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Missouri Bar > Corporations > Flashcards

Corporations Flashcards

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1
Q

Corporation definition

A

Legal entity separate from its owners by filing docs with secretary of state. No personal liability for shareholders, directors, officers.

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2
Q

De Jure Corporation

A

(1) Comply with all applicable statutory requirements

(2) File articles of incorporation with SOS

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3
Q

What info required in articles of incorporation?

A

(1) Name
(2) Number of shares issued
(3) Registered agent name/address
(4) Each incorproators name/address

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4
Q

Ultra Vires Acts

A

Corporations can only act within the scope of their business purpose. If no business purpose defined then its any lawful act.

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5
Q

De Facto Corporation

A

No formal formation, but court finds a corporation anyway - veil protection applied when:

(1) Statue existed where entity could have incorporated
(2) Attempted compliance with the statute
(3) Conduct of business in corporate name
(4) Didn’t know it wasn’t incorporated

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6
Q

Corporation by Estoppel

A

Parties act like they are corporation, and there is no statutory requirement to file.

Insulates against personal liability but not torts.

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7
Q

Elements justifying piercing corporate veil

A

(1) Alter Ego - treat corporate assets as their own
(2) Inadequate capitalization at time of formation
(3) Prevent fraud

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8
Q

If veil pierced, who is liable

A

Shareholders are jointly and severally liable.

Only applies to those active in the operation

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9
Q

Who is a promoter?

A

Before corporation formed - promoters get commitments for capital for use after company formed.

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10
Q

Promoter relationship/duty with each other

A

Have a fiduciary relationship with each other. Will breach if they act for their own interest.

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11
Q

Promoter relationship/duty with company

A

Fair disclosure and good faith.

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12
Q

Corporations liability with Promoter’s contracts

A

Promoter liable on all contracts and future corp is not until there is a novation (agreement in K that corp will replace promoter under K)

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13
Q

Shareholders power to run day-to-day affairs

A

Shareholders have no such power, unless corp’s articles or sharehodler agreement provides otherwise.

Power is vested in the board of directors, and sharehodlers elect the board.

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14
Q

Shareholder Meeting Elements

A

(1) Must have annual meetings
(2) Can be held within/outside the state
(3) Not less than 10 but no more than 60 days notice
(4) Notice must include location/date/time
(5) Notice must also include purpose if special meeting
(6) Shareholder vote count decided on day of notice, or if another date fixed.

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15
Q

what is a proxy?

A

Shareholder votes her shares in person or by proxy: (1) in writing (2) signed (3) sent to corp (4) authorizing another person to vote (5) valid 11 months.

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16
Q

Elements of shareholder voting

A

(1) Quorum - majority of outstanding shares, unless articles require greater number if director election
(3) One share one vote (unless cumulative voting - then shareholder gets as many votes per share as there are directors being elected - can cast anyway he likes).

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17
Q

Shareholder rights

A

Inspect books, papers, accounting, shareholder records on five days notice stating a proper purpose.

No purpose needed for: corps’ articles/bylaws, board resolutions, minutes, communications, list of names and addresses of officers and directors, annual report.

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18
Q

Preemptive rights to maintain proportional interest

A

Does not exist, unless in the articles OR when new stock is issued for cash.

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19
Q

Shareholder Suit

A

Shareholder can sue officer or director for breach of fiduciary duty OWED TO THE SHAREHOLDER.

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20
Q

Derivative Suits

A

Sharehodler sues to enforce corp’s cause of action. Must have (1) stock ownership when claim arose (2) written demand on corp to take action.

21
Q

Distributions Required?

A

At least one set of stock must receive corp’s net assets on dissolution. Beyond this distributions discretionary.

22
Q

Who decides distributions?

A

Board’s discretion - shareholders usually have no right to compel distribution.

23
Q

Distribution not allowed when

A

(1) Corp couldn’t pay its debts

(2) Total assets less than sum of its total debts.

24
Q

Types of distributions

A

Dividends, Redemption of shares, repurchase of shares, distribution of assets on liquidation.

25
Q

What is excluded from distributions and therefore not subject to the limitations?

A

Share dividends or stock dividends.

26
Q

Preference for Dividends

A

Ask if it is common or preferred stock.

(1) preferred means pay first
(2) Participating gets paid first AND paid again as common
(3) Common stock gets paid second/third
(4) Cumulative stock gets unpaid dividends first, then they get the current year, then everyone else.

