Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

Bar Prep > Corporations > Flashcards

Corporations Flashcards

You may prefer our related Brainscape-certified flashcards:
MBE flashcards
1
Q

Who are promoters?

A

Persons acting on behalf of a corporation not yet formed.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

When is a corporation liable for a promoter’s pre-incorporation contracts?

A

Corporation adopts the contract either by express board of directors resolution or implied adoption through knowledge of K and acceptance of benefits.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

What is a novation?

A

An agreement between the promoter, corp., and other contracting party that the corporation will replace the promoter under the contract. This absolves the promoter of liability.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

Until what point does the promoter remain liable on a K?

A

Until a novation.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

Who is liable if promoter enters a K but the corporation is never formed?

A

Promoter alone is personally liable.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

Who is liable if the promoter enters a pre-incorporation K, and the corporation merely adopts the K?

A

Corporation is liable upon adoption and promoter liable until novation. Both liable upon election of 3d party.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

What duties do promoters owe the corporation?

A

They are fiduciaries. Cannot make secret profits off dealings for corp.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

What if a promoter has made a profit off a secret dealing?

A

Corp may disgorge all profit made by resale of property she required as promoter even if resale price is FMV.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

Who are subscribers?

A

Persons or entities who make written offers to buy stock from a corp. not yet formed.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

Is a pre-incorporation offer to buy stock revocable?

A

No. Not for 6 mos. after the offer.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

What must incorporators absolutely do to form a corporation?

A

Sign and file articles of incorporation w/ S.C.C.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

What must the articles of incorporation include?

A

APAIN. (1) Authorized shares (max # shares corp. may issue); (2) describe Preferences, rights, and priorities assigned to each class of stock; (3) Agent and address of registered office (official legal representatives); (4) Incorporators; (5) Name of corp. must contain some indicia of corp. status.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

Do the bylaws have to be in the Articles?

A

No. But corp. must adopt by laws. Articles give the power to SHs, but board has power to adopt and amend bylaws.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

What is the legal significance of formation of corporation?

A

Illegal to do business unless properly formed as a corp. (if try and fail, a corp. is partnership, so liability attaches). A corp. is a separate legal person. SHs not a liability.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

Why will the court pierce the corporate veil?

A

Avoid fraud or unfairness and to render SH liable to 3d party.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

What are the reasons the court will pierce the corporate veil?

A

Alter ego, undercapitalization, failure to observe corporate formalities.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

What is the alter ego manner of piercing the corporate veil?

A

Controlling owner of stock fails to observe sufficient corporate formalities.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

What is the undercapitalization manner of piercing the corporate veil?

A

Corporation fails to maintain sufficient money to cover foreseeable liabilities.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

How may foreign corporations (incorp. outside VA) qualify to transact business in VA?

A

Transacting business means regular course of interstate business activity. Must get a certificate of authority from SCC that includes APAIN.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q

What are the consequences of transaction business w/o qualifying?

A

(1) Modest fine could be levied; (2) May not initiate lawsuit in VA state court.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
21
Q

What is par value?

A

Minimum issuance price. Applies where corporation issues its own stock.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
22
Q

Can property be acquired with par value stock?

A

Yes. Any valid consideration can be received if board values consideration for at least par value.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
23
Q

What is no par and what does it mean?

A

“No minimum issuance price.” Any valid consideration can be received if deemed adequate by the board.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
24
Q

What is treasury stock?

A

Stock previously issued and reacquired by the corporation. It can then be re-sold. It is deemed to be no par stock.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
25
Q

What are the consequences of issuing par stock for less than par value?

A

No double recovery but may choose who to sue. Directors may be personally liable for authorizing a below par issuance or purchasing SH may be liable for paying full consideration for shares.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
26
Q

What are preemptive rights?

A

Right of an existing SH to maintain her percentage of ownership by buying stock whenever there is a new issuance of stock for cash.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
27
Q

When do preemptive rights exist?

A

Only when expressly granted in the Articles.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
28
Q

What are the requirements for the Board of Directors?

