Corporations

Question 1

What is a derivative suit?

Answer 1

Shareholder suing for a corporation’s claim – corp could have brought themselves.

Question 2

Which shareholders can vote?

Answer 2

Record shareholders on the record date – fixed by the board not more than 70 days before meeting – owning outstanding stock.

Question 3

Exceptions to who can vote as a shareholder

Answer 3

1. Treasury Stock – reacquired by the corporation before the record date.
2. Death of shareholder after the record date – executor votes
3. Voting by proxy

Question 4

Voting by Proxy

Answer 4

(1) a writing), (2) signed by the record shareholder (or identifiable if email), (3) directed to the secretary of the corporation, (4) authorizing another to vote the shares.

Question 5

Irrevocable Proxy

Answer 5

Generally revocable but irrevocable if (1) it states it is irrevocable and (2) is coupled with an interest or given as security.

Question 6

Voting Trusts

Answer 6

(1) written trust agreement controlling how shares will be voted; (2) copy of the agreement given to corp; (3) transfer of legal title to the shares to the voting trust; (4) OG shareholders receive trust certificates and retain all shareholder rights except voting.

Question 7

Voting Agreements

Answer 7

(1) in writing;
(2) signed.

Question 8

Where do shareholders vote?

Answer 8

(1) Meeting; OR
(2) unanimous written vote (email okay)

Question 9

Notice of Meetings

Answer 9

To all shareholders 10-60 days before meeting, in writing.

Consequence of no notice – any action is voidable unless those not sent notice waive the notice defect. – by express waiver or implied meaning attend.

Question 10

Quorum

Answer 10

Must have quorum represented at all meetings – requires majority of outstanding shared entitled to vote, unless articles or bylaws require greater number.

Question 11

Electing Director

Answer 11

Plurality vote needed

Question 12

Removing Director

Answer 12

Traditionally, need majority of shares entitled to vote but moving towards “other matters”

Question 13

Voting on “Other Matters”

Answer 13

Majority of shares that actually vote on the issue

Question 14

Approving fundamental corporate change

Answer 14

Majority of shares entitled to vote… moving towards other matters

Question 15

Cumulative Voting

Answer 15

Only available when electing directors and if in by laws – one election for multiple seats and top finishers are elected to board.

Question 16

Stock Transfers

Answer 16

Allowed if reasonable – RFR always – enforceable if (1) conspicuously noted on the stock certificate, or (2) had actual knowledge at time of purchase.

Question 17

Right to Inspect

Answer 17

Unqualified, just written notice. Qualified – must state a proper purpose, related to interest as a shareholder.

Question 18

Distributions

Answer 18

Dividends, repurchase, and redemptions. – In board’s discretion, no right until then. Will only win if abuse of discretion – paying self bonus and no distributions despite large profits.

Question 19

Dividends

Answer 19

Record shareholder as of record date will receive.

Question 20

Improper Distribution

Answer 20

Makes insolvent – total assets less than total liabilities plus what would be needed if were to be dissolved or would not be able to pay debts as they became due.

Question 21

Liability for Improper Distribution

Answer 21

Directors are jointly and severally liable unless good faith reliance defense.

Shareholders only if they knew improper when received it.

Question 22

Fundamental Corporate Change – Types

Answer 22

amending articles, merging or consolidating into another company, transferring substantially all assets, converting to another form of business or dissolving

Question 23

Right of Appraisal

Answer 23

Dissenting shareholders get the right to force corp to buy you out at fair value.
- No appraisal for amending articles
– ONLY CLOSE CORPORATIONS so not if publicly available on national exchange

Question 24

Perfecting right of appraisal

Answer 24

(1) Notice states entitled to exercise rights
(2) written notice of objection and intent to demand payment
(3) must abstain or vote against
(4) corp must notify within 10 days of approval, all who filed intent to demand payment
(5) shareholder must make written demand to be bought out.
(6) must pay
(7) shareholder may send own estimate within 30 days and if can’t agree corp must file action in court within 60 days requesting appraisal.

Question 25

Dissolution

Answer 25

(1) Voluntary by board action and shareholder approval; or (2) Involuntary by court order on shareholder request or creditors

Question 26

Grounds for Involuntary Dissolution by Shareholders

Answer 26

Director abuse, waste of assets or misconduct – deadlock by management – shareholders deadlock in election of directors – abandoned business and failed to dissolve

Question 27

Winding Up

Answer 27

(1) written notice to known creditors and in newspaper in county of PPB, (2) gather cash, (3) liquidate assets, (4) pay creditors, (5) distribute remaining sums to shareholders.