Corporations

Question 1

How do you form a corporation?

Answer 1

To form a corporation, a document, such as articles of incorporation or a charter, must be filed with the state and include basic information such as: (1) name, (2) number of shares authorized to issue, (3) name and address of its registered agent, (4) name and address of each incorporator, and (5) the corporation’s purpose.

Question 2

How do you pierce the corporate veil?

Answer 2

To pierce the corporate veil, Courts will look at the totality of circumstances, including: undercapitalization, disregard of corporate formalities, intermingling of assets, self-dealing within the corporation, etc.

Question 3

What duties do directors have?

Answer 3

Directors have a duty of care and duty of loyalty.

Question 4

Explain duty of care:

Answer 4

Duty of care requires the officer to act like an ordinarily prudent person in like position and similar circumstances. Protected by the Business Judgment Rule.

Question 5

Explain duty of loyalty:

Answer 5

Duty of loyalty requires the officer to act in the Corporation’s best interest.

Question 6

When may a director engage in self-dealing?

Answer 6

If a director engages in self-dealing, he may be protected from liability if one of the following occurs: (1) disclose all material facts to the board and receive approval from a majority of disinterested directors; (2) disclose all material facts to the shareholders and receive approval from a majority of disinterested shareholders; or (3) the transaction is FAIR to the corporation at the time of the deal.