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MEE Decks > corporations > Flashcards

corporations Flashcards

1
Q

Issue spotting corporations

A
  1. was there a k or an agreement before any incorporation (regardless of intent to form)?
  2. was the corporation properly formed?
  3. Is there a purpose stated in the articles of incorporation?
  4. Does someone seek liability against shareholders behind the corporation?
  5. Board of directors or officers (D&O) present in the facts?
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2
Q

what to check based on q: was there a k or an agreement before any incorporation (regardless of intent to form)?

A

promoter liability

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3
Q

what to check based on q: was the corporation properly formed?

A

de jure, de facto, by estoppel

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4
Q

what to check based on q: Is there a purpose stated in the articles of incorporation?

A

ultra vires acts

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5
Q

what to check based on q: Does someone seek liability against shareholders behind the corporation?

A
  • Fraud? -> piercing the corporate veil
  • in contract? -> officers are gents of corp, check agency issues
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6
Q

what to check based on q: Board of directors or officers (D&O) present in the facts?

A
  • track # for quorum purposes
  • look for reasons to kick off board
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7
Q

reasons to kick d off board

A
  • bad faith, negligence in decision (duty of care, business judgment rule)
  • conflict of interest (duty of loyalty, self-dealing, usurp corp opportunity)
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8
Q

Issue spotting corporate shareholders

A
  1. does a shareholder want to sue the corporation?
  2. does a shareholder want to vote?
  3. is a shareholder’s voting agreement or voting trust valid?
  4. controlling shareholder?
  5. shareholder liability for corporate obligations?
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9
Q

issue spotting: does a shareholder want to sue the corporation?

A

can bring derivative suit (demand requirement)

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10
Q

issue spotting: does a shareholder want to vote?

A

can vote in person or by proxy

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11
Q

issue spotting: controlling shareholder?

A

special statuses: insider, may be liable if fiduciary to minority s/h

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12
Q

issue spotting: shareholder liability for corporate obligations?

A

not liable unless:
- pcv
- controlling s/h fiduciary
- selling to looter

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13
Q

issue spotting: tipper/tippee liability?

A

misappropriation where breach of duty owed to source, not necessarily to corporation)

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14
Q

Formation concepts

A
  1. Incorporation
  2. Organization
  3. De Facto Corp
  4. Corp by Estoppel
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15
Q

When does incorporation occur

A
  • execution &
  • filing of
  • articles of incorp
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16
Q

what is required for proper execution of articles of incorp

A
  1. prepare &
  2. sign the articles & include essential elements
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17
Q

essential elements of the articles of incorporation

A
  1. name and address of each incorporator
  2. address of registered office
  3. name of registered agent
  4. number of shares authed to issue
  5. name of corp
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18
Q

what is required for proper filing of articles of incorp

A
  1. incorporator files at
  2. secretary of states office &
  3. pays filing fee
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19
Q

date of incorporation

A

date of filing unless articles delay date of effectiveness

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20
Q

how long can articles of incorp delay date of effectiveness

A

up to 90 days from date of filing

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21
Q

how a corp must be properly organized after incorp

A

incorps or initial directors (if any) named in articles call organizational meeting

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22
Q

result of failure to properly organize

A

may expose shareholders to personal liability for corp. debt & obligations

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23
Q

reqs to complete organization of a corp

A
  1. naming or election of directors
  2. appointing of officers, and
  3. adopting the corporate bylaws
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24
Q

what are bylaws

A

internal rules governing corps actions and relations to shareholders, directors, and officers

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25
Q

what are the bylaws like relative to the articles of incorp

A

articles of incorp are like constitution, bylaws are like statutes

aoi > bylaws

bylaws cannot be inconsistent with aoi

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26
Q

what is often specified in bylaws

A
  • time/place for annual shareholder’s meeting
  • record date
  • number of shares to constitute a quorum
  • % of votes to authorize corp action
  • restrictions on transferability of shares
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27
Q

point of de facto corp

A

recognize de facto corp if de jure status fails b/c statutory compliance insufficient

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28
Q

elements necessary for de facto corp

A
  • good faith, colorable attempt made to comply with statute
  • corporate principals acted as if they were a corp
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29
Q

when does corp by estoppel arise

A

contract dispute b/w 3p & unformed corp believed to be properly formed

30
Q

what does corp by estoppel allow the court to do

A
  1. estop 3p from alleging defective incorp if that would unjustly expose corp’s principals to liability
  2. estop corp from arguing it isn’t liable due to defective incorporation if it would unjustly deprive the 3p of relief
31
Q

what is corp by estoppel not a defense to

A

tort claim

32
Q

are corps and shareholders same legal entity?

