Corporations Flashcards
What effect does pledging stock as collateral have on the shareholder’s rights
None, a shareholder retains her right to vote if she pledges stock for collateral unless she signs an agreement to the contrary
What procedure is there for inspecting a corporation’s documents
Shareholders have the right to inspect and copy corporate documents, so long as the shareholder sends a signed written request at least 10 business days in advance and has a proper purpose for doing so. The shareholder may only inspect and copy the records at the corporation’s main office during business hours.
Which shareholders can access records
For certain types of corporate records, such as meeting minutes, corporate accounting records, and the list of shareholders, the shareholder must have either been a shareholder for 6 months or be the owner of at least 5 percent of the outstanding shares
What is a proper purpose for inspecting corporate records
A proper purpose is defined as one that relates to the shareholder’s interest in the company.
When must shareholders receive notice of a special meeting
10-60 days beforehand
Can shareholders waive notice
Yes, either through attendance or writing
How can a corporation change the way it is managed from the statutory provisions
The agreement must be set forth or referenced either (i) in the articles or the corporate bylaws and approved by all persons who are shareholders at the time of the agreement, or (ii) in a written agreement that is signed by all persons who are shareholders at the time of the agreement and that is made known to the corporation
How can voluntary dissolution take place
For a corporation that has already issued stock, a voluntary dissolution can occur when the board of directors adopts a proposal for dissolution and two-thirds of the outstanding shares approves, or when all shareholders consent to the dissolution, even without approval of the board.
What happens to a corporation’s property upon termination?
Directors discharge the liabilities and obligations, and then distribute the remainder of the corporation’s assets among its shareholders according to their respective rights and interests. The remaining assets will be distributed to the shareholders according to their interest in the corporation.
How is a director removed
Unless the articles of incorporation provide otherwise, a majority of the members must vote in favor of the removal of a director
What are the consequences of indemnifying a director
When the authorization simply obligates the corporation to provide indemnification to the fullest extent permitted by law, the authorization is deemed to also require the corporation to advance or reimburse reasonable expenses of any kind. The director may seek a court order to compel the corporation to indemnify the director in accord with the indemnification authorization.
What does indemnity not protect against
The only restriction on the corporation is that it cannot indemnify a director against liability for (i) willful misconduct or (ii) a knowing violation of criminal law.
What duties do directors owe the corporation
duty of care and duty of loyalty
What is the business judgment rule
Virginia’s statutory business judgment rule protects a director’s decision if the decision was made with good faith business judgment of the best interests of the corporation. To overcome this protection, the party challenging the director’s conduct bears the burden of persuasion, which generally requires a showing that the director engaged in self-dealing or fraud or acted in bad faith.
What does the duty of care entail
A director is not liable for a breach of this duty if the director’s conduct was undertaken in good faith, which is a subjective standard. A director is entitled to rely on the performance of, as well as information, opinions, reports, and statements supplied by a committee of the board of which the director is not a member if the director believes, in good faith, the committee merits confidence
