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Florida Bar by LL > Corporations > Flashcards

Corporations Flashcards

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1
Q

Do corporations have perpetual existence?

A

Yes

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2
Q

What is the liability of a shareholder limited to?

A

The obligation to pay for their shares.

Good faith transferees who are unaware that shares weren’t paid for, are not liable to pay.

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3
Q

Who can be the incorporator?

A

one or more natural person, or entity such as corp., partnership or association.

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4
Q

What are the Articles of Incorporation?

A

agreement between incorporators regarding the details of the organization of the corp

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5
Q

Can the Articles of Incorporation be amended?

A

Yes, at any time, subject to SH approval

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6
Q

What are the requirements for valid Articles of Incorporation?

A

Must be in writing and MUST include

a. Name of corp.
b. Number of shares
c. Preemptive rights. If silent, SH have no preemptive rights.
d. Address of registered office
e. Names and addresses of incorporators
f. Address of initial principal office.

Everything else MAY be included -
-number of directors, par value, purpose, etc.

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7
Q

What are the by-laws and who adopts them ?

A

adopted by BOD or incorporators, unless power is reserved to SH in AOI.
-contains provisions for managing the business and regulating the affairs of the corporation that are not inconsistent with the law or AOI.

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8
Q

How is incorporation accomplished?

A

by signing, acknowledging and deliver AOI to department of state.

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9
Q

When is corporate existence deemed to begin?

A
  • Upon filing

- “De jure status” is achieved and is effective against all parties accept the state.

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10
Q

What happens if there is a defect in incorporating the corporation?

A

It is a “de facto” corp, as long as the corp.:

  • was UNAWARE of the defect, AND
  • made a good faith attempt to comply with incorporating statute (substantial compliance).

If so, its existence cannot be attacked by third parties except the state.

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11
Q

Corporation by estoppel

A
  • third persons who have who have dealt w/a business believing it to be a corp are estopped from denying it is a valid corp for the purpose of avoiding contractual obligations.
  • And corps cannot use lack of legal organization as a defense to an action against them as a corp. N/a to tort - so for that there would be personal liability still.
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12
Q

When can a person be held PERSONALLY LIABLE for a defectively formed corporation?

A

-where person purports to act on behalf of a corporation having ACTUAL KNOWLEDGE that there was no corporation UNLESS other party to K knew the corp wasn’t yet formed

So no personal liability for corporate obligations if there was a de facto, de jure or corporation by estoppel

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13
Q

Is a corporation bound by preincorporation contracts of promoters?

A

No. The promoters are bound by such contracts.

-Joint and several liability for all promoters

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14
Q

Can a corporation become liable on preincorporation contracts of promoters?

A

Yes. By adopting them.

  • Acceptance of benefits can be adoption.
  • Novation - corp adopts contract and releases promoter from liability. This is the only way a promoter can be relieved of liability
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15
Q

What happens if preincorporation contract negates personal liability of promoter?

A

K is treated as a continuing offer that cannot be binding until accepted by corp after incorporation

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16
Q

Does the corporation need to have a registered agent?

A

Yes. Corp. must maintain registered agent in state and to produce, upon subpoena, the names of past & current shareholders and the equitable owners.

$1k per day penalty for failure to comply.

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17
Q

Does corp need to file an annual return?

A

Corp must file annual return and state may propound interrogatories to ensure compliance with state law.

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18
Q

What happen if corporation fails to file an annual return?

A

If corp fails to file annual return, it can’t sue or defend action and is subject to involuntary dissolution

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19
Q

What do corporations have the power to do?

A

a. Sue and be sued;
b. Have a corporate seal
c. Own real and personal property
d. Dispose of its property
e. Lend money
f. Elect directors and appoint officers
g. Enter into contracts
h. Make donations
i. Transact any lawful business
j. Enter into general or limited partnerships
k. Indemnify corp officers, directors, agents
l. Make political contributions to state and local candidates

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20
Q

What can a corporation be held liable for?

A
  • Contractual obligations of corporation
  • Torts of employees acting within the scope of their employment
  • Punitive damages
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21
Q

When can a corporation be held liable for punitive damages?