A

no; distinct legal entities

33
Q

four key characteristics of corps

A
  1. perpetual or continuous existence
  2. centralized mgmt of assets & business through board of directors
  3. limited liability for shareholders
  4. transferability of ownership interests (shares)
34
Q

advantage of corporate form

A

raise significant amounts of capital

35
Q

disadvantage of corporate form

A

subject to double taxation (corporate tax and then income tax)

36
Q

Structure of corporation

A
37
Q

LLC topics

A
  1. organization
  2. control and management
  3. owner liability and ownership rights
  4. dissolution
38
Q

LLC

A
  • unincorped association
  • 1+ members
  • organized & operated under state’s llc statute
  • treated like a corp for ll purposes
39
Q

how to organize llc

A

must file aoi with SS

40
Q

what must llc aoi include

A
  • statement that entity is llc
  • name of llc
  • address of llc’s registered office & agent
41
Q

what must llc name include

A

“limited company” or something similar or abbrev

42
Q

what may llc name not imply

A

association with government entity

43
Q

llc operating agreement

A
  • similar to a corp’s bylaws
  • governs llc’s internal affairs
44
Q

what is needed to admit initial and subsequent members of llcs other than assignees?

A

consent of all members, unless operating agreement says otherwise

45
Q

what is needed to admit assignees as members

A

consent of a majority of the remaining members, unless operating agreement says otherwise

46
Q

who has control of llc

A

members, generally

47
Q

member liability

A

generally up to amt of contribution to llc

48
Q

threshold for personal member liability

A

court pierces corporate veil

49
Q

what can member operating agreement set forth

A
  • how llc will be operated
  • how profits/losses will be shared
50
Q

member-managed llc

A
  • each member has equal rights in management
  • members owe llc and other members duties of loyalty and care
51
Q

manager-managed llc

A
  • managers may or may not be members
  • managers owe duties of loyalty and care (like directors of corp)
  • owe duty not to engage in grossly negligent or reckless conduct, intentional misconduct, or knowing violation of the law (some states reject gross negligence & use business judgment rule)
52
Q

do most states and ullca permit operating agreement to alter fiduciary duties of managers or members

A

yes

53
Q

what are members, managers, and not liable for/liable for

A

llc debts and obligations / own conduct

54
Q

pierce the corporate veil

A

court renders individual liable for corporate action

55
Q

reasons for piercing the corporate veil

A
  1. using corporate funds for personal use
  2. corporation is undercapitalized, suggesting not for intended use
56
Q

what kind of actions can members bring

A
  1. direct
  2. derivative
57
Q

assignment

A
  • member may assign all or part of econ interest in llc
  • assignee does not become a member
58
Q

when is an llc dissolved & must be wound up under ullca

A
59
Q

llc members have limited liability UNLESS

A
  • proper procedures are not followed during dissolution or winding up, OR
  • a court pierces the company veil
60
Q

what can court do if proper winding up procedure is not followed

A

enforce creditor’s claim against each member (proportionate to member’s share of the claim, up to amount of assets distributed to member during dissolution)

61
Q

what are promoters not

A

agents, i.e., no power to bind corp

62
Q

relationship b/w multiple promoters

A
  • mutual agency (partnership-type relationship)
63
Q

do contracts entered into by joint promoters bind each promoter?

A

yes

64
Q

are joint promoters joint and severally liable for their contracts?

A

yes

65
Q

when are promoters NOT personally liable on pre-incorporation contracts entered into for the benefit of the unformed corp?

A
  • contract specifically disclaims personal liability of the promoter
  • circs demonstrate other party agreed to look only to the corp for performance
66
Q
A
67
Q

what are promoters

A

act on behalf and for the benefit of the unformed corp.; take the preliminary steps for creating the corp. such as entering into contracts.

68
Q

obligation to creditors on dissolution

A

provide notice to creditors including explanation of how credits can enforce claim

69
Q

derivative suits

A

must make a demand unless that demand would be futile because other members or managers have a financial interest or are otherwise biased

70
Q

professional LLC

A
  • sole purpose: rendering pro services
  • has members licensed or otherwise duly authorized to render services

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