Corporations Flashcards
Limited Liability Company (LLC)
As an introductory matter, a limited liability company, an LLC, is a business entity in which the members of the LLC have limited liability for the debts and obligations of the entity, but still receive the favorable pass-through tax treatment that partners in a partnership receive. Formation of an LLC requires a filing with the state, and is typically managed by an operating agreement that details how the LLC will be managed and how it will operate. An LLC typically has a board of managers or a manager who is responsible for the daily operation of the LLC.
Duty of Loyalty and Care
First, managers of an LLC owe the fiduciary duties of care and loyalty to the LLC. They must act in the best interest of the LLC at all times and exercise due care and diligence in deliberating on and making decisions regarding the LLC. Managers also owe a duty of loyalty in which they will refrain from engaging in self-dealing transactions with the LLC and will not take or use corporate assets or opportunities for their own personal gain
Derivative Suit
A shareholder in an LLC may bring a derivative suit against the entity to attempt to force the entity to bring a valid claim that the entity has. This requires that a demand on the company be brought in order to bring the claim.
Judicial Dissolution
Judicial dissolution will be granted when there is deadlock within the company that threatens the future of the entity.
Shared Equally
In an LLC it is assumed that profits and losses are shared equally unless otherwise provided for in the operating agreement. However, one of the benefits of the formation of an LLC is that members do not have individual liability for the debts and obligations of the LLC beyond their initial investment in the company.
Notice of the special meeting
Unless the articles of incorporation or bylaws provide otherwise, notice of a special meeting of a corporation’s board of directors must be given at least two days prior to the date of the meeting. MODEL BUS.CORP.ACT(MBCA) § 8.22(b). The notice must include information regarding the time, location, and date of the meeting but does not need to include information regarding the purpose of the meeting. Id.
Waiving the notice
A director who does not receive notice of a special meeting of the board of directors at least two days prior to the meeting does not receive proper notice of that meeting. (See Point One(a).) However, a director who attends a special meeting of the board of directors despite not receiving proper notice waives such notice unless the director objects to the holding of the meeting and thereafter does not vote at the meeting. MBCA § 8.23(b).
Quorum
In order for action taken at a special meeting of directors to be proper, a quorum must be present at the meeting. MBCA § 8.24(c). Unless the articles of incorporation or bylaws provide otherwise, when a corporation has a fixed number of directors, a quorum consists of a majority of that fixed number. Id. § 8.24(a)(1).
Majority vote of directors
The purchase of the asset did not receive the required number of votes and was therefore not properly approved by the board of directors.
Unless the articles of incorporation or bylaws provide otherwise, if a quorum is present when a vote is taken, a majority vote of directors present is the act of the board of directors. MBCA§ 8.24(c). Here, a quorum was present when the vote was taken (see Point Two). However, there were only five members of the board of directors present at the special meeting.
