Corporations Flashcards
Name of Corp must include words
Corporation,
Company
Incorporated
Or an abbreviation thereof
What is statutory cap for liability of directors for damages?
$100k
How can corporations reduce or eliminate liability if it’s directors/officers?|
By laws or articles
Who may fill vacancy on directors of a corporation
Board of directors
What must occur for the board of directors to take an action at a meeting
A majority of directors must approve of action where there is a quorum
A person may become a member of a manager-managed LLC if
A majority of the managers of the LLC consent
can a person become a member of an LLC without making a contribution, monetary or otherwise, to the LLC?
Yes
A promoter is generally ___ liable for
personally liable for actions on behalf of an unincorporated business even after the business is incorporated, unless a subsequent novation releases the promoter from liability.
Before a board may delegate the authority to fix the amount and terms of a distribution to a committee, the board must first
authorize a distribution and set sufficient parameters
A restriction on the transfer of stock can be enforceable against a transferee who takes the stock
W knowledge of the restriction
placement of a notation regarding a transfer restriction on a stock certificate ensures that the transferee is deemed to have
Knowledge of the restriction
Under the default rules, provided there is a quorum, how many votes cast are required for the election of a director by the shareholders
Plurality of votes cast
When shareholders are granted cumulative voting rights in the articles of incorporation, each shareholder is entitled to
multiply the number of votes she is entitled to cast by the number directors for whom she is entitled to vote and cast the resulting product for a single candidate or distribute the product among two or more candidates.
When shareholders are granted cumulative voting rights in the articles of incorporation, each shareholder is entitled to
multiply the number of votes she is entitled to cast by the number directors for whom she is entitled to vote and cast the resulting product for a single candidate or distribute the product among two or more candidates.
What document includes how profits and losses are allocated among the members of the LLC.
LLC’s operating agreement
Steps to establish a corporation
File articles of incorporation with state corporation commission and pay registration fee
Articles of incorporation must include
Name of corp, number of authorized shares, and registered agent and office
Steps to create a general partnership
No filing, created whenever two or more persons created a business for profit as co-owners
Steps to create limited partnership
File certificate of limited partnership with state corporation commission and pay required fee
Certificate of limited partnership must include
Name of limited partnership, registered agent and office, principal office of limited partnership, and name and address of general partner
How can a general partnership be converted to a limited partnership
With approval of all partners and filing articles of limited partnership
Liability of partners in general partnership
Unlimited person liability for debts of partnership. jointly and severally liable for debts of biz
Liability of partners in limited partnershop
Limited partners have limited liability and are typically not liable unless they engage in control of business, third party reasonably believes they are a general partner and has no reason not to believe
Liability of shareholders in corp
Generally not liable for debts of corporation unless pierce corp veil.
Liability of members of LLC
Not personally liable for debts of corp unless pierce corp veil.
How are profits and losses distributed in corp?
Shareholders are issued stock in accordance w their investment. Directors issue dividends in accordance w the stock they hold
How are profits and losses distributed in LLC
According to the value of each member’s contribution
How are profits and losses distributed in general partnership?
Partners share profits equally and share losses in same way share profits
How are profits and losses distributed in Limited partnership?
According to the amount each LP contributes to partnership
What happens when one person acts on behalf of a corporation not yet formed?
anyone who purports to act on behalf of a corporation knowing that the entity has not been incorporated is personally liable unless the other party also knew that there was no incorporation.
What happens when officer/director/ person acts on behalf of a corp not yet formed but other officer does not know that corp has not formed?
Officer/director with no knowledge that corp didn’t form is not liable but party who knew is liable
Does dissociation by death of a partner cause dissolution of partnership?
No, the dissociation of a partner by death from a partnership at will does not trigger dissolution and winding up of the partnership.
What act must partnership do when a partner partnership continues to operate after partner dissociates?
the partnership must buy out the dissociated partner’s interest when the partnership continues after the partner’s dissociation.
Buyout price of dissociated partner’s interest
The greater of the partnership’s (1) liquidation value or (2) going concern value, on the date of dissociation.
Gen Partners are personally liable for
Debts of partnership
Partners are personally liable for
Debts of partnership
Does partner’s dissociation terminate their liability for partnership obligation that occurred before dissassociaton?
No liable for debts of partnership incurred before dissociation
Dissociated partner’s liability to third party
Dissociated partner is liable to third party who contracted w partnership within one year of partner’s dissociation and who reasonably believed dissociated partner was still a partner
What must partnership do after dissociated partner’s interest is bought out?
Indemnify the dissociated partner for all partnership obligations
What must partnership do after dissociated partner’s interest is bought out?
Indemnify the dissociated partner for all partnership obligations
Direct/officer cant usurp corp opportunity w/o first
offering the opportunity to the corp
Promoter liability
promoter is liable for pre incorporation duties, even after corp comes into existence unless they have been released by novation
Exception to promoter liability
third party who promoter dealt w knew that corp had not come into existence
Can promoter be indemnified by corp for pre incorporation K?
Yes
Does promoter have fiduciary duties?
Yes
When promoter is held personally liable for pre incorp Ls made in GOOD FAITH, promoter generally has right to
reimbursement from corp
Is corp liable for pre incorporation transactions?
No unless it expressly or impliedly adopts a K by accepting benefits of the transaction or gives an express acceptance of liability for the debt
Who must sign articles of incorp
at least one incorporator
Can a third party escape liability for a transaction w a C that is not a stated business purpose in its articles?
No
Who can challenge ultra vires acts by Corp?
only SHs
Who can amend Articles where Corp has no stock
only Board of Directors
How are articles amended where Corp has stock
BD amends and submit to SH for approval
Authorization of distributions rest with Board unless
restricted by articles
Are directors liable for unlawful distributions?
Yes, personally liable for unlawful distribution to C for amount in excess of lawful amount
SH agreements on limiting stock transfer are valid so long as
they have a lawful purpose and cannot create an undue restraint on alienation
Can articles set a different amount of votes required to be cast on a matter?
yes, typically a majorityb but articles can state a different amount not less than 1/3rd
How long is board of director’s term
typically 1 yr but no more than 3…
directors may be removed w/ or w/o cause unless
articles provide otherwise
D can resign at any time so long as
hes filed written notice to BD
Cap on Director’s liability is greater of
$100,000 or cash compensation D received during 12 month period immediately preceding conduct
BD must adopt resoltion authorizing a merger and give notice to
SHs not less than 25 no more than 60 days before meeting
Can Corp convert to a domestic LLC?
Yes
When may creditors of a corp dissolve the corp
when a claim has been reduced to judgment, remains unsatisified and C is bankrupt
Are members of a nonstock corp entitled to distributions?
no, but otherwise have same rights and restrictions as SH in stock
How is a benefit corp formed
by including statement in articles that identifies it as a benefit C
A dissolved C can dispose itself of known creditors by
(i) providing notice of dissolution
(ii) stating whether the claim is admitted or not admitted;
(iii) providing a mailing address where the claim may be sent
(iv) setting adeadline to confirm the claim
(v) stating that any claim not admitted will be barred if a confirmation is not received by the stated deadline
State corp commission may dissolve a corp if it finds that
(i) C has abused its authority
(ii) C has failed to keep a registered agent
(iii) C has failed to file a required doc; or
(iv) C has violated fed employment law
