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Virginia Essays > Corporations > Flashcards

Corporations Flashcards

1
Q

Promoters

A

Persons acting on behal fo a corporation not yet formed

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2
Q

The corporation becomes liable on a promoter’s pre-incorporation contract when the corporation adopts the contract by either:

A
  1. Express board of directors’ resolution; OR
  2. Implied adoption through knowledge of contract AND acceptance of benefits
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3
Q

Promoter remains liable on pre-incorporation contracts until there has been a

A

Novation, an agreement between the promoter, the corporation, and the other contracting party that the corporation will replace the promoter under the contract

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4
Q

Who is laible if the promoter enters a pre-incorporation contract and the corporation merely adopts the contract?

A

Both corporation and promoter are liable at the election of the third party. NO DOUBLE RECOVERY

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5
Q

Promoters are of each other and the corporation. Therefore, promoters cannot make a on their dealings with the corporation

A
  1. Fiduciary
  2. Secret profit
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6
Q

If promoter acquires property before becoming a promoter and sells to corporation at a profit: profit recoverable only if sold for

A

MORE than FMV

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7
Q

If promoter acquires property after becoming a promoter and sells toa corporation at a profit:

A

Any profit is recovered by corporation even if resale price is FMV

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8
Q

Suscribers

A

Persons or entities who make written offers to buy stock from a corporation not yet formed

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9
Q

In Va, a pre-incorporation offer to buy stock is

A

irrevocable for 6 months.

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10
Q

Absolute Formation requirements

Incorporators

A

Incorporators merely sign and file Articles of Incorporation with Va State Corporation Commission (SCC)

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11
Q

Absolute Formation requirements

The Articles must include

A
  1. Authorized shares: maximum number authorized–corparoation my issue or sell less but not more unless they change articles
  2. Preferences: Must describe prefences and rights assigned to each class of stock
  3. Agent: and address of registered office (registered agent is the corporation’s official legal rep.)
  4. Incorporators
  5. Name of corporation: name must contain some indication of corporatae status
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12
Q

Absolute Formation requirements

By-laws

A

Need not be in Articles. But the corporation must adopt By-laws. The board has the power to adopt and amend the by-laws, unless the articles give the power to the shareholders.

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13
Q

Legal Significance of Forming a Corporation

A
  1. Illegal to do business as a corporation unless properly formed
  2. a corporation is a separate legal person
  3. Generally, shareholders are not personally liable for debst of coporation. Limited Liability, shareholder is only liable for the price of her stock.
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14
Q

Piercing the Corporate veil

The court will pierce the corporate veil in order to

A

avoid fraud or unfairness AND to render shareholders liable to 3d party victims of tort or K breach

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15
Q

Piercing Corporate veil

Alter ego

A

a controlling shareholder, alter ego, fails to observe sufficient formalities (ex: commingling funds)

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16
Q

Piercing Corporate veil

Under Capitalization

A

Corporation failed to maintain sufficent capital money to cover foreseeable liabilities (ex: dangerous business, no insurance, and mininum capitlization)

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17
Q

Courts are generally more willing to pierce the corporate veil for a victim than for a

A
  1. Tort
  2. Contract claimant
18
Q

Foreign Corporations

A
  1. FCs transacting business (regular course of intrastate activity, not interstate) in Va must qualify
  2. A FC is one incorporate outside Va
  3. Qualify by getting a Certificate of Authority from the S.C.C. that requires: same information requried for articles of incorp.
  4. Consequences of transacting w/o qualifying:
    1. modes fine
    2. may not initiate lawsuit
19
Q

Consideratoin–what must the corproation receive when it issues stock

A
  1. Par value: minimum issuance price. never less
  2. Acquring property with par value stock: any valid consideration can be rec’d if board values in good faith of at least par value
  3. No Par: means no minium issuance price, any consideration can be rec’d if deemed adequate by board (ex: treasury stock–stock previosuly issued and had been reacquired by the corporation)
20
Q

Consequences for issuing par stock for less tha par value

A

Corporation can make an election between (not both)

  1. directors liable personanly for authorizing a below par issuance
  2. force the shareholder to pay at least par value
21
Q

Preemptive Right

A

Right of an existing shareholder to maintain her percentage of ownership by buying stock whenever there is a new issuance of stock for cash.