A

May be held liable for punitive damages if agent/ee engages in intentional or grossly negligent conduct and (i) corp. actively participated in conduct (ii) officers, managers, dir. ratified or consented to conduct or (iii) corp was grossly negligent.

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22
Q

What is an ultra vires action of a corporation?

A

Actions of corp. are said to be ultra vires when they are beyond the powers expressly conferred by law or its charter or implied from stated purposes

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23
Q

Can the doctrine of ultra vires be used as a defense to an obligation of a corporation?

A

Under CL ,yes.

Under modern law, defense abolished. No act of a corp. is invalid merely because corp. was without capacity or power.

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24
Q

What is a quo warranto action?

A

state may bring quo warranto action to enjoin ultra vires acts, to enforce complaince with statute, or to dissolve corp for such acts.

A quo warranto action requires corp. to whom it is directed to show what authority they have for exercising a right or power they claim to hold.

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25
Q

Can a corporation sue its officers/employees for ultra vires acts?

A

Yes. a corporation may sue its officers or employees to recover damages for past ultra vires acts that caused damage to corp.

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26
Q

Can a SH enjoin an executory contract executed by ultra vires act?

A

Yes. Shareholder derivative action may be brought to enjoin performance of specific ultra vires executory contract, if all parties to K are before the court and the court finds it equitable to do so.

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27
Q

When can a court pierce the corporate veil?

A
  1. Alter ego doctrine
  2. Thin capitalization - not enough capital to meet reasonable needs
  3. Deep rock doctrine
  4. Subsidiary corporation
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28
Q

Alter ego doctrine

A

where corporate form is a sham or mere conduit for the business activities of SH. Look at: segregation or commingling of funds; bona fide corporate purpose; corporate and personal affairs are separate.

Can be used as evidence of lack of separateness and improper conduct

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29
Q

3 elements to peirce the corporate veil

A
  1. lack of separateness between corp and its shareholders
  2. SH engaged in improper conduct in the formation or use of the corporation .3. Improper conduct was the proximate cause of the alleged loss
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30
Q

What is the deep rock doctrine

A

SH loans to a thinly capitalized corp. may be subordinated to claims of general creditors in bankruptcy if it would be inequitable to permit insider to share equally with general creditors.

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31
Q

For veil piercing involving parent-subsidiary relationships, what factors will courts consider?

A

subsidiary is/has

  • inadequately capitalized
  • common management
  • fails to deal with parent at arms length (intermingled
  • parent finances subsidiary)
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32
Q

DO SH have fiduciary duty to corp?

A

controlling SH have a duty to act in good faith and for the best interest of corp. Otherwise, SH have no fiduc. duty to corp.

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33
Q

How to approach acts by a corporation in a fact pattern

A

Florida statutes give corps broad powers, and they can generally do anything related to a business purpose. Thus, unless AOI restrict corp powers, you should not find any rational act to be ultra vires.

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34
Q

What is authorized capital?

A

Number and kinds of shares provided for in the AOI, whether or not actually issued

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35
Q

What kind of stock must there be in AOI

A

1 class of common stock

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36
Q

Types of stock

A

Common - voting or nonvoting, right to residual ownership

Preferred - voting or nonvoting, and include a variety of preferences

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37
Q

What is preferred stock?

A

-right to be paid a fixed dividend ahead of any dividend payments to holder of common stock

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38
Q

where must preferences for preferred stock be stated?

A
  1. Stated in AOI AND

2. Either set forth or summarized in stock certificates

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39
Q

What is a subscription agreement?

A

contract by which subscriber agrees to buy shares for a specified price

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40
Q

Are written, preincoporation subscription agreements permissible?

A

Yes, and they are irrevocable for six months unless they provide otherwise, or unless all subscribers consent to revocation.

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41
Q

What type of consideration may be paid for shares?

A
  • cash
  • other property,
  • services actually performed
  • promissory note (expressly permitted in Fla)
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42
Q

Who determines amount and adequacy of consideration?

A

BOD

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43
Q

Issuance of shares -do you need a certificate?