A

Must have at least 1 member. Elected by owners of stock. SHs can remove directors before term expires w/ or w/o cause.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
29
Q

What about board of directors meetings?

A

Mtg required for all board action; notice of mtg can be set by bylaws; proxies not allowed and no voting agreements; need a majority of all directors present to do business but only need a majority vote of those present.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
30
Q

What is the basic rule regarding the liability of directors to own corporation and SHs?

A

Directors have a duty to manage the corp. Directors generally protected by BJR i.e. no liability for mistakes of business judgment. BUT may be liable for breaches of duty of care and duty of loyalty.

31
Q

What is the duty of care?

A

Must act with the care that a prudent person would use with regard to her own business unless Articles have limited director liability for a breach of duty of care.

32
Q

What is the duty of loyalty?

A

May not receive an unfair benefit to the detriment of the corporation or its SHs, unless there is a material disclosure and independent ratification. No self-dealing or usurping corporate opportunities, UNLESS ratification.

33
Q

What does no-self dealing mean?

A

Director who receives an unfair benefit to herself in a transaction with own corporation i.e. interested director transaction.

34
Q

What does usurping corporate opportunity mean?

A

Director receives unfair benefit by usurping for herself an opportunity which corporation would have pursued.

35
Q

What is ratification?

A

Directors may avoid liability by obtaining independent ratification through a majority vote of independent directors or a majority vote of shares held by independent SHs.

36
Q

When must/must not a corporation indemnify a director?

A

NEVER if director is held liable to own corporation; ALWAYS if director wins against any party.

37
Q

When may a corporation indemnify?

A

Liability to 3d parties or settlement w/ corporation; director or officer shows he acted in GF and w/ reasonable belief.

38
Q

Who may determine whether to grant permissive indemnity?

A

1) Majority of independent directors approve; 2) majority of committee of 2+ independent directors; 3) majority of shares held by SHs vote; 4) special lawyer’s opinion recommends it.

39
Q

What is a derivative suit?

A

SH is suing to enforce the corporation’s COA. Always ask: could corporation have brought the suit? If yes, it’s a derivative suit.

40
Q

What are the requirements for bringing a derivative suit?

A

Contemporaneous stock ownership (own 1 share stock when claim arose and fairly/adequately represent corp. interests) and must make demand on directors that the corporation bring suit (demand must be rejected or 90 days must pass).

41
Q

What are the consequences of a successful derivative suit?

A

Recovery only goes to corp itself and is capped in VA by individual director’s last 1 year cash compensation or 100K, whatever is greater.

42
Q

Which SHs have the right to vote at a meeting?

A

Only the record SH of the SH date has a right to vote.

43
Q

Who is the record owner?

A

Person show as the owner in the corporate records no later than 70 days before the meeting.

44
Q

What is a proxy?

A

Writing or electronic transmission authorized by record SH directed to secretary of corporation authorizing another to vote the shares. Valid for maximum of 11 months.

45
Q

When is a proxy interest irrevocable?

A

When 1) labeled irrevocable and 2) coupled with an interest or consideration.

46
Q

What are the meetings at which SHs vote?

A

(1) Annual meeting at which 1 director slot open for election; (2) Special meeting of SH to vote on proposal or fundamental corporate change.

47
Q

What are the notice requirements for a meeting?

A

Must give written notice to every SH entitled to vote for every meeting. For annual meeting must disclose time and place; for special meeting must give notice of meeting’s special purpose because nothing else can happen in meeting that isn’t in the special notice.

48
Q

What is the timing requirement for meeting notice?

A

Timing must be 10-60 days prior to meeting; 25-60 days prior for fundamental corporate change.

49
Q

What is the consequence of failure to give notice to all SHs?

A

Action taken at meeting void unless those w/o notice waive objections in writing or by attending meeting.

50
Q

What is a quorum for purposes of SH meetings?

A

Majority of all shares must be represented (in person, by proxy, or by electronic transmission) when the meeting starts. A quorum cannot be broken by leaving a meeting.

51
Q

When is a vote approved?

A

When a quorum is present, action is approved if the votes for it exceed votes against it, unless the Articles require higher vote.

52
Q

What is the difference between a voting trust and voting agreement?

A

Voting trust is a formal written delegation of voting power to voting trustee for up to 10 years; a voting agreement is an agreement in writing to all vote shares as a majority of assignors direct.

53
Q

What is straight voting versus cumulative voting?

A

Under straight voting, you can vote the number of your shares for M in each of 9 separate elections. Under cumulative voting, the number of shares you hold is multiplied by the number of elections and you vote total votes in one election.

54
Q

How do you know if you have straight or cumulative voting?

A

Cumulative voting must be provided for in the Articles.

55
Q

When may SH inspect and copy the books and records of the corporation?

A

Unqualified right when SH upon a signed written request giving 5 days advance notice may inspect and copy corporate records maintained at the corporation’s principal office. Qualified right when SH who has been a record holder for more than 6 mos. or owns more than 5% of stock or who obtains court approval may inspect additional books and records upon 5 days written notice stating proper purpose.

56
Q

When are dividends distributed?

A

No right to dividends. Board has discretion to issue.

57
Q

What is the priority of distribution of dividends?

A

Preferred means paid first. Participating preferred shares get paid twice. Cumulative preferred shares means right to received prior missed dividend payments. Common shares get paid last and equally.

58
Q

When can a corporation never offer dividends?

A

Corporation is insolvent or a dividend would render the corporation insolvent.

59
Q

Directors are personally liable for unlawful dividends or distributions. What are the defenses?

A

GF reliance on financial officer’s representation and right to contribution from co-defendants and SHs who receive unlawful dividend payments.

60
Q

When can SH agreements eliminate formalities?

A

Nonpublic corporations or unanimous SH agreement in articles or by-laws. Valid for 10 years unless otherwise indicated.

61
Q

What are the consequences of SH agreement eliminating formalities?

A

1) Court won’t pierce the veil to render you liable even if fail to observe formalities, 2) possible sub-chapter S-Corp status, treated as partnership for tax status if no more than 100 owners of stock + 1 class of stock.

62
Q

What is an LLC?

A

Limited liability of corporation and beneficial tax status of a partnership. To form, file articles of organization and made out operating agreement.

63
Q

How is an LLC controlled?

A

Owners (members, like SH) may manage biz or delegate control to team of managers (like directors).

64
Q

How long does an LLC last?

A

Company will dissolve on unanimous consent of members or as provided in articles or operation agreement.

65
Q

Does an LLC have limited liquidity?

A

Full membership interest may not be transferred w/o majority vote of members or as provided in Articles or operating agreement.

66
Q

What is the overview of rules about LLCs?

A

limited liability, life, liquidity, and tax.

67
Q

How are VA business trusts formed and what are the formalities?

A

File articles of trust w/ S.C.C. that create managing trustee and beneficial owners.

68
Q

What are the liability and life of a VA business trust?

A

Beneficial owners may manage trust w/o liability and perpetual trust for any lawful business.

69
Q

What are the characteristics of fundamental corporate change?

A

Merger, consolidation, share exchange, dissolution; OR fundamental amendment of articles, sale of substantially all assets.

70
Q

What are the procedural steps for fundamental corporate change?

A

Resolution by board at valid meeting, notice of special meeting, approval by more than 2/3 of all shares entitled to vote, possibility of dissenting SH remedy, and then file notice with SCC.

71
Q

How can an SH get right of appraisal to force the corporation to buy shares at fair value?

A

Before SH vote, file written notice of objection to change and intent to demand payment. At the vote, vote against or abstain. After the vote, make a timely demand in writing to be bought out. If SH and corp. can’t agree on fair value, court appoints expert appraiser.

72
Q

When may a corporation’s articles be amended?

A

If ministerial, board may make changes on own. If fundamental, more than 2/3 all outstanding shares must vote for the change. If change adversely affects a class of stock, 2/3 all shares of that class must vote for the change, no right of appraisal.

73
Q

What about the sale of all or substantially all assets not in OCOB?

A

This is a fundamental corporate change for the selling corporation only. 2/3 all shares must approve and rights of appraisal.

Bar Prep (25 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions