Corporations

Question 1

Who is liable for pre-incorporation transactions?

Answer 1

Promoters (they are fiduciaries) unless a later novation.

Question 2

The articles of incorporation must include

Answer 2

the name, the agents, names and addresses of incorporates, duration, the purpose (usually any lawful activity) and authorized shares

Question 3

When is the corporation incorporated?

Answer 3

When the secretary of state accepts the fee and files the articles

Question 4

If by laws and articles of incorporation conflict, which wins?

Answer 4

Articles

Question 5

What is the de facto corporation rule?

Answer 5

When a corporation isnt properly formed but acts as a corp, it will be treated as a corp if there was a good faith attempt to incorporate and there was no actual knowledge of the faulty corporate status.

Question 6

What are the three factors to pierce the veil?

Answer 6

Alter ego, undercapitilization, and fraud

Question 7

What are issued shares?

Answer 7

Number of authorized shares actually sold

Question 8

What are outstanding shares?

Answer 8

Shares that were once issued and remain in the possession of shareholders

Question 9

What are treasury shares?

Answer 9

Shares one issued but subsequently reacquired by the corporation

Question 10

Par value is?

Answer 10

The minimum value to sell a share at (it is not required)

Question 11

Watered stock is?

Answer 11

Stock sold for less than the par value. Shareholders who buy watered stock are liable to creditors of the corp.

Question 12

How long is a stock subscription irrevocable for pre incorporation?

Answer 12

six months

Question 13

Preemptive rights allow what

Answer 13

The person to maintain their percentage of ownership when new shares issue

Question 14

Who can authorize dividends?

Answer 14

Directors unless would cause insolvency

Question 15

Must every corp hold an annual meeting?

Answer 15

Yes.

Question 16

Special meetings are for?

Answer 16

Voting on fundamental changes

Question 17

Notice for meetings must occur?

Answer 17

no fewer than 10 days and no more than 60 days before the meeting

Question 18

Directors must set a record date when?

Answer 18

no fewer than 10 days before the meeting and no more than 70 days before the meeting

Question 19

A proxy must be?

Answer 19

In writing, signed by the shareholder as of the record date, sent to the secretary, state that it authorizes another to vote, and cannot be valid for more than 11 mos

Question 20

Quorum of shareholders is?

Answer 20

A majority of the outstanding shares, not shareholders

Question 21

Necessary vote of shareholders is?

Answer 21

When more of the votes of a shareholder quorum for the proposal exceed the votes against

Question 22

Shareholders can inspect corp records so long as they?

Answer 22

State a proper purpose

Question 23

Shareholders can sue

Answer 23

Directly or derivatively (on behalf of the corp)

Question 24

Derivative law suits require

Answer 24

Claim made in corp name, contemporaneous stock ownership, was a shareholder at time of harm, fairly represents interests of the corp, and made a demand to board unless it would have been futile

Question 25

A controlling shareholder may owe a duty to a minority shareholder if

Answer 25

There is sale of stock to an outsider or lotter, the shareholder is transacting with the corporation

Question 26

For directors, a quorum is

Answer 26

A majority of the total number of directors

Question 27

Directors may dissent and avoid liability by

Answer 27

Entering dissent in minutes of the meeting, filing a written dissent before the meeting adjourns, or provide a written dissent to the secretary

Question 28

Directors and officers owe what to the corporation?

Answer 28

A fiduciary duty of care (duty of care and duty of loyalty)

Question 29

The business judgment rule is?

Answer 29

Absent fraud, illegality or self dealing, courts will not disturb good-faith business decisions

Question 30

A self-interested transaction may be upheld if?

Answer 30

It is ratified by a majority of disinterested directors or shareholders.

Question 31

Fundamental changes require approval of?

Answer 31

Both shareholders and directors

Question 32

Merger is

Answer 32

when two or more corps combine and one survives assuming the assets and liabilities of the others

Question 33

Consolidation is

Answer 33

the combination of two or more corps when neither survives and a new one is created assuming the assets and liabilities

Question 34

Involuntary dissolution can occur by?

Answer 34

Creditors showing a corp is not paying its debts, shareholders show the corp is wasting assets, the directors are committing fraud, or the directors and shareholders deadlock.

Question 35

Appraisal rights are?

Answer 35

When a shareholder dissents from a fundamental change he can demand his shares to be purchased by the corp for FMV.

Question 36

LLCs require filing ___ and its owners are called ____ instead of shareholders?

Answer 36

An operating agreement; Members.

Question 37

When members agree to voluntarily dissolve an (LLC) entity, the entity must … (2 things)

Answer 37

Wind up its affairs and liquidate its business.

Only after the entity’s debts and obligations to creditors have been paid may the members receive a portion of the liquidated value of the LLC.

Question 38

What notice is required for a special meeting?

Answer 38

Unless the articles of incorporation or bylaws provide otherwise, notice must be provided at least two days prior to the meeting and should state the date, time, and place of the meeting. The notice need not describe the purpose of the special meeting.

Question 39

Is telephonic attendence at a board meeting sufficient for a quorum?

Answer 39

Yes, but only if everyone can hear everyone else