A

Can be issued with out without a certificate

Certficated or uncertificated

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44
Q

What happens if SH payls less than the full consideration he agreed to pay - may he be held liable for remainder?

A

Yes.

He may be held liable by corp., trustee in bankruptcy, and SH suing derivatively

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45
Q

Are restrictions on the transfer of shares enforceable?

A

Yes, s/l/a they are reasonable.

-Restrictions must be on certificate or written statement in lieu of certificate

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46
Q

Is it a reasonable restriction to require written permission to transfer?

A

No, that is unreasonable

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47
Q

May a third party compel transfer of restricted stock?

A

Third party may compel transfer of stock if it has no knowledge of restriction even though the transfer violates an agreement between a corp and another party.

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48
Q

What are preemptive rights?

A

Preemptive rights entitle SH to purchase a number of shares of new stock or treasury shares sufficient to maintain her relative voting strength

SH may waive preemptive rights

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49
Q

Do SH automatically have preemptive rights?

A

No. SH have no preemptive rights unless specifically stated in AOI.

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50
Q

What issuances of stock DO NOT trigger preemptive rights?

A
  • Shares issued as compensation
  • Shares issued to satisfy conversion or option rights;
  • Shares issued w/in 6 months of incorporation
  • Shares sold for something other than money
  • Shares issued pursuant to a plan or reorg.
  • Shares sold to holders of shares w/o voting rights but with preemptive rights
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51
Q

Can a corporation acquire its own shares?

A

Yes, through a repurchase. they become unauthorized but unissued shares

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52
Q

Can a corp issue more shares than authorized in AOI?

A

No. Can issue less but not more

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53
Q

What is straight preferred stock?

A

fixed dividend (payable prior to common stock)

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54
Q

What is participating preferred stock?

A

fixed dividend plus share of residual profits

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55
Q

What is convertible preferred stock

A

can convert to common stock

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56
Q

What is cumulative preferred stock

A

right to receive fixed dividend is carried over into other dividend periods

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57
Q

What is noncumulative preferred stock

A

right to fixed dividend is lost if dividend is not paid.

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58
Q

What is callable or redeemable stock

A

corp can repurchase shares

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59
Q

What is a liquidation preference?

A

on liquidation, SH entitled to receive stated value for shares, plus accumulated dividends before common stock SH receive anything.

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60
Q

What is a stock series?

A

-any class of preferred stock can be further divided into a series

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61
Q

Who authorizes distributions/dividends to SH

A

Auth by Bd, subject to restrictions in AOI and bylaws.

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62
Q

Once a cash dividend is declared, can it be revoked?

A

b. Once a cash dividend is declared, it may not be revoked, unless declaration or dividend would be illegal.

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63
Q

When are dividends payable?

A

Dividends are usually declared payable on a specified date in the future. Whoever is record holder on that date gets dividend.

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64
Q

What does it mean when stock is sold “ex-dividends”

A

Stocks are usually sold “ex-dividends” meaning that seller keeps dividends payable before purchaser becomes record owner.

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65
Q

What is Florida’s two part test for the payment of dividends?

A
  • Equity test AND

- Balance Sheet test

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66
Q

Equity Test

A

a dividend is permissible only if the corp will be able to pay its debts after it is issued.

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67
Q

Balance sheet test

A

dividends are limited to the amount by which total assets exceed total liabilities and the liquidation preferences of the preferred shares.

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68
Q

When can directors be held liable for improper dividends?

A

Directors who willfully or negligently vote to declare div. are liable to corp to the extent of the amount paid improperly.

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69
Q

When can SH be held liable for improper dividends?

A

div. paid while corp is insolvent are a fraudulent conveyance, and SH are directly liable to corp. creditors whether or not they knew that corp. was insolvent.

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70
Q

Do SH have day to day management rights?

A

no power to control day-to-day, unless AOI says so.

71
Q

What are some indirect methods of management that SH have?

A
  • election of directors;
  • approval of amendments to AOI;
  • approval of merger, sale, dissolution.
72
Q

What is a promoter of a corporation?

A

undertakes to form corporation and to procure the necessary capital and other items. A promoter may or may not be the incorporator (i.e., one who signs AOI)

73
Q

Does the promoter have a fiduciary duty to the corporation?

