corporations

Question 1

promoter liability exceptions

Answer 1

-novation
-promoter has no actual knowledge of corporation’s charter has not been issued
-3P knows corp has not been formed and agrees to look only to corporation for performance

Question 2

de facto corporation

Answer 2

-good faith effort to incorporate
-operates business without knowing reqs not met

Question 3

adoption

Answer 3

corporation adopts K

express: explicitly done
implicit: corporation accepts benefits of transaction

Question 4

corp is liable for promoter actions if

Answer 4

novation or adoption
**promoter only off hook if novation

Question 5

incorporaiton

Answer 5

files articles w/ state with proper purpose

Question 6

de jure corporation

Answer 6

when statutory requirements are met, then corporation is formed

Question 7

ultra vires

Answer 7

corporation has narrow purpose and engages in activities outside purpose

modern rule is that most corporations are allowed to engage in any legitimate business purpose and are not able to void contracts merely based on a claim of ultra vires action

SH or corp can sue or state

Question 8

de facto corporation

Answer 8

-good faith to incorporate
-operates business not knowing requirements are not met

Question 9

corporation by estoppel

Answer 9

-party deals with entity as if it is a corp
-estopped from denying existence and seeking SH liability

Question 10

par value

Answer 10

-corp must sell stock for at least par value as consideration
-if sells below then board is liable to corporation for difference between par value and actual price
-SH that receives while knowing it is below par value is liable

Question 11

10(b)(5) misrepresentation

Answer 11

Peter Parker = SPIDeR

P bought or sold security
P relied on D’s conduct

Scienter
P suffered harm
Interestate Commerce
Deception/fraud
Related to material info

Question 12

insider trading

Answer 12

-corporation nationally traded OR more than $10M and 500 SHs
-corporate insiders: D’s, O’s, 10% SHs
-6 month period of profits

Question 13

misrepresentation

Answer 13

IS DCF JR?

-intent
-scienter/knowledge

-damages
-causation
-false representation

-justifiable reliance

Question 14

shareholder meeting

Answer 14

-annual meeting required to elect directors

Question 15

shareholders and dividends

Answer 15

no right

Question 16

shareholder voting

Answer 16

-right to elect and remove directors
-fundamental corporate changes

Question 17

inspection

Answer 17

-five days written notice
-inspect bylaws, articles, minutes of SH meetings
-proper purpose related to SH if: financials, accountings, board meeting minutes

Question 18

proxy voting

Answer 18

written agreement by SH to allow proxy to vote for them

must be delivered to corp or its agent

valid for 11 months, revocable unless consideration

Question 19

SH agreements

Answer 19

binding K to vote in certain way

Voting agreements can be binding on successors in interest if the successor has notice of the agreement.

Question 20

direct action

Answer 20

only if there is direct harm

Question 21

derivative action

Answer 21

-contemporaneous ownership
-SH at time of harm
-maintain shares thorughout litigation
-fairly and adequately rep interests of corporation
-demand 90 days before filing or futile

Question 22

PCV

Answer 22

getting to SH’s personal in cases of fraud or unfairness - alter ego, undercapitalization, fraud

totality of circumstances:
-undercapitalization at formation
-disregard of corporate formalities
-commingling assets
-self dealing

CUDS = commingling, undercapitalization, disregard of formalities, self dealing

Question 23

controlling SHs

Answer 23

owe fiduciary duty to minority SHs to not use their power in a way to disadvantage them

-more than 50% share or enough share to enact changes in voting

Question 24

board voting

Answer 24

quorum must be present at meeting
quorum is majority

transferor board must vote on sale of substantially all assets

Question 25

board dividends

Answer 25

can declare unless: -not solvent -declaring would make them not solvent --> personal liability, unless relied in good faith on financial statements

Question 26

duty of care

Answer 26

duty to act as ordinarily prudent person in like position and similar circumstances can rely on outside experts and others in corp BJR

Question 27

BJR

Answer 27

rebuttable presumption that director reasonably thought actions were in best interests of corp. protect if in good faith. overcome: bad faith, severeduly uninformed so cannot reasonably make decision, material interest in decision, didn't investigate after beling alerted

Question 28

duty of loyalty

Answer 28

act in manner that is in best interests of corporation self dealing and corporate opps

Question 29

self dealing

Answer 29

director engages in transaction with corp that benefits themselves or family member, or another entity director or family is associated with safe harbor -disclose material facts to board and receives approval by majority of disinterested members -disclose material facts and receives approval by majority of disinterested SHs -fair to corporation remedies -injunction -rescinding -damages

Question 30

usurpation of corporate opportunity

Answer 30

director taking opp rather than offering it to corp. must present it first is cork seeking the opportunity? in line of business?

Question 31

authority corporations

Answer 31

express: defined by laws or set by board implied: duties of position apparent: like officer title

Question 32

S corps

Answer 32

taxed once limited number of SHs, residency req's

Question 33

LLC

Answer 33

limited liability of corps tax treatment of partnerships members not SHs

Question 34

director voting agreements

Answer 34

In general, an agreement between directors as to how to vote (i.e., a pooling agreement) is unenforceable.

Question 35

director proxy

Answer 35

directors cannot vote by proxy