***IN VA, preemptive rights DO NOT exist UNLESS expressly granted in articles***

22
Q

Directors Statutory Requirements

A
  1. Board with at least 1 member
  2. Stokholders have power to elect directors
  3. Shareholder can remove director before term expires with/without cause
23
Q

Director Statutory Requirements

meetings

A
  1. unless all directors consent in writing, a meeting is required
  2. notice of directors’ meeting can be set in bylaws
  3. Proxies are not allowed. Also no voting agreements
  4. Quorum: majority of all directors to do business (unless a different percentage is requried in bylaws, but never fewer than 1/3 of all directors)
  5. Vote: majority vote of those present
24
Q

Liability of Directors to their own corporation and shareholders

A
  1. Directors have duty to manage
  2. Protected by business judgment rule (presumption of good faith and best interests management)
  3. Directors, however, are fiduciaries
25
Q

Director owes the Corporation a duty of care

A

She must act with the care that a prudent person would use with regard to her own business unless the articles limit liability for breach of duty of care.

26
Q

Duty of loyalty

A

Directors may not receive unfair beneit unless there is a material disclosure and independent ratification

  1. Self dealing
  2. Usurping Corporate opportunities
  3. Ratification: directors may avoid liability by obtaining independent ratification through a majority vote of independent directors, or majority vote of share held by independent shareholders.
27
Q

Indeminifaction of directors and officers

Costs, attorneys fees, fines, judgment, settlement

A
  1. Corp. may never indemnify director/officer who is held liable to their own corp.
  2. Corp. must ALWAYS indemnifty if they win a lawsuit against any party
  3. MAY indemnify if
    1. liability to 3parties or settlement with corp.
    2. D/o shows good faith with reasonable beleif that conduct was in corp.’s best interest
28
Q

Director and officer indemnification

Who determines permissive idemnity?

A
  1. majority vote of independent directors; or
  2. majority vote of a committee of at least 2 independent directors; or
  3. majority vote of shares held by independed shareholders; or
  4. A special lawyer’s opinoin could recommend it
29
Q

Requirements for a derivative suit

A
  1. contemporaneous stock ownership: through entire litigation
  2. Adequacy: represent
  3. Demand: must make demand to directors and give board 90 days to review and if rejected, alelge directors failure to review adequately
  4. committee of 2 or more independent directors can investigate and move for dimissal if it concludes that the derivative suit is not in best interst
30
Q

Consequences of succesful derivative suit

A
  1. recovery to corp.
  2. shareholder gets fees and costs
  3. recovery against individual directors is limited by 100k or that director’s past year’s compensation
31
Q

which shareholdres have right to vote at meeting?

A
  1. record shareholders as of record date
    * record date is a voter eligibility cut-off set by the Board no more than 70 days before the meeting
32
Q

Proxies

A
  1. Writing or electronic transmission
  2. authorized by record shareholder
  3. directed to secretary of corporation
  4. authorizing another to vote shares
  5. valid for 11 months
33
Q

Proxies are revocable UNLESS

A
  1. labelled irrevocable
  2. couple with some other interest
34
Q

Where do shareholders vote?

A

Annual Meeting: every corp must have annual meeting where at least onde director slot is open for election

Special Meeting: a meeting of stockholders to vote on a proposal or fundamental corporate change

35
Q

Annual meeting

Special meeting

Written notice must be given to every shareholder entitled to vote and what must the contetns be

A
  1. where and when
  2. for special meeting, special notice–meeting’s special prupsoes must be included. Nothing else can take place
36
Q

Notice requiremeent

Consequences of failure to give proper notice to all shareholders

A
  1. action taken is void unless those not getting ntoice waive their objections or actually attend the meeting
37
Q

Shareholders

QUORUM

A
  1. must be quorum represented at meeting
  2. focuses on number of SHARES represented, not number of shareholders
  3. cannot be broken by leaving a meeting
  4. requires a majority of outstanding shares represented for any purpose unless otherwise provided in articles
38
Q

Shareholders

Vote

A

If quorum ispresnet action is approved if the votes for it exceed votes against it, unles the Articles require higher vote

39
Q

Voting Trusts

A

delegation of voting power, in writing to a trustee for any duration stated in the agreement which must be depositied at the corp’s principal office

40
Q

Voting Agreement

A

An agreement in writing to all vote share as the majority of the signers of the the agreement dictate

41
Q

In Va, cumulative voting does not exists UNLESS

A

expressly granted in articles

42
Q

Directors are personally liable for unlawful dividends or distributions. BUT:

A
  1. Defense of good faith reliance on a financial officer’s representations
  2. 2 year SOL period
  3. Right of contribution among stockholder and direcotrs who were paid unlawful dividend amount

Virginia Essays (10 decks)

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