close corporation

A

shareholders run close corp
- can be managers or can elect board

few shareholders and stock is not publicly traded

39
Q

Shareholder management agreement

A

Close corps
- set up alternative management

to set up
- in articles and approved by all shareholders
- unanimous written shareholder agreement

whoever is in management owes a fiduciariy duty

If no shareholder management agreement set up - no power in management

40
Q

Close corp - special duties

A

Fiduciary duty on shareholders owed to other shareholders

controlling shareholders to minority shareholders
- cannot use power to benefit at expense of minority
- disclose material info to minority

oppression of minority shareholders
- can sue the controlling shareholders who oppress them for breach of duty

41
Q

Professional corporation

A

Licensed professionals can incorporated - must have PC of PA in name

Articles must state purpose is to practice particular profession

Directors, officers, shareholders must be licensed professionals

employees can be non-professionals

42
Q

Piercing the corporate veil

A

only in close corporations
- shareholder might become personally liable
- to void fraud or unfairness

Requirements
- shareholders must have abused the privilege of incorporating
- fairness must require holding them liable

Elements justifying
- alter ego - shareholders ignore corporate formalities and treat the corp as a mere instrumentality/alter ego of the shareholders - treating corp assets as own, commingling money

  • undercapitalization - at time of formation, not enough unencumbered capital to reasonably cover prospective liabilities
  • Fraud, avoidance of existing obligations, evasion of statutory provisions
43
Q

Piercing corporate veil - who is liable and for what

A

only the shareholders who were active in the operation

easier in a tort claim than a contract claim

44
Q

Derivative suit

A

shareholder suing to enforce the corporations claim, not own personal claim

money from judgment goes to the corporation

45
Q

Standing for derivative suit

A

Shareholder at the time the claim arose or must have become a shareholder through transfer by operation of law (inheritance or divorce) from someone who did own stock at the time the claim arose

46
Q

Derivative suit procedures

A

Shareholder must made a written demand on corporation to take action, wait 90 days to sue - unless demand would be futile

join corporation as defendant

dismissal and settlement requires court approval
- reasonable independent investigation found not in the best interest of the corp

Burden of proof
- burden on shareholder to prove decision not made in good faith
- burden on directors if personal interest in controversy that it was made in good faith

47
Q

Stock

A

Authorized - number of shares corporation may issue - set in articles

Issued - number corp has sold

Outstanding - shares issued but not reacquired

48
Q

Shareholder voting

A

Shareholders of record on the record date may vote at the meeting

record date fixed by BoD - cannot be more than 70 days before meeting

exceptions
- treasury stock - reacquire stock before record date - no one votes on the stock
- death of shareholder after record date - executor votes

49
Q

Voting by proxy - shareholder

A

Requirements
- writing
- signed by record shareholders
- directed to secretary of corp
- authorizing another to vote the shares

proxy only good for 11 months unless it says otherwise

revocation
- revoke by attending meeting, in writing to corp secretary, or by subsequent appointment of another proxy
- irrevocable if proxy coupled with an interest other than voting or given security and states that it is irrevocable

50
Q

Pool voting power

A

Voting trust

Voting agreement

51
Q

Voting trust

A

Written agreement of shareholders under which all of the shares owned by the parties to the agreement are transferred to a trustee who votes the shares

usually only valid for 10 years

requirements
- written trust agreement
- copy of the agreement given to corp
- legal title to shares transferred to voting trustee
- original shareholders receive trust certificates and retain all shareholder rights except voting

52
Q

Voting agreement

A

Writing and signed

  • no time limit
  • does not need to be filed with corp

specifically enforceable

53
Q

Shareholder meetings

A

Can take action in meeting or unanimous written consent

annual meeting
- if not held within 6 months of the end of the fiscal year or 15 months after last annual, whichever is earlier - can petition court to order one
- usually to elect directors

special meeting
- may be called by BoD, president, holders of atleast 10% of outstanding shares, or anyone authorized in articles or bylaws

Notice
- in writing 10-60 days before meeting
- can be waived
- date, time, place
- if special meeting - purpose because cannot do anything else but the purpose at the meeting
- if no notice - actions may be void unless waiver - express or implied

54
Q

How and what do Shareholders vote

A

What do they vote
- elect directors - plurality voite
- remove directors - majority entitled to vote but increasingly majority that actually voted
- fundamental corporate changes - majority entitled to vote but increasingly majority that actually voted
- other things board asks them to vote on - majority that actually voted

(follow traditional voting numbers)

Quorum - based on number of shares not shareholders
- majority of outstanding shares entitled to vote
- not lost if people leave meeting

55
Q

Cumulative voting

A

only if in the articles
- dont vote for each seat individually like straight voting
- one large election and top to finishers are elected

  • multiply number of shares times number of directors to be elected to determine voting power and allocate shares to candidates
56
Q

Stock restrictions

A

Can restrict transfers if not an undue restrain on alienation
- rights of first refusal are valid

Cannot enforce restrictions on a third party purchaser if no notice of restriction

57
Q

Shareholder inspection rights

A

Noncontroversial things - unqualified rights
- written demand at least 5 days in advance

Controversial things - qualified right
- must state proper purpose reasonably related to person’s interest as a shareholder
- 5 day written notice

58
Q

Distributions

A

No right - solely within directors discretion

can compel if there is an abuse of discretion

record shareholder as of the record date will receive the dividend

59
Q

Funds for distribution

A

Cannot made distribution if insolvent or the distribution will make them insolvent

  • corp would not be able to pay its debt as it becomes due
  • the corp’s total assets would be less than the total liabilities plus the amount need if the corp were to dissolve at the time of distribution to satisfy preferential rights
60
Q

Unlawful distribution liability

A

Directors jointly and severally liable unless good faith

shareholder if they knew the distribution was improper when receiving it

61
Q

Fundamental corporate cahanges

A

Amending articles
merging or consolidating
transferring substantially all assets
converting to another form of business
dissolving

  • board action adopting resolution
  • board submits proposal to shareholders with written notice
  • shareholder approval
62
Q

Right of appraisal

A

Dissenting shareholder to fundamental change can force corp to buy their stock at fair value - only if stock not publicly traded or have less than 2000 shareholders with stock valued less than 20 million

merging or consolidating
transferring substantially all assets
converting to another form of business

not amending or dissolving

63
Q

Merger and consolidation

A

Merger - two corps combine and one corp survives

consolidation - two corp combine and form a new entity

need shareholder approval from both corps
- exception to surviving corp in merger if no significant change (articles dont change, shares dont change, voting power does not change much)

Surviving corp has all liabilities of constituents - successor liability

64
Q

Shot form merger

A

No shareholder approval required

Parent corp owning at least 90% of outstanding shares of subsidiary merged the subsidiary into itself

65
Q

Transfer of all or substantially all of assets

A

at least 75% of assets

fundamental change for seller not buyer

no successor liability unless buyer is mere continuation of seller - same management, shareholder - de facto merger

66
Q

Fundamental changes that require filings with secretary of state

A

Amendments to articles
mergers and consolidations
conversion

67
Q

Dissolution

A

Voluntary
- incorporators and initial directors before shares have been issued and business had commenced
- corporate act - board and shareholder approval
- can revoke

involuntary
- attorney general - fraud in obtaining articles or abusing authority
- shareholder - director abuse, waste of assets, misconduct, director deadlock, failed to elect directors for 2 annual meetings in a row
- creditors if have judgment and insolvent
- administrative - can cure within 2 years to be reinstated

Bar Exam (18 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions