Corporations

Question 1

Promoters

Answer 1

-Corp not yet formed
-Promoter liable until novation or fiduciaries
Corp liable if adopts K by express board of directors resolution or implied adoption through knowledge and acceptance of its benefits (promoter can still be liable)

Question 2

Subscribers

Answer 2

People who make written offers to buy stock from a corp. not yet formed (irrevocable for 6 months)

Question 3

De Jure Corporation

Answer 3

Incorporator signs and files articles (APAIN)
Articles include: Authorized shares; Purpose; Agent; Incorporators; Name of Corp
NOTE: Can be De Facto corp

Question 4

Piercing the Corporate Veil

Answer 4

General Rule - SH not liable EXCEPT:

PCV to void fraud or unfairness: (1) failure to observe corporate formalities; OR (2) undercapitalization

Question 5

Par Value

Answer 5

Minimum issuance price (obsolete in IL)
Any valid consideration if deemed adequate by board
NOTE: Treasury stock is NO PAR STOCK

Question 6

Preemptive Rights

Answer 6

Right of SH to maintain % ownership

Must be expressly granted in the articles

Question 7

Valid Meeting for Board Action

Answer 7

Notice - at least 2 days notice stating time and place of meeting
Proxies not allowed
Quorum - majority of ALL directors (can be through phone too and must be able to hear each other simultaneously)
Vote - majority of those present

Question 8

Liability of Directors (MCL + BJR)

Answer 8

Duty to Manage
BJR - presumption that directors acts in good faith and in best interest of corp - challenger has burden to show no
Duty of Care - act as a prudent person - consider inside and outside information
Duty of Loyalty - cant receive unfair benefit to detriment of cop unless material disclosure and ind. ratification

Question 9

SH Derivative Suit (CAD)

Answer 9

Contemporaneous stock ownership
Adequacy - fairly and adequately rep corps interest
Demand on directors - rejected or 90 days pass
NOTE: In IL demand excused if futile

Question 10

Proxy Voting

Answer 10

(1) Writing
(2) Signed by SH
(3) Sent to Sec of Corp
(4) Authorizing another
(5) Valid for 11 months
REVOCATION: Proxies Revocable unless (1) labeled irrevocable and (2) coupled with an interest (sale of shares) —-This is an exception to the record date requirement

Question 11

Priority of Distribution

Answer 11

Common stock paid last and equally
Preferred - paid first
Participating - paid twice - Preferred and C/S
Cumulative - paid for prior years and current years

Question 12

Closely Held Corps

Answer 12

(1) Unanimous SH election
(2) Share transfer restriction
Consequence: NO PCV and possible S Corp

Question 13

Limited Liability Company

Answer 13

Hybrid b/t corp and p-ship

Limited control, liquidity, life and tax

Question 14

Anti-Fraud - 10(b)

Answer 14

Scienter - intent to deceit
Deception (lie/insider trading)
In connection with actual purchase or sale of securities
for private action need reliance and loss causation

Question 15

Shareholder Voting

Answer 15

Properly noticed annual meeting - at least 1 director slot open for election; time place must be notified
Special notice if proposal or fundamental change
Quorum - Majority of outstanding shares unless otherwise stated (votes cast in favor > those against)
Director Vote = most votes wins

Question 16

Types of Shareholder Voting

Answer 16

Voting trust - formal delegation i n writing of voting power to a voting trustee
SH Voting Agreement - stock owners enter agreement in writing to vote shares 
Cumulative Voting (must be stated in articles; presumed in IL) - Multiply number of shares times number of directors to be elected

Question 17

Professional Corporations

Answer 17

(1) Only licensed pros can be SH and may practice only one profession
(2) Liable personally for own malpractice but not for each others
Must end in Ltd or PC

Question 18

Fundamental Corporate Changes (Merger (not short form merger) or Fundamental Amendment of the Articles)

Answer 18

Procedure: resolution by board at valid meeting, notice of special meeting; approval by majority of all shares entitled to vote and by a majority of each voting group affected by the change (2/3 in IL)
SH can get appraisal rights