Corporations Flashcards
Who is liable for pre-incorporation transactions?
Promoters (they are fiduciaries) unless a later novation.
The articles of incorporation must include
the name, the agents, names and addresses of incorporates, duration, the purpose (usually any lawful activity) and authorized shares
When is the corporation incorporated?
When the secretary of state accepts the fee and files the articles
If by laws and articles of incorporation conflict, which wins?
Articles
What is the de facto corporation rule?
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.
What are the three factors to pierce the veil?
Alter ego, undercapitilization, and fraud
What are issued shares?
Number of authorized shares actually sold
What are outstanding shares?
Shares that were once issued and remain in the possession of shareholders
What are treasury shares?
Shares one issued but subsequently reacquired by the corporation
Par value is?
The minimum value to sell a share at (it is not required)
Watered stock is?
Stock sold for less than the par value. Shareholders who buy watered stock are liable to creditors of the corp.
How long is a stock subscription irrevocable for pre incorporation?
six months
Preemptive rights allow what
The person to maintain their percentage of ownership when new shares issue
Who can authorize dividends?
Directors unless would cause insolvency
Must every corp hold an annual meeting?
Yes.
Special meetings are for?
Voting on fundamental changes
Notice for meetings must occur?
no fewer than 10 days and no more than 60 days before the meeting
Directors must set a record date when?
no fewer than 10 days before the meeting and no more than 70 days before the meeting
A proxy must be?
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
Quorum of shareholders is?
A majority of the outstanding shares, not shareholders
Necessary vote of shareholders is?
When more of the votes of a shareholder quorum for the proposal exceed the votes against
Shareholders can inspect corp records so long as they?
State a proper purpose
Shareholders can sue
Directly or derivatively (on behalf of the corp)
Derivative law suits require
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
A controlling shareholder may owe a duty to a minority shareholder if
There is sale of stock to an outsider or lotter, the shareholder is transacting with the corporation
For directors, a quorum is
A majority of the total number of directors
Directors may dissent and avoid liability by
Entering dissent in minutes of the meeting, filing a written dissent before the meeting adjourns, or provide a written dissent to the secretary
Directors and officers owe what to the corporation?
A fiduciary duty of care (duty of care and duty of loyalty)
The business judgment rule is?
Absent fraud, illegality or self dealing, courts will not disturb good-faith business decisions
A self-interested transaction may be upheld if?
It is ratified by a majority of disinterested directors or shareholders.
Fundamental changes require approval of?
Both shareholders and directors
Merger is
when two or more corps combine and one survives assuming the assets and liabilities of the others
Consolidation is
the combination of two or more corps when neither survives and a new one is created assuming the assets and liabilities
Involuntary dissolution can occur by?
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.
Appraisal rights are?
When a shareholder dissents from a fundamental change he can demand his shares to be purchased by the corp for FMV.
LLCs require filing ___ and its owners are called ____ instead of shareholders?
An operating agreement; Members.
When members agree to voluntarily dissolve an (LLC) entity, the entity must … (2 things)
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.
What notice is required for a special meeting?
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.
Is telephonic attendence at a board meeting sufficient for a quorum?
Yes, but only if everyone can hear everyone else
