corporations

Question 1

surplus

Answer 1

assets minus liability minus stated capital (par value of an issuance)

Question 2

From whom can director held liable for an unlawful distribution seek contribution?

Answer 2

from other directors who approved it and from shareholders who knew it was improper when they received it

Question 3

procedure for fundamental corp change

Answer 3

1) board takes action adopting resolution (both corps if merger, transfer, share exchange); 2) board must submit proposal to shareholders with written notice; 3) shareholders must approve by two-thirds of shares entitled to vote (required for disappearing/selling corp, unless 90% owned/short-form merger); 4) doc usually delivered to Secretary of State for filing

Question 4

Amendment of COF

Answer 4

board action and shareholder approval (two-thirds entitled to vote). Deliver amended COF to Secretary of State for filing.

Question 5

Shareholder remedy for director’s illegal, oppressive, or fraudulent acts:

Answer 5

fire for cause, sue for breach of fiduciary duty, or seek appointment of a receiver

Question 6

Time limit for claims against corporation arising before termination was asserted?

Answer 6

within 3 years after termination

Question 7

steps in liquidation process

Answer 7

a) gather all assets; b) convert to cash; c) pay creditors; d) distribute remainder to shareholders, pro-rata by share unless there is a liquidation preference.

Question 8

interested director transaction

Answer 8

valid if it was fair to the corporation or approved by a majority of disinterested directors or shares after disclosure of all material facts.

Question 9

fiduciary duty of care

Answer 9

The duty of care requires directors and officers to use the care an ordinarily prudent person would exercise under similar circumstances

Question 10

business judgment rule

Answer 10

Courts will not second-guess the board if it acted in good faith and with a reasonable basis (ex: giving a bonus to an officer)