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Corporations Flashcards

1
Q

Topics? (7)

(Formation)

A
  1. De Jure Corporation = Corporation Formed in Accordance with the Law
  2. De Facto Corporation
  3. Corporation by Estoppel
  4. Foreign Corporation
  5. Limited Liability for Shareholders
  6. Contract Formation
  7. Alternative Corporate Forms
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2
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Structure?

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(Formation: De jure Corporation = Corporation Formed in Accordance with the Law)

A
  1. Articles of Incorporation
    1. Number of Authorized Shares
    2. Purpose
      1. General Presumption
      2. Ultra Vires Doctrine
        1. Shareholder May Enjoin Ultra Vires Activity
        2. Directors & Officers Personally Liable to Corporation, OR
        3. State May Dissolve
    3. Identify Registered Agent(s)
    4. Identify Incorporators
    5. Name of Corporation
      1. Name Must Indicate Corporate Status
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3
Q

Requirements? (4)

(Formation: De Facto Corporation)

A
  1. Valid Corporation Law
  2. Colorable Good Faith Attempt to Comply
  3. Unaware that Attempt Invalid
  4. Corporate Action
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4
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Structure?

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(Formation: Corporation by Estoppel)

A
  1. Corporation
  2. Third Parties
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5
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Structure?

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(Formation: Foreign Corporation)

A
  1. Must File Certificate of Authority with CA Secretary of State
    1. Number of Authorized Shares
    2. Purpose
    3. Identify Registered Agent(s)
    4. Identify Incorporators
    5. Name of the Corporation
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6
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(Formation: Limited Liability for Shareholders)

A
  1. Piercing the Corporate Veil
    1. Only Controlling Shareholders Liable
    2. Only If justice Requires
      1. Torts v. Contracts
    3. Theories for Piercing the Corporate Veil
      1. Fraud
      2. Undercapitalization
      3. Alter Ego
      4. Enterprise Liability
      5. “Deep Rock” Doctrine
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7
Q

Exception?

(Formation: Contract Formation)

A

Exception: Corporation by Estoppel

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8
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Structure?

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(Formation: Alternative Corporate Forms)

A
  1. Closely-Held Corporation = Operate without Corporate Formalities
    1. Unanimous Shareholder Election
    2. Reasonable Share Transfer Restriction
  2. Sub-Chapter S = Avoids Corporate Taxation
    1. Formal Requirements
      1. Maximum 100 Shareholders
      2. American Residents
      3. Only One Class of Stock
  3. Professional Corporation = Corporation of Licensed Professional
    1. Applicable Professions
      1. Architects
      2. Attorneys
      3. CPAs
      4. Engineers
      5. Medical Professionals
    2. Filing Requirements
      1. Articles of Incorporation
        1. Must Label as Professional Corporation in Articles
          1. Professional Corporation
          2. Professional Association
          3. Service Corporation
          4. P.C.
          5. P.A.
          6. S.C.
      2. Purpose to Render Professional Services
        1. Only One Profession
      3. Shareholders Must be Licensed Professionals
    3. Limited Liability
      1. Liable For Own Malpractice or Misconduct
      2. Not Liable For Others’ Malpractice or Misconduct
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9
Q

Topics? (3)

(Capital Structure (Stock Issues) & Securities Regulation)

A
  1. Capital Structure
  2. Federal Securities Regulation
  3. Sarbanes-Oxley Act
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10
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Structure?

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(Capital Structure (Stock Issues) & Securities Regulation: Capital Structure)

A
  1. Issuance of Stock
    1. Consideration
      1. Par Value = The Minimum Issuance Price
        1. Shares Issued for Property
        2. Shares Issued For Less Than Par Value
          1. Directors
          2. Buyer of Shares
      2. No Par Value = No Minimum Issuance Price
        1. Treasury Stock = No Par Value
    2. Preemptive Rights
      1. Must be an Existing Shareholder
      2. Expressly Granted in Articles of Incorporation
  2. Debt Securities
  3. Shareholders’ Claims
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11
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Structure?

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(Capital Structure (Stock Issues) & Securities Regulation: Federal Securities Regulation)

A
  1. Publicly Held Corporation
  2. Section 16(b)
    1. Applicable To Large Companies Registered Under the 1934 Act
      1. $10 Million in Assets & 500 Shareholders, OR
      2. Listed on a National Stock Exchange
    2. Defendants
      1. Directors
      2. Officers
      3. > 10% Shareholders
    3. Profits
    4. Strict Liability Provision = No Defenses
  3. Rule 10b-5
    1. Rule 10b-5 Elements
      1. Scienter = Intent to Deceive
      2. Deception
        1. Misstatements of Material Fact
        2. Failure to Disclose Material Fact, OR
        3. Insider Trading
          1. Insiders
          2. Misappropriation
          3. Tippers & Tippees
            1. Tippers
            2. Tippees
      3. In Connection with the Actual Purchase or Sale of a Security
      4. In Interstate Commerce
      5. Reliance = Private Actions Only
      6. Damages = Private Actions Only
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12
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Structure?