A

Yes, must act in good faith and in the best interest of all investors

74
Q

Does a promoter have the right to recover expenses or salary?

A

Generally, no, but some courts have allowed recovery of reasonable value of services performed.

75
Q

What types of meetings do SH have?

A

Annual meeting and special meetings

76
Q

When is annual SH meeting

A

At time state in bylaws, but w/in 13 months of prior annual meeting

77
Q

Does SH annual or special meeting need to be held w/in state?

A

No it can be held anywhere, and can attend via remote communication

78
Q

What notice is required for SH annual meeting?

A

10 days notice, personally or by mail

79
Q

Is proxy voting allowed at annual and special SH meetings?

A

Yes

80
Q

What happens at SH annual meeting?

A

Election of board of directors and other business

81
Q

Who calls a special meeting of SH and for what purpose?

A

May be called for any appropriate purpose by the board of directors.

82
Q

What notice must be given for the SH special meeting?

A

10 days notice, personally or by mail

MUST INCLUDE PURPOSE

83
Q

WHO can vote at SH meetings (annual or special)

A

Record holders of the voting shares on the record date are entitled to vote, incl. trustees, fiduciaries, and sometimes nominees

Recod date may not be more than 70 days before meeting

84
Q

How many SH needed to take a vote?

A

Quroum

85
Q

What is a quroum

A

majority of SH entitled to vote; . AOI may provide for no less than 1/3 quorum or may provide for a supermajority quorum.

86
Q

What is a proxy

A
  • every SH entitled to vote may authorize someone else to vote for him, which is revocable. Solicitation of proxies is highly regulated by SEC.
  • expire after 11 months unless otherwise expressly provided
87
Q

For an ordinary matter, how many votes needed to pass?

A

Majority of votes cast

88
Q

How many votes needed for election of a director?

A

Plurality, unless AOI provides for cumulative voting

89
Q

What is cumulative voting?

A

Each SH gets as many votes PER SHARE as there are directors being elected and may cast all for one candidate or divide the votes among the candidates any way they see fit . The candidates getting the most votes wins.

Helps minority shareholders

90
Q

For a fundamental change, how many votes needed to pass?

A

A majority of all outstanding shares entitled to vote

91
Q

What is a fundamental change?

A
  • amendment to AOI
  • merger
  • share exchange
  • sale of substantially all corporate assets
  • dissolution
92
Q

What happens when a vote needs be taken to decide on an amendment that effects a particular class adversely

A
  • the SH of that class are entitled to vote separately as a class on the change, whether or not the class is entitled to vote, and
  • the amendment must be approved by an absolute majority of the class, and of the total shares entitled to vote.
93
Q

What is a Voting Trust

A

SH can execute a voting trust agreement, transfer their shares, and confer upon trustee an irrevocable right to vote their shares. Agreement must be filed with the company and is available to every SH for inspection

-Legal ownership transferred to trustee, beneficial ownership retained by SH

94
Q

What is a pooling agreement?

A

2 or more SH can agree to pool their votes as specifically provided in agreement in writing, signed by SH.

Transferee of shares is bound by it if notice is on certificate or he otherwise had knowledge. They are enforceable in court.

SH retains legal and beneficial ownership

95
Q

Fla statute permits SH agreements for close corps with 100 or fewer SH, not publicly traded on these matters

A

agreements on the following:
• Eliminating or restricting powers of BOD
• Authorization or making of distributions
• Who shall be Dir and officers
• Division of voting power
• Transferring to SH the authority to exercise corp powers
• Requiring dissolution at request or upon happening of event

96
Q

Under FLa statute re: SH voting agreements, how may agreement be approved and terminated

A

To be valid ALL SH must approve agreement, and sign.

May be terminated or amended by unanimous vote of SH, unless agreement states otherwise.

97
Q

Are subsequent purchasers of shares subject to agreement bound by it?

A

Yes, but they may rescind w/in 90 days days of discovery of existence of agreement, or 2 years from purchase of shares, if they did not have notice.

