Corporations

Question 1

Incorporation

Answer 1

People (human/entity)
Paper (articles of incorp.)
Act (file w/ State)

Question 2

Articles of Incorp

Answer 2

Name, Incorporators, Directors, Agent, Purpose, Capital Stock

-Ultra Vires Act: beyond specified purpose = K valid to TP’s; SH can enjoin act; corp. can sue responsible persons for losses

Question 3

Corp Substitutes

Answer 3

]bolished in many states…

1. De Facto Corp: statute + good faith attempt to comply + act like corp = treat like corp for all purposes but action by state
2. Corp by Estoppel: held out as corp + treat like corp = can’t deny existence and corp can’t deny liability [K, not tort]

Question 4

Bylaws

Answer 4

Adopted by board

Amended by SHs (and sometimes board)

Question 5

Pre-Incorp Ks

Answer 5

Promoter liable unless novation

Corp not liable unless adopts (affirms or accepts benefits)

Question 6

Foreign Corp

Answer 6

Must qualify in state where doing regular business

Violation = civil fine _ can’t sue in state court

Question 7

Stock - Subscription

Answer 7

Written offer to purchase

• pre-incorp irrevocable for 6 months
• post-incorp revocable until accepted

Question 8

Stock - Consideration

Answer 8

$, Property, Past Services

Split: future services and promissory note

Question 9

Stock - Watered Issuance

Answer 9

below par

• director liable of knowingly issued
• buyer liable
• subsequent BFP not liable

Question 10

Stock - Preemptive Rights

Answer 10

Must be in articles; maintain ownership %

Question 11

Stock - Transfer Restrictions

Answer 11

ok if not reasonable (not absolute prohibition)

Enforceable against transferee if noted on stock cert or had actual notice

Question 12

Board

Answer 12

Manages business of corp

1+ elected and removed by SH’s; vacancy filled by board or SH’s (SH created = filled)

Act: UWC or Noticed (waivable) meeting

• quorum + maj. present
• presume concur unless dissent in writing

Question 13

Board - Committee

Answer 13

Can do most, but no dividends or filling vacancy

Question 14

Board - Fid Duties

Answer 14

Care: good faith + reas. prudent person would do w/r/t own business
–BJR: no 2nd guess if informed basis + good faith + no conflicts + rational basis

Loyalty: good faith + reas. belief acting in corp’s best interest

• -Int Dir Trans: set aside unless (i) fair at time or (ii) int facts known and approved in advance by majority of disinterested directors or by SHs (some courts req. both)
• -Corp Opportunity: must tell board and board rejects [damages, equity recoup profits]

Question 15

Officers

Answer 15

agents of corp w/ fid duties

selected/removed by board

Question 16

Indemnification

Answer 16

• No: held liable or received improper personal benefit
• Mandatory: successful on merits or otherwise
• Permissive: other (settle) so long as no loyalty breach
• Reimbursement: court can order if justified in view of circ’s
• Articles: can eliminate damages for duty of care violations (not loyalty)

Question 17

SH’s - Close Corp

Answer 17

Can sue majority SH for oppression

Question 18

SH’s - Pierce Veil

Answer 18

1. SH abused privilege of incorporation
2. Fairness requires liability

• alter ego + undercap
• very difficult + ct’s reluctant

Question 19

SH Derivative Suit

Answer 19

Corp’s name, corp gets judgment except fees, leads to claim preclusion

Req’s: (1) ownership at time and throughout, (2) adq. rep. of corp. int., (3) written demand+ 90 days, unless futile, (4) joins corporation as defendant

Settle/Dismiss: need court approval (may require SH notice + input)

Corp can move to dismiss deems not in best interest

Question 20

SH Votes

Answer 20

Record holders at record date

Quorum + Votes For > Against

Cum voting ok if in bylaws

Proxy: signed writing delivered to corp. + valid 11 months if silent + revocable unless says irrevocable AND coupled w/ interest

Question 21

SH Voting Trust

Answer 21

agreement + copy to corp + tx title to trustee + get trust cert for all rights but voting

Question 22

SH Voting Agreement

Answer 22

Signed Writing

Split on SP, but should be yes

Question 23

SH Meetings

Answer 23

Annual (forced after 15 months)

Special if 10% request, nee notice or void if not waived

Question 24

Dividends

Answer 24

common, preferred, preferred participating, cumulative

Trad: must come out of capital surplus or earned surplus (not stated capital)

Modern: not if insolvent or would render insolvent (pay debts as they come due or assets < liabilities)

Directors liable absent good faith; SH liable if knew improper when received

Question 25

Fund Corp Change

Answer 25

SH approval for merger, share exchange, sale of sub all assets, amend charter

Dissenters Right of Appraisal (close corp only): written notice before + abstain or vote no + written demand after

Question 26

Dissolution

Answer 26

Followed by wind up

• Vol: board + SHs
• Invol: (i) derivative suit for 2 no annual meetings or director misconduct; (ii) creditor petition

Question 27

16b

Answer 27

D/O/10% SH strictly liable to public reporting corp. on profits on any short-swing trading (buy + sell match w/in 6 months)

Question 28

10b5

Answer 28

(i) interstate commerce, (ii) covered transaction, (iii) material mires/omission, (iv) scienter (intent/reckless), (v) reliance (public = presume), (vi) damages

Transaction: (i) misrep, (ii) insider trading/misapprop./tipping [MUST ABSTAIN/DISCLOSE]

Tippee: gift or increased reputation is sufficient benefit