Corporations Flashcards
What is “Corporation by Estoppel?”
A person dealing with an entity they believe is a corporation is estopped room on arguing that it is not a corporation.
What is Required to Find the Formation of Corporation?
De Jure Corp: acceptance of articles of incorporation by secretary if state’s office.
De Facto Corp: good faith attempt to comply with the incorporation statute.
What Are Promoters?
People who enter contracts on behalf of a forming corporation; promoter is liable until there is a notation substituting the corporation or until the corporation adopts the agreement.
Promoters owe the corporation a duty of loyalty to not usurp the corporations opportunities.
What Are Subscriptions?
Written offers to buy corporate stock. Pre incorporation subscriptions are irrevocable for 6 months unless provided otherwise. Post incorporation subscriptions are revocable until the corporation accepts them.
What is Validly Issued Stock?
Issued pursuant to articles of incorporation and authorized by appropriate body as noted in by laws.
What is Fully Paid Stock?
Traditional rule allowed money, tangible property, intangible property, or services already performed to constitute valid consideration. The modern trend is to allow any tangible or intangible property of benefit to the corporation.
What is Par Value?
The minimum issuance price for corporation’s stock
What is Watered Stock?
Stock that is not fully paid or was issued at a price below par value.
What Are a Shareholder’s Preemptive Rights?
A shareholder has the right to purchase more stock in order to maintain her percentage share of ownership whenever new common (voting) stock is issued for consideration.
What is the Function of Corporate Directors?
Statute requires one or more adults, shareholders must elect at an annual meeting or as provided in the by laws, shareholders can remove directors with or without cause, and a corporation may act through its board by unanimous written consent or through votes at a meeting.
What are a Director’s Duties to the Company?
Care - must act as prudent person. Nonfeasance creates liability for director if it caused a corporate loss; malfeasance creates liability only if the business judgment rule does not shield the director.
Loyalty - must not usurp corporate opportunity. Deals with interested directors are void unless they are fair to the corporation or the interest and relevant facts are disclosed to the corporation with an approval of majority of disinterested directors.
What is the Presumption of Director Action?
A director is presumed to have concurred with any board action unless her dissent or abstention is noted in rewriting. This will not apply to absent directors or if the director relies on another to note her dissent in good faith.
What is the Role of Indemnification in Corporate Affairs?
A Director is entitled to indemnification from legal expenses by the corporation if it is successful defending a suit rising out of its responsibilities as director.
A corporation may not indemnify a director if the director is liable to the corporation or received an improper personal benefit.
What are Shareholder Derivative Suits?
Shareholder sues to enforce claim of corporation against directors. Plaintiff must have
1) held shares at the time of questionable conduct;
2) must be able to adequately represent the corporation; and
3) must make a written demand of the corporation to bring suit, unless such demand would be futile.
What Are the Requirements for Share Voting Proxies?
A shareholder authorizes another shareholder to vote according to his interest. Valid for 11 months unless otherwise agreed, and revocable unless the proxy is coupled with an interest. Shareholders may also enter voting trusts or arrangements whereby their shares will be voted by a trustee or single proxy.