98
Q

What records does a SH have the absolute right to inspect?

A 
SH has absolute right to inspect with 5 days written notice:
•	AOI, bylaws
•	Resolutions
•	SH meeting minutes
•	List of current D & O
•	Annual report.
99
Q

What records may SH inspect upon a showing off good faith and proper purpose?

A

SH may inspect the following docs upon 5 days written notice if his demand is made in g.f. and for a proper purpose. Must describe his purpose with reasonable particularity.
• Minutes of board meetings,
• Accounting records,
• Shareholder records, etc.

100
Q

If SH has to go to court to enforce his tights, may he collect attorneys fees?

A

Court may order inspection and award attorneys fees to SDH unless corp proves it was acting in g.f.

101
Q

What is a SH derivative suit?

A

A SH derivative suit is one brought by a SH to enforce a corp. COA when directors have failed to do so.

• SH stands in shoes of corp. and has any defenses that it would have.

102
Q

What are the requirements BEFORE bringing a derivative action?

A

Make demand on BOD that they prosecute the suit, and wait 90 days to see if it is rejected or ignored.

103
Q

When can SH sue w/o waiting 90 days from demand

A
  • if demand is rejected earlier OR

- if delay will cause irreparable injury

104
Q

What SH are eligible to bring suit?

A

• SH must have owned stock at time alleged wrong took place or rec’d stock by operation of law

105
Q

What must SH derivative complaint contain to be valid?

A

• Complaint must contain demand, and that Demand was rejected, or refused/ignored by Bd for 90 days (unless there is irrep. Injury for waiting)

106
Q

Upon motion, when may court dismiss derivative suit?

A

Corp. can dismiss der. suit if the court finds that one of the following groups determined in good faith that it is not in best interest of corp:

(i) Maj vote of indep. directors, if there is a quorum;
(ii) majority vote of committee appointed by majority vote;
(iii) panel of 1 or more people appointed by court upon moiton of corporation.

107
Q

What is the doctrine of equitable contribution?

A

all subscribers purchasing stock at the same time must pay the same price, unless otherwise agreed by subscribers and the price must be adequate and not dilute other stockholders.

108
Q

SOL to sue SH to pay for shares

A

5 years from issuance; or date of subscription, whichever is earlier.

109
Q

What are blue sky laws, and what does Florida exempt from blue sky laws?

A

Regulate sale of securities w/in state. Florida exempts private placements of not more than 35 persons within any 12 month period.
-Fla blue sky law does not require scienter, and may be the only basis for civil relief if the transaction has no nexus with interstate commerce

110
Q

What does UCC Article 8 regulate?

A

regulates purchase and sale of financial assets in Fla. Similar to Article 3 “holder in due course”. Applies to securities held directly by owner, and those held indirectly through a brokerage house.

111
Q

Who does UCC Article 8 protect

A

Protects “Protected purchasers” or purchasers for value who (i) gives value, (ii) does not have any notice of an adverse claim and (iii) obtains control of the security (Whether certificated or not)

112
Q

When does control of security occur for Article 8

A
  • Control of certificated security occurs upon delivery.
  • Control of uncertificated security occurs when issuer agrees that it will comply with instructions of purchase without further consent from owner
  • Control of security entitlement occurs when the security intermediary agrees that it will comply with instructions of purchase without further consent from owner. (a security entitlement is the ownership interest in a security held by an intermediary like a brokerage house).
113
Q

Does SOF apply to sale of securities?

A

No

114
Q

IS a K necessary for sale of securities?

A

No

115
Q

What are the issuers defenses to a protected purchase under UCC Article 8

A

Issuer has limited defenses: lack of genuineness is a complete defense;

-unauthorized signature, defects as to validity, nondelivery, incompleteness are not valid defenses against a Protected Purchaser.

116
Q

What is insider trading rule in Fla

A

Fla Supreme Ct has held that directors and their tippees are NOT liable to the corp for personal profits realized in trading on the basis of inside info.

117
Q

Section 16(b) Federal Securities law

A

corp may recover “short swing profits” realized by insiders (owning more than 10% of stock) from any purchase and sale, and any sale and repurchase, within a six month period.