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(Capital Structure (Stock Issues) & Securities Regulation: Sarbanes-Oxley Act)

A
  1. Applicable To Large Companies Registered Under the 1934 Act
    1. $10 Million in Assets & 500 Shareholders, OR
    2. Listed on a National Stock Exchange
  2. Penalty
  3. Civil Liability
    1. False Reports
    2. Insider Trading During Pension Black-Out Periods
      1. Pension Blackout Periods
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13
Q

Topics? (5)

(Shareholders)

A
  1. Shareholder Control
  2. Shareholder Rights
  3. Shareholder Voting Agreements & Voting Trusts
  4. Distributions: Dividends, Redemptions and Repurchases
  5. Limited Liability for Shareholders
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14
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Structure?

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(Shareholders: Shareholder Control)

A
  1. Direct Control
  2. Indirect Control
    1. Shareholders Elect & May Remove Directors With & Without Cause
    2. Shareholders May Adopt & Modify Bylaws
    3. Shareholders Must Approve Fundamental Corporate Changes
    4. Merger
    5. Sale of Assets Outside Ordinary Course of Business
    6. Dissolution
    7. Other Extraordinary Corporate Matters
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15
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(Shareholders: Shareholder Rights)

A
  1. Derivative Suits
    1. Contemporaneous Stock Ownership
      1. When Cause of Action Arose
      2. Throughout the Entire Litigation
    2. Written Demand to Board of Directors
      1. 90 Days
        1. Notified of Rejection by Board
        2. Irreparable Injury
  2. Voting Rights
    1. Registered Owner on Record Date
      1. Record Date
    2. Proxies
      1. Requirements for Valid Proxy
        1. In Writing
        2. Signed by Record Owner
        3. Sent to the Corporation’s Secretary
        4. Authorizes Vote
          1. Valid for 11 Months
      2. Revocability of Proxy
        1. Conspicuously States that Proxy Irrevocable
        2. Coupled With an Interest in Shares Themselves
          1. Pledgee
          2. Purchaser
          3. Creditor
          4. Employee
          5. Voting Agreement
  3. Shareholders’ Meetings
    1. Annual Meetings
    2. Special Meeting
      1. Who Can Call Special Meeting
        1. Board of Directors
        2. Other Authorized Persons, OR
        3. 10% of the Votes Entitled to Be Cast at the Meeting
      2. Purpose?
        1. Proposals
        2. Fundamental Changes
    3. Notice Requirements
      1. Not Less Than 10 days or More Than 60 days
      2. Must Include Time Time & Place of Meeting
        1. Notice for Special Meetings Must Contain Purpose
    4. Voting
      1. Quorum Requirement = Majority of All Outstanding Shares
      2. Voting Requirement = Votes in Favor > Votes in Opposition
      3. Director Elections
        1. Cumulative Voting
          1. Must Be Expressly Granted in the Articles
  4. Shareholder Inspection Rights
    1. 5 Days Written Notice
    2. State Proper Purpose
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16
Q

Structure?

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(Shareholders: Shareholder Voting Agreements & Voting Trusts)

A
  1. Voting Trusts
    1. In Writing
    2. Filed With Corporation
    3. Transfer of Legal Title to Voting Trustee
    4. Trust Certificate Issued to Shareholders
    5. Shareholders Retain All Rights Other than Voting
    6. Duration = 10 Year Limit
  2. Voting (Pooling) Agreements
    1. In Writing & Signed by Shareholders
    2. Binding & Enforceable on All Signors
  3. Management Agreements
    1. Set Forth in Articles, Bylaws or Written Agreement Approved By All Shareholders
    2. Valid for 10 Years
    3. Terminate Upon Listing on National Securities Exchange
17
Q

Structure?

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(Shareholders: Distributions: Dividends, Redemptions and Repurchases)

A
  1. No Right to Dividends = Discretionary
    1. Insolvent or Dividend Will Render Corp Insolvent
      1. Defense: Good Faith Reliance
  2. Priority of Dividends
    1. Preferred Stock
      1. Cumulative Preferred Stock
      2. Participating Preferred Stock
    2. Common Stock
18
Q

Structure?

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(Shareholders: Limited Liability for Shareholders)

A
  1. Piercing the Corporate Veil
  2. Fiduciary Duties of Controlling Shareholders
    1. Sale & Subsequent Looting
      1. Defense: Reasonable Investigation of Character & Reputation
19
Q

Topics? (4)

(Directors)

A
  1. Powers
  2. Rights & Duties of Directors
  3. Director Liability
  4. Removal of directors
20
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Structure?

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(Directors: Powers)

A
  1. Requirements for Binding Board Action
    1. Meeting Requirement
      1. Exception: Unanimous Written Consent
    2. Notice Requirement
      1. Regular Meetings
      2. Special Meetings
    3. Quorum Rules for Binding Board Action = Majority of All Directors
      1. Conference Calls Ok
    4. Voting Requirements for Binding Board Action = Majority of Directors Present
      1. No Proxies
      2. Conference Calls Ok
  2. General Presumption
21
Q

Structure?

