CORPORATIONS Flashcards
What is statute of limitations for an action against a director improperly declaring a distribution
two years
Directors who voted or assented to distribution generally are jointly and severally liable for:
The amount by which distribution exceeds permissible amount
From whom may a director found liable for impermissible distribution seek funds to defray her portion?
1) He may seek contribution from all other directors found liable; and
2) He may seek recoupment from SHs, in proportion to distribution amounts they received.
What is the limit on director liability for any one transaction, occurrence, or course of conduct in a derivative proceeding or class action?
Director liability damages may not exceed lesserof:
(i) monetary limit specified in articles or bylaws; or
(ii) greaterof $100,000; or amount of cash compensation she received from the corporation in the preceding 12 months
** Provided that the director has not engaged in willful misconduct or knowing violation of criminal or securities laws.
What are examples of “significant transactions” in corporate law?
1) merger
2) share exchange
3) corporate guarantee for greater than 5% of corporate net worth
4) corporate dissolution, and
5) disposition of greater than 5% corporate assets
Who is an “interested shareholder”?
One who beneficially owns more than 10% of outstanding voting shares.
A significant transaction with or for an interested SH generally must be approved by:
two-thirds disinterested SHs.
What is a subscription agreement?
An offer to buy stock at certain price
A subscription agreement(offer to buy stock at certain price) is typically accepted by:
board resolution; no enforceable K until then
what is shareholder’s personal action
action where:
1) shareholder asserts her own interest against corporation
2) seeks personal recovery
3) no fiduciary duty to share the recovery
what is a derivative suit
suit brought by SH to enforce a corporate cause of action where corporation has not sued to protect its own rights
recovery almost always runs to corporation rather than plaintiff-shareholder personally
SH need not have suffered personal harm - suit on behalf corp.
To have standing to bring derivative action, a SH must:
(i) have been a SH at time of act or omission complained of;
(ii) have become a SH through operation of law from one who was SH at time of alleged wrong; or
(iii) have become a SH before public disclosure and without knowledge of alleged wrong
-Also, SH must fairly and adequately represent interests of corporation
what right to SH have to compel a distribution
None. Decision to declaredividends is within directors’ business judgment, subject to solvency limitations
Directors who declared illegal dividend:
1) individually liable to corporation and its creditors for amount of unlawfulportion of dividend
2) entitled to contributions from:
certain directors; and
SHs proportional to amount illegal dividend they received
Is shareholder consent required for a sale of asserts
SH consent is required for a sale, lease, or exchange of all or substantially all assets
(i) if such transaction not made in usual or regular course of business
What is default duration of a Virginia limited liability company (“LLC”)?
Perpetual
Unless articles of organization provide otherwise.
what are examples of indirect ways SHs may exert control
1) Electing directors
2) removing directors without cause
3) amending bylaws
4) approving fundamental corporate changes
5) suing derivatively
6) voting on matters submitted by board to SHs
Companies listed on a national exchange may not enter into a SH agreement to:
Eliminate board of directors
Only those in nonpublic corporations may enter into agreements to run corporation in any manner they desire
notice of a shareholders’ meeting must set forth:
Place, date, and time of meeting
A meeting’s purpose must only be specified for a special meeting
Shareholders of record generally entitled to notice of:
shareholder meetings
A waiver of notice effective whenever anyone entitled to notice of a meeting:
1) signs written waiver, before or after meeting and delivers to corporation’s secretary
2) attends meeting
i. unless he objects at beginning of meeting bc meeting not lawfully called or convened
ii. or objects when matter presented, arguing the matter outside notice given
notice of SH meeting not waived when:
notice mailing sent to shareholder returned as “undeliverable.”
board (and committee) action may be taken without a meeting if:
all members of board (or committee) sign written consent before or after action taken
informal action in a close corporation may be binding if:
1) it had “knowledge and acquiescence of all of its shareholders;” or
2) if consent signed by all officers, directors, and shareholders
what is a director’s duty of care
director must discharge her duties in good faith in accordance with best interests of corporation
Directors do not insure success of every decision made
In discharging her duties a director entitled to rely on information, opinions, reports from:
(i) corporate officers or employees whom director reasonably believes reliable and competent;
(ii) legal counsel, accountants, other competent professionals; or
(iii) a committee of board of which director not a member, if reasonably believes reliable
A director may not divert a business opportunity in which her corporation may reasonably be interested without first:
1) giving corporation chance to take opportunity for itself,
2) or unless corporation releases opportunity to her
What are the characteristics of an LLC
1) SH have limited liability enjoyed by corporate SHs
2) and flow-through tax treatment enjoyed by partnerships
Ownership interest (management interest) in an LLC may not be transferred without:
consent ofa majority of other members
A member of an LLC may assign:
1) her interest in the LLC (i.e. right to receive profits and losses)
2) without consent of other members