118
Q

Section 10(b)(5) Federal Securities law

A

prohibits insiders from trading on basis of inside information if by doing so, she breaches a duty of trust and confidence owed to the issuer or SH. Insiders must disclose all material inside information before trading corporation’s stock. Ask whether D’s misrepresentation or omission was of a material fact.
• There must be an intent to defraud.
• Non trading D’s can be held liable.
• Fla has similar protections in its Blue Sky law.

119
Q

When can SEC sue for insider trading violations”?

A

When any person, including tippees illegally trade on the basis of insider info. Can collect an amount equal to three times their profit or loss avoided. Private persons who trade contemporaneously with the securities law violator may sue for damages

120
Q

What determines the number of directors in a corp?

A

AOI or by-laws. 1 minimum

121
Q

Term of directors

A

1 year.

Elected by plurality vote; terms may be staggered

122
Q

What types of meetings do BOD have?

A

Regular and special

123
Q

Where can regular and special meetings be held

A

Anywhere, within or outside state, can be telephone or other remote attendance

124
Q

Is proxy voting allowed at BOD meetings?

A

No

125
Q

Can directors be removed by SH

A

Yes, with or without cause, at any time, unless otherwise provided.

Directors elected by a class of stock can only be removed by vote of that class

126
Q

How are vacancies on board filled?

A

With remaining directors or SH until next annual election

127
Q

Is notice of REGULAR BOD meetings required?

A

No

128
Q

Is notice of SPECIAL BOD meetings required?

A

Yes. Personally or by mail at least 2 days before meetings unless AOI or bylaws provide otherwise;
NEED NOT state purpose

129
Q

Who calls special meetings?

A

Chairman of Board or President unless AOI or bylaws provide otherwise

They can be called at any time

130
Q

When are regular meetings held?

A

As by laws provide

131
Q

If notice is required, but director did not receive notice, what happens?

A

meeting is deemed illegal unless director attends and participates.

132
Q

What constitutes a quorum at a BOD meeting?

A

Majority of total number of directors authorized is necessary to constitute a quorum (unless AOI states otherwise, but no fewer than 1/3).

133
Q

What vote is necessary to take action at a BOD meeting

A

majority of those present

134
Q

Can actions be approved without a meeting?

A

Yes, if directors unanimously consent in writing.

135
Q

Does a director have the power to bind the corp to extraordinary contracts?

A

NO, unless there is actual authority to act

136
Q

What is actual authority?

A

Can only arise if:

  1. proper notice was given at BOD meeting;
  2. quorum was present; and
  3. majority of directors approved action
137
Q

To whom does a director owe fiduciary duties?

A

To corporation and its shareholders

138
Q

What are the powers and rights of a director?

A
  • Manage business
  • Fill vacancies
  • Elect officers and fix their compensation
  • Declare dividends
  • Adopt and amend by laws
  • Issue stock previously auth but unissued
  • Initiate fundamental change, subject to final approval by SH
  • Mortgage, pledge or create a security interest.
139
Q

What RIGHTS do directors have?

A

Inspect books and records; rely on management reports and statements; reimbursement for expenses

140
Q

What is a director’s duty of care?

A
  • must exercise the care and skill that an ordinarily prudent person in like position would use under similar circumstances.
  • OBJECTIVE STANDARD
141
Q

What is the business judgment rule and when is it applied?

A

-Court will not second guess decisions that are reasonably informed and rational, and in the best interest of corp.
- If it turns out that it was unprofitable or unwise, directors are protected.
-Courts will apply business judgment rule when it is called upon to consider the wisdom of a director’ decision
Judiciary reluctant to find directors liable.

142
Q

Is the liability of directors joint and several?

A

Yes, unless director voiced dissent

143
Q

Can directors be held liable to corp for breach of the duty of care?

A

No, Florida has statutorily abolished such liability

144
Q

When does the duty of loyalty come into play?

