Corporations

Question 1

de facto corp

Answer 1

business that doesn’t fulfill filing formalities may nonetheless be treated as a corp if organizers have made a good faith, colorable attempt to comply with corp formalities and have no knowledge of the lack of corp status

Question 2

piercing the corporate veil

Answer 2

avoid fraud or unfairness and to render SHs liable to 3rd party victim

Question 3

what does piercing the corporate veil require

Answer 3

SHs treat corp as their alter ego by failing to observe sufficient corp formalities OR corp is under capitalized

Question 4

who is liable when the corporate veil is pierced

Answer 4

SHs active in operation of corp or D

- courts are more willing to pierce veil for tort victim rather than K claimant

Question 5

promoter

Answer 5

person acting on behalf of unformed corp

• liable until novation
• solely liable if corp never formed

Question 6

corp formation requirements

Answer 6

• general purpose with perpetual duration valid and presumed (unless specific statement of purpose or limited duration)
• agent and address of registered office
• incorporators names and addresses
• name of corp with some indicia of corp status

Question 7

ultra vires

Answer 7

• if specific purpose in statement of purpose, activities that go beyond
• ultra vires Ks are valid

Question 8

treasury stock

Answer 8

stock previously issued and reacquired re-sold as no par

Question 9

duty of care

Answer 9

must act with care a prudent person would use with regard to her own business

Question 10

duty of loyalty

Answer 10

may not receive an unfair benefit to detriment of corp or SHs unless there has been material disclosure and independent ratification

• may not self deal
• may not usurp corp opportunity

Question 11

a corp comes into existence when

Answer 11

a charter is obtained by the state

Question 12

advantages of the corp form

Answer 12

• SHs, owners, have limited personal liability for corp debts and are ordinarily subject to lose only their investment in shares
• SHs may freely transfer ownership rights
• corp may have perpetual life
• corp has a regular form of mgmt decision making established by statute

Question 13

combinations of businesses a corp may not engage in under TBOC

Answer 13

• raising cattle and owning land therefor while operating stockyards and slaughtering, canning, curing meat
• petroleum oil producing business while in the oil pipeline business

Question 14

a director owes a fiduciary duty to her corp and is restricted from profiting at the…

Answer 14

expense of the corp

Question 15

notice of special meetings

Answer 15

required

Question 16

existing SH may exercise her preemptive rights to…

Answer 16

maintain her proportional voting strength

Question 17

any SH who has been a holder of record for at least 6 months or who owns at least 5% of the outstanding shares of the corp has the right to…

Answer 17

examine the corp’s books and records

Question 18

the share certificates of a close corp must conspicuously indicate

Answer 18

close corp status

Question 19

unless otherwise provided in the certificate of formation, a majority of shares entitled to vote, represented in person or by proxy constitute a…

Answer 19

quorum (may never consist of less than 1/3 of shares entitled to vote)

Question 20

SHs in a de jure corp are under an obligation to the corp or its director to…

Answer 20

pay full consideration for the shares

Question 21

SH will not be liable for any K obligation of a corp on the basis of actual or constructive fraud unless…

Answer 21

the obligee demonstrates the SH caused the corp to perpetrate an actual fraud on the obligee for direct personal benefit of the SH

Question 22

the initial board of directors, if chosen, must consist of ____ or more persons

Answer 22

one

Question 23

a proposed corp name may be reserved for ____ days by application to the secretary of state

Answer 23

120

Question 24

the certificate of formation must contain…

Answer 24

• the initial directors
• name of the corp
• purpose of the corp
• duration of the corp if not perpetual
• capital stock structure and SHs rights
• name and addresses of the corporate agent
• names and addresses of the organizers