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(Directors: Rights & Duties of Directors)

A
  1. Duty to Manage
    1. Business Judgment Rule
      1. Good Faith
      2. Rational Basis
      3. Reasonably Informed
  2. Duty of Care
    1. Articles May Limit Directors’ Liability
    2. Defense = Business Judgment Rule
      1. Good Faith
      2. Rational Basis
      3. Reasonably Informed
  3. Duty of Loyalty
    1. Standard for Upholding Interested Director (Self-Dealing) Transactions
      1. Material Disclosure
      2. Independent Ratification
        1. Majority Vote of Independent Directors
        2. Majority Vote of Committee with at Least 2 Independent Directors, OR
        3. Majority Vote of Shares Held By Independent Shareholders
    2. Usurping Corporate Opportunities
      1. Corporation Must Have an Interest or Expectancy
      2. Personal Capacity Defense
      3. Lack of Adequate Financing No Defense
  4. Duty to Disclose
  5. Right to Appoint & Fire Officers
  6. Compensation
22
Q

Structure?

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(Directors: Director Liability)

A
  1. Indemnification
    1. Never Available = Director Found Liable to Corporation
    2. Always Available = Director Wins Successful Claim
    3. Permissive = Director Liable to 3rd Party or Director Settles With Corporation
      1. Majority Vote of Independent Directors
      2. Majority Vote of Committee with at Least 2 Independent Directors
      3. Majority Vote of Shares Held By Independent Shareholders, OR
      4. Special Lawyer’s Opinion Recommends Indemnity
23
Q

Structure?

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(Directors: Removal of Directors)

A
  1. Shareholders Removal With & Without Cause
  2. Removal for Fraud or Gross Abuse of Authority
24
Q

Topics? (5)

(Officers)

A
  1. Fiduciary Duties = Same as Directors
  2. Agents of the Corporation
  3. Required Officers
  4. Officer Liability
  5. Resignation & Removal
25
Q

Structure?

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(Officers: Fiduciary Duties = Same as Directors)

A
  1. Duty of Care
  2. Duty of Loyalty
26
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Structure?

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(Officers: Agents of the Corporation)

A
  1. Actual Authority
    1. Express Authority
    2. Implied Authority
      1. Necessity
      2. Custom, OR
      3. Prior Dealings
  2. Apparent Authority
27
Q

Structure?

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(Officers: Required Officers)

A
  1. President
  2. Secretary
  3. Treasurer
28
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Structure?

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(Officers: Officer Liability)

A
  1. Indemnification
    1. Never Available = Officer Found Liable to Corporation
    2. Always Available = Officer Wins Successful Claim
    3. Permissive = Officer Liable to 3rd Party or Director Settles With Corporation
      1. Majority Vote of Independent Directors
      2. Majority Vote of Committee with at Least 2 Independent Directors
      3. Majority Vote of Shares Held By Independent Shareholders, OR
      4. Special Lawyer’s Opinion Recommends Indemnity
29
Q

Structure?

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(Officers: Resignation & Removal)

A
  1. Resignation
  2. Removal
30
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Structure?

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(Pre-Incorporation - Promoters, Subscribers & Incorporators)

A
  1. Promoters
    1. Fiduciary Duties
      1. Fiduciary Duty to Other Promoters
      2. Fiduciary Duty to Corporation = Good Faith & Fair Disclosure
        1. Secret Profit Rule
          1. Property Acquired Before Promoter
          2. Property Acquired After Promoter
    2. Liability on Pre-Incorporation Contracts
      1. Corporation Liability
        1. Express Adoption
        2. Implied Adoption
          1. Knowledge of Contract
          2. Acceptance of Benefits Without Protest
        3. Effect of Adoption on Promoter’s Liability
      2. Promoter Liability
        1. Novation
        2. Corporation Never Formed = Promoter Personally Liable
        3. Adoption But No Novation = Promoter Personally Liable
          1. Indemnification From Corporation
  2. Subscribers
    1. Pre-Incorporation Offer to Buy Stock Irrevocable for Six Months
  3. Incorporator
31
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Structure?

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(Changes in Corporate Structure)

A
  1. Types of Fundamental Change in Corporate Structure
    1. Merger (A + B = B)
    2. Consolidation (A+ B = C)
    3. Dissolution
    4. Fundamental Amendment to Articles
    5. Sale of Substantially All of the Corporation’s Assets
  2. Procedural Requirements for Fundamental Changes
    1. Board Resolves to Change at Valid Meeting
    2. Special Notice for Special Meeting
    3. Shareholder Approval
      1. Majority of All Shares Entitled to Vote
      2. Majority of Any Voting Group Adversely Affected by the Change
    4. Notice of Change Filed with the State
  3. Short-Form Merger
    1. Definition
    2. Requirements
      1. Board Approval
      2. Notice to Shareholders
  4. Dissenter’s Rights
    1. Procedure
      1. Before Vote: SH Must Give Written Notice of Objection & Intent to Demand Payment
      2. Vote Against or Abstain From Voting
      3. After Vote: SH Must Promptly Demand Payment
    2. Fair Value

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