Corporations Flashcards
What is the business judgment rule? Fiduciary Duties
In the absence of fraud, illegality, or self-dealing, courts will not disturb good faith business decisions.
The business judgment rule is rebuttable. What do you have to demonstrate?
That there was self-dealing or fraud or illegality or carelessness.
What duty of care is owed?
Directors and officers must use the care a person in a like-position would reasonably believe appropriate under similar circumstance.
If an officer has a special skill, what do you expect of that person?
To use that skill!
What reliance defense can you use for duty of care?
They relied on expert opinions that were erroneous is a defense!
Duty of Loyalty
Directors and officers cannot receive unfair benefits to the detriment of the corporation unless they effectively disclose and obtain ratification of those benefits.
-self-dealing or corporate opportunities
Duty of Loyalty Defenses:
- obtain approval from the disinterested memebrs of the board
-approval from di sh
-persuade a court that the transaction was fair to the corp
SH voting
-Annual meetings
-Special meetings: fundamental corporate changes
Adequate notice for meeting how much time should be given for notice and what info must be given
-10-60 days prior
-date, time, location, purpose
-attendees waive defects with notice
Record date
To determine which shareholders are eligible to vote, the directors fix record date no more than 70 days before the meeting.
Only shareholders who held stock on record date can attend even if they sold it before the meeting.
Requirements for proxies for shareholders
- In writing
- Signed by shareholder
- Sent to secretary of corp
- Authorize proxy to vote
- Valid for max 11 months
Distributions by the board of the directors:
-A corp removes profit from corp and gives it to the shareholders
-Dividends authorized only by board
-Board can’t declare dividend if it would make corp insolvent or if it already is
Libaility is Ds who authorize it are personally liable, jointly and severally, in amount of excess lawful amount.
What is the name given to shares of stock issued to shareholders that remains in their possession?
Outstanding shares
The adequacy of the consideration received for stock issued by a corporation is determined by what?
The corporation’s board of directors.
If a stock is classified as “participating,” then each share in the class collects a dividend as part of the __________ class and then collects an additional amount together with the __________ class.
preferred; common