27
Q

Shareholder liabilities generally

A

No fiduciary duty

28
Q

Sharehodler liability in Close corporation

A

Corporation with few shareholders - owe each other same duty of loyalty and good faith

29
Q

Board of Director powers

A

management of the business affairs of the corp.

30
Q

Board of Director Meeting requirements

A

(1) Regular meeting - held without notice or Special meeting - two days notice
(2) Quorum (majority unless articles require more)

31
Q

Director authority to bind company

A

No power to bind unless given actual authority by

(1) meeting of directors AND majority of directors approved action; OR
(2) unanimous written consent of the directors with no meeting

32
Q

Director’s Duties

A

(1) Care - reasonable prudence
(2) Loyalty - Not harm corporation
(3) Must manage - delegate this duty
(4) Protected by business judgement rule - burden on challenger

33
Q

What is Business Judgment Rule

A

Act in a way where they reasonably believe to be in the best interests of the corporation.

34
Q

Can Director’s Conflicting Interest Transaction be OK?

A

Yes - if

(1) transaction approved by majority of the directors
(2) transaction approved by majority vote of shareholders, or
(3) judged to be fair to the corporation
(4) interested director disclosed all material facts at the meeting to disinterested directors/shareholders

35
Q

Corporate Opportunity Doctrine

A

Director learns of business opportunity at interest to the director and corporation. In this case, director must:

(1) present opportunity to corporation first;
(2) Disclose all material facts
(3) Take advantage of opportunity only if corp turns it down first.

36
Q

Officers duties

A

No requirements to have officers- so their duties governed by articles and general agency law applies. Authority can be apparent or actual. Actions binding on corp if within officers authority.

37
Q

Indemnification of director, officer, employee

A

(1) MUST if they prevailed
(2) MAY if they did not prevail and show they acted in good faith and was in best interests of the corp.

NO indemnification if (1) director/officer found liable to company or (2) received an improper benefit

38
Q

Who makes decision for corporation to indemnify

A

(1) Majority of independent directors
(2) Majority of shareholders
(3) Special lawyers

39
Q

Elements to Conduct a Fundamental Change in Corporate Structure

A

(1) Board adopts resolution
(2) Written notice to shareholders
(3) Shareholders approve
(4) Change filed with the state
(5) Shareholder not in favor can force corp to buy shares at FMV (not available for publicly held companies)

40
Q

Disposition of More than 75% of Corporate Property

A

Considered a fundamental change in corporate structure and requires fundamental change procedure.

Ask if it could be a de facto merger - then seller would also assume the liabilities.

41
Q

How does corporation dissolve itself?

A

(1) If it hasn’t formed yet - majority of incorporates or initial directors may dissolve by delivering dissolution articles to state.
(2) If formed - follow fundamental change procedure. Corp. existence continues but cannot carry on business other than windup.

42
Q

Claims against a dissolved corp.

A

(1) Claim can be asserted
(2) If assets all distributed - assert against each shareholder for pro rata share.

Corp should cut short these claims by notifying claimants in writing of dissolution and giving deadline not less than 120 days.

43
Q

How is corporation administratively dissolved

A

(1) Failure to file annual report, registered agent in state
(2) State serves written notice
(3) If not fixed within 60 days of notice, state signs certificate of dissolution

Corp may reinstate within two years after dissolution date - showing issue fixed. Reinstatement relates back to the date of dissolution.

44
Q

Action by court or shareholders to dissolve corporation.

A

(1) Directors are deadlocked AND irreparable injury to corp threatened.
(2) Directors acting illegally, oppressively or fraudulently
(3) Failed to elect a director
(4) Assets being diverted for non-corporate purpose
(5) Corp abandoned business

45
Q

Foreign corporations requirements to do business

A

Must get certificate of authority from SOS

46
Q

10b-5 Cause of Action (Fraudulent action in relation to purchase or sale of security)

A

P must show:

(1) Fraudulent conduct (material and scienter required).
(2) In connection of purchase or sale of a security by P
(3) in interstate commerce
(4) P relied
(5) P has damages

47
Q

Sarbanes Oxley Act

A

CEO, CFO or similar person must certify in financial reports that

(1) officer reviewed the report
(2) report is true and contains no material omissions
(3) signing officer responsible for internal controls

48
Q

What do exculpatory provisions in articles protect against, and what can they not protect against

A

Can limit or eliminate director’s personal liability for money damages, but won’t work if

(1) director received a benefit which not entitled
(2) intentionally inflicted harm
(3) approved unlawful distributions
(4) intentionally committed a crime

Missouri Bar (15 decks)

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