A

where director has personal stake in the action to be taken by the board

145
Q

Interested director transaction - where director has a financial interest in the contract

A

Fla provides that a contract or other transaction between a corp and Dir is not void or voidable solely because of Dir.’s relationship interest if the contract is: (i) disclosed to BD and approved by disinterested majority of the board;
(ii) disclosed to SH and ratified or approved by SH OR (iii) fair and reasonable to the corp. even if not disclosed

146
Q

What are the two aspects of the duty of loyalty

A
  • Good faith: director must make full and fair disclosure of her conflict of interest and to act in the best interests of the corp.
  • Fairness: even if director has made full disclosure, any transaction in which she is interested must be fair to corporation
147
Q

Corporate opportunity doctrine

A

Dir and officers must inform the corp of business opportunities of which it might want to take advantage

BOP on director to prove the fairness of failure to offer opportunity to company

If director fails to do so and personally takes advantage of the opportunity, she may be compelled to transfer the opportunity and/or benefits to the corporation

148
Q

Has Florida abolished director liability for a breach of the duty of loyalty

A

No, but it has been statutorily limited.

149
Q

Fact patterns dealing with director learning of a business opportunity, what to consider

A

Consider whether corp would have an actual or expectant interest in the opportunity. If so, dir must present the opportunity to the corporation, and can only take advantage personally if corp decides not to pursue it. If corp not given the chance to pursue, dir can be forced to turn over opportunity or profits

150
Q

Does the director face liability for unlawful distributions?

A

dir who votes for or assents to illegal distribution will be liable for the amount of such distribution in excess of what was available if the general standards of director were violated.

151
Q

What defense can director raise against liability for illegal distributions?

A

It is a defense that dir. reasonably relied on financial statements.

152
Q

Director liability under federal securities laws

A

Dir may be held liable for signing a registration statement that contains materially false or misleading information

153
Q

How are officers and agents appointed?

A

By Board of directors, and they carry out their duties under the general supervision of the board in accordance with corporate policy and the by laws

154
Q

Do officers and agents have the power to bind the corporation in dealings with third parties?

A

Yes, laws of agency give officers that power

a. Actual auth: (both express and implied)
b. Apparent auth: created by acts of principal giving the appearance that authority exists (not agent)
c. Principal may ratify officer’s conduct, and it can be express or implied.

Officers only have power to enter into contracts in the ORDINARY course of the company’s business

155
Q

Compensation of directors

A

unless otherwise provided in bylaws or AOI – compensation is set by Bd of Dir.

156
Q

How can directors resign?

A

a. Resignation any time by written notice. May be made irrevocable

157
Q

Do officers have fiduciary duties?

A

Yes to corporation

158
Q

Who decides officer’s compensation?

A

Bd of dir

159
Q

What if an officer is also a director - can they vote concerning their own compensation?

A

officer-directors should not vote concerning their own compensation – can create a compensation committee.

160
Q

Who proposes amendments to the bylaws?

A

Board

161
Q

What amendments do not require SH approval?

A
  • extending duration of of the corporation
  • deleting names of inital directors
  • making certain changes to corporate name
162
Q

When there is a sale of assets, which corp SH’s need to approve the sale?

A

SH of the acquired corporation

163
Q

When there is a merger of companies, which corp SH’s need to approve the sale?

A

Both companies, after directors deleop a plan of merger

164
Q

Does a company purchasing assets become liable for the other’s debts?

A

No

165
Q

If corporation is dissatisfied with terms of a fundamental change, what can they do?

A

They can compel the corporation to buy their shares at fair value by following a special statutory procedure.

This is their exclusive remedy absent fraud, misrepresentation or improper procedure.

166
Q

Which SH may dissent?

A
  • any SH entitled to vote on a plan of merger, or the SH of a subsidiary in a short form merger
  • SH entitled to vote on a disposition of corporate property;
  • SH of the corp whose shares are being acquired in a share exchange
  • SH whose shares will be reduced to fractional shares by and amendment to the articles
167
Q

Does corp need to give notice of appraisal rights?

A

Yes, when fundamental corporate change is going to be submitted to a vote at a meeting, notice must state whether SH will be entitled to assert appraisal rights.

168
Q

Procedure for exercising appraisal rights

A
  • Corp gives notice of right to assert appraisal rights at meeting to vote on fundamental change
  