Corporations Flashcards
When does corporate existence begin?
When state files artilces of incorporation=conclusive proof of beginning of corp. (incorporator signs ad submits to state)
When is corp. liable for pre-incorporation contract signed by promoter
When there is novation formally release the promotor of liability
When is a shareholder proxy revokable
At any time unless appointment form states that it is irrevokable and appointment is coupled with an interest.
What are the steps for adopting a fundamental corporate change?
Board adopts resolution recommending change, notice describing change sent to shareholders, change approved by shareholders, change is filed with the state
A corp’s articles of incorp can limit a director’s personal liability for:
money damages for failure to take action as a director or for taking action
Cant limit liability for amount of financial benefit recieved to which he was not entitled, intentional crimes, unlawful distributions
What kind of act is changing preference of class of shares?
fundamental corporate change, requires vote by shareholders
When does a director have a conflicting interest?
When he or someone else is 1) a party to the transaction 2) has beneficial interest in it or is closly linked to it or 3) where he is a director, partner etc of another entity with whom the corporation is transacting business
When does a conflicting interest give rise to damages?
When (i) the transaction was approved by a majority of the directors (but at least two) without a conflicting interest after all material facts have been disclosed to the board;
(ii) the transaction was approved by a majority of the votes entitled to be cast by shareholders without a conflicting interest in the transaction after all material facts have been disclosed to the shareholders;
or (iii) the transaction, judged according to circumstances at the time of commitment, was fair to the corporation.
If Articles are silent, what is the default standard for determining outcome of ordinary shareholder vote?
Under the RMBCA, each outstanding share is entitled to one vote unless the articles provide otherwise.
If a quorum exists, an ordinary action will be deemed approved by the shareholders if the votes cast in favor of the action exceed the votes cast against the action, unless the articles provide for a greater voting requirement.
Under the Revised Model Business Corporation Act (“RMBCA”), a preincorporation subscription is irrevocable by the subscriber for ____________________ from the date of the subscription unless otherwise provided in the terms of the subscription, or unless all subscribers consent to revocation
Under the RMBCA, a pre-incorporation subscription is irrevocable by the subscriber for six months from the date of the subscription unless otherwise provided in the terms of the subscription, or unless all subscribers consent to revocation.
Under the Revised Model Business Corporation Act (“RMBCA”), which of the following statements regarding preemptive rights is true?
Shareholders do not have preemptive rights unless the articles of incorporation so provide.
Alter Egos
If a corporation is the “alter ego,” “agent,” or “instrumentality” of a sole proprietor, its separate identity may be disregarded. In the case of an individual shareholder, if the shareholder treats the assets of the corporation as her own (e.g., by using corporate funds to pay her private debts), courts often find that the corporate entity is a mere alter ego of the shareholder. However, sloppy administration alone may not be sufficient to warrant piercing the corporate veil. The operation of the corporation must result in some basic injustice so that equity would require that the individual shareholder respond to the damage she has caused. In this case that would be paying her own personal bills and as a result leaving the corporation unable to pay its creditors. An individual shareholder can vest the power to run the corporation in herself, rather than in a board of directors, and doing so is not a ground for disregarding the corporate veil, even if it results in a failure to keep corporate records. The mere fact that a sole shareholder is in a better financial position than the corporation she owns is also not a justification for piercing the corporate veil. Finally, the corporate form is designed to protect a shareholder’s personal assets from the possibility of being seized to satisfy the obligations of the business; this alone is not a reason to pierce the corporate veil.
Effects on removal of cumulative voting?
If less than the entire board is to be removed, a director elected by cumulative voting may not be removed by a shareholders’ vote if the votes cast against her removal would have been sufficient to elect her if cumulatively voted at an election of the board. Directors may be removed before the expiration of their term with or without cause by the shareholders, unless the articles provide that removal may be only for cause.
Under the Revised Model Business Corporation Act (“RMBCA”) notice of a shareholders’ meeting must be delivered:
not less than 10 days or more than 60 days before meeting
