CORPORATIONS Flashcards
When does a corporation’s existence begin?
The date the articles are filed with the Secretary of State, unless a delayed effective day is specified.
What must the articles of incorporation contain?
- Name
- Number of shares authorized to issue
- Address of registered office and name of agent for service of process
- Name and address of each incorporator
What is required for LLC formation?
Filings of Articles of Organization must be properly filed with the Secretary of State and the company must have at least one member.
What is the governing document of an LLC?
Operating Agreement.
What is a de jure corporation?
A legally formed corporation.
What happens if a corporation is not legally formed?
It cannot enter into contractual obligations, resulting in personal liability for the owners or promoters, unless the de facto corporation exception applies.
What is a de facto corporation?
An entity that makes a good faith attempt to incorporate, is eligible to incorporate, and takes action indicating it considers itself a corporation.
What is corporation by estoppel?
Any person or entity that treated a business as a corporation may be estopped from denying that the business is a corporation, even if not validly formed.
Who is a promoter in corporate law?
A person who acts on behalf of a corporation that has not been formed yet.
What are the exceptions to promoter liability?
- Subsequent novation removing the promoter as a party to the contract
- Contract explicitly provides that the promoter has no personal liability.
When is a corporation liable for pre-incorporation contracts?
A corporation is not liable unless it adopts the contract.
What constitutes ultra vires acts?
Activities outside the scope of a corporation’s articles of incorporation.
What is the common law stance on ultra vires acts?
Such acts are deemed void and unenforceable.
Under the RMBCA, how can a corporation’s ultra vires acts be challenged?
- Shareholder sues the corporation
- Corporation sues an officer or director for damages
- State brings action to dissolve the corporation.
What is the power of a corporation under the RMBCA?
A corporation has the power to do all things necessary or convenient to carry out its business and affairs.
When can a court pierce the corporate veil?
- When the corporation acts as an alter ego of the shareholders
- Shareholders fail to follow corporate formalities
- Corporation is inadequately capitalized at inception.
What is watered stock?
Stock issued at a price greater than its actual market value, exposing the stockholder to liability up to the actual value.
Who decides to declare dividends or issue distributions?
The board of directors.
What must a valid proxy include?
It must be signed, on an appointment form, or an electronic submission; an oral proxy is invalid.
What is a voting trust?
A more formal agreement where the trustee votes shares according to the voting trust agreement.
What rights do shareholders have to inspect corporate records?
They have an unqualified right to inspect and copy records during regular business hours with 5 days written notice.
What is required for a board of directors to act?
A quorum must be present; a majority is necessary unless stated otherwise in articles.
How is the compensation of directors determined?
The board of directors determines it, ensuring it aligns with reasonable parameters.
What is the duty of care for directors and officers?
They must discharge their duties in good faith, in a manner they reasonably believe to be in the corporation’s best interest, and with appropriate care.
