Corporations Flashcards
Incorporation
People (human/entity)
Paper (articles of incorp.)
Act (file w/ State)
Articles of Incorp
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
Corp Substitutes
]bolished in many states…
- De Facto Corp: statute + good faith attempt to comply + act like corp = treat like corp for all purposes but action by state
- Corp by Estoppel: held out as corp + treat like corp = can’t deny existence and corp can’t deny liability [K, not tort]
Bylaws
Adopted by board
Amended by SHs (and sometimes board)
Pre-Incorp Ks
Promoter liable unless novation
Corp not liable unless adopts (affirms or accepts benefits)
Foreign Corp
Must qualify in state where doing regular business
Violation = civil fine _ can’t sue in state court
Stock - Subscription
Written offer to purchase
- pre-incorp irrevocable for 6 months
- post-incorp revocable until accepted
Stock - Consideration
$, Property, Past Services
Split: future services and promissory note
Stock - Watered Issuance
below par
- director liable of knowingly issued
- buyer liable
- subsequent BFP not liable
Stock - Preemptive Rights
Must be in articles; maintain ownership %
Stock - Transfer Restrictions
ok if not reasonable (not absolute prohibition)
Enforceable against transferee if noted on stock cert or had actual notice
Board
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
Board - Committee
Can do most, but no dividends or filling vacancy
Board - Fid Duties
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]
Officers
agents of corp w/ fid duties
selected/removed by board
Indemnification
- 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)
SH’s - Close Corp
Can sue majority SH for oppression
SH’s - Pierce Veil
- SH abused privilege of incorporation
- Fairness requires liability
- alter ego + undercap
- very difficult + ct’s reluctant
SH Derivative Suit
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
SH Votes
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
SH Voting Trust
agreement + copy to corp + tx title to trustee + get trust cert for all rights but voting
SH Voting Agreement
Signed Writing
Split on SP, but should be yes
SH Meetings
Annual (forced after 15 months)
Special if 10% request, nee notice or void if not waived
Dividends
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
