Corporations Flashcards
What is a derivative suit?
Shareholder suing for a corporation’s claim – corp could have brought themselves.
Which shareholders can vote?
Record shareholders on the record date – fixed by the board not more than 70 days before meeting – owning outstanding stock.
Exceptions to who can vote as a shareholder
- Treasury Stock – reacquired by the corporation before the record date.
- Death of shareholder after the record date – executor votes
- Voting by proxy
Voting by Proxy
(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.
Irrevocable Proxy
Generally revocable but irrevocable if (1) it states it is irrevocable and (2) is coupled with an interest or given as security.
Voting Trusts
(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.
Voting Agreements
(1) in writing;
(2) signed.
Where do shareholders vote?
(1) Meeting; OR
(2) unanimous written vote (email okay)
Notice of Meetings
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.
Quorum
Must have quorum represented at all meetings – requires majority of outstanding shared entitled to vote, unless articles or bylaws require greater number.
Electing Director
Plurality vote needed
Removing Director
Traditionally, need majority of shares entitled to vote but moving towards “other matters”
Voting on “Other Matters”
Majority of shares that actually vote on the issue
Approving fundamental corporate change
Majority of shares entitled to vote… moving towards other matters
Cumulative Voting
Only available when electing directors and if in by laws – one election for multiple seats and top finishers are elected to board.
Stock Transfers
Allowed if reasonable – RFR always – enforceable if (1) conspicuously noted on the stock certificate, or (2) had actual knowledge at time of purchase.
Right to Inspect
Unqualified, just written notice. Qualified – must state a proper purpose, related to interest as a shareholder.
Distributions
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.
Dividends
Record shareholder as of record date will receive.
Improper Distribution
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.
Liability for Improper Distribution
Directors are jointly and severally liable unless good faith reliance defense.
Shareholders only if they knew improper when received it.
Fundamental Corporate Change – Types
amending articles, merging or consolidating into another company, transferring substantially all assets, converting to another form of business or dissolving
Right of Appraisal
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
Perfecting right of appraisal
(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.
