Corporations Flashcards
notice of special meeting (board of directors)
Directors are entitled to notice of a special meeting. Unless the articles of incorporation or bylaws provide otherwise, notice must be provided at least two days prior to the meeting and should state the date, time, and place of the meeting. The notice need not describe the purpose of the meeting.
waiver of notice (board of directors)
A director’s attendance waives notice of that meeting unless the director promptly objects to lack of notice.
quorum (board of directors)
For the board of directors’ acts at a meeting to be valid, a quorum of directors must be present at the meeting. A majority of all directors in office constitutes a quorum, unless the articles of incorporation or bylaws require a higher or lower number. A director must be present at the time that the vote is taken in order to be counted for quorum purposes, but presence includes appearances made through communications equipment that allows all persons participating in the meeting to hear and speak to one another.
requisite votes for approval (board of directors)
Typically, the assent of a majority of the directors present at the time the vote takes place is necessary for board approval. However, the articles of incorporation or bylaws may specify a higher level of approval.
de facto corporation doctrine
If the owner made a good faith effort to comply with the incorporation requirements and operates the business as a corporation without knowing that the requirements have not been met, then the business entity is treated as a de facto corporation, and the owner, as a de facto shareholder, is not personally liable for obligations incurred in the purported corporation’s name.
The RMBCA has abolished the de facto corporation and many jurisdictions have adopted the RMBCA.
corporation by estoppel
A person who deals with an entity as if it were a corporation is estopped from denying its existence and is thereby prevented from seeking the personal liability of the business owner. This doctrine is limited to contractual agreements.
self-dealing transactions (parent and subsidiary)
A parent corporation that engages in a conflict-of-interest transaction with its own corporation by participating in a business transaction that prefers the parent at the expense of the subsidiary is self-dealing.
fairness test for self-dealing
looks at the substance and procedure of the transaction
- for parent corps: whether the benefit is comparable to what might have been obtained in an arm’s length transaction; procedural fairness is generally not at issue unless there has been a change in control
interest or expectancy test
whether the corporation has an existing interest or an expectancy arising from an existing right in the opportunity; an expectancy can also exist when the corporation is actively seeking a similar opportunity
line of business test
whether the opportunity is within the corporation’s current or prospective line of business; whether an opportunity satisfies this test frequently turns on how expansively the corporation’s line of business is characterized
