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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
what are the bylaws like relative to the articles of incorp
articles of incorp are like constitution, bylaws are like statutes aoi > bylaws bylaws cannot be inconsistent with aoi
26
what is often specified in bylaws
- 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
27
point of de facto corp
recognize de facto corp if de jure status fails b/c statutory compliance insufficient
28
elements necessary for de facto corp
- good faith, colorable attempt made to comply with statute - corporate principals acted as if they were a corp
29
when does corp by estoppel arise
contract dispute b/w 3p & unformed corp believed to be properly formed
30
what does corp by estoppel allow the court to do
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
what is corp by estoppel not a defense to
tort claim
32
are corps and shareholders same legal entity?
no; distinct legal entities
33
four key characteristics of corps
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
advantage of corporate form
raise significant amounts of capital
35
disadvantage of corporate form
subject to double taxation (corporate tax and then income tax)
36
Structure of corporation
37
LLC topics
1. organization 2. control and management 3. owner liability and ownership rights 4. dissolution
38
LLC
- unincorped association - 1+ members - organized & operated under state's llc statute - treated like a corp for ll purposes
39
how to organize llc
must file aoi with SS
40
what must llc aoi include
- statement that entity is llc - name of llc - address of llc's registered office & agent
41
what must llc name include
"limited company" or something similar or abbrev
42
what may llc name not imply
association with government entity
43
llc operating agreement
- similar to a corp's bylaws - governs llc's internal affairs
44
what is needed to admit initial and subsequent members of llcs other than assignees?
consent of all members, unless operating agreement says otherwise
45
what is needed to admit assignees as members
consent of a majority of the remaining members, unless operating agreement says otherwise
46
who has control of llc
members, generally
47
member liability
generally up to amt of contribution to llc
48
threshold for personal member liability
court pierces corporate veil
49
what can member operating agreement set forth
- how llc will be operated - how profits/losses will be shared
50
member-managed llc
- each member has equal rights in management - members owe llc and other members duties of loyalty and care
51
manager-managed llc
- 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
do most states and ullca permit operating agreement to alter fiduciary duties of managers or members
yes
53
what are members, managers, and not liable for/liable for
llc debts and obligations / own conduct
54
pierce the corporate veil
court renders individual liable for corporate action
55
reasons for piercing the corporate veil
1. using corporate funds for personal use 2. corporation is undercapitalized, suggesting not for intended use
56
what kind of actions can members bring
1. direct 2. derivative
57
assignment
- member may assign all or part of econ interest in llc - assignee does not become a member
58
when is an llc dissolved & must be wound up under ullca
59
llc members have limited liability UNLESS
- proper procedures are not followed during dissolution or winding up, OR - a court pierces the company veil
60
what can court do if proper winding up procedure is not followed
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
what are promoters not
agents, i.e., no power to bind corp
62
relationship b/w multiple promoters
- mutual agency (partnership-type relationship)
63
do contracts entered into by joint promoters bind each promoter?
yes
64
are joint promoters joint and severally liable for their contracts?
yes
65
when are promoters NOT personally liable on pre-incorporation contracts entered into for the benefit of the unformed corp?
- contract specifically disclaims personal liability of the promoter - circs demonstrate other party agreed to look only to the corp for performance
66
67
what are promoters
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
obligation to creditors on dissolution
provide notice to creditors including explanation of how credits can enforce claim
69
derivative suits
must make a demand unless that demand would be futile because other members or managers have a financial interest or are otherwise biased
70
professional LLC
- sole purpose: rendering pro services - has members licensed or otherwise duly authorized to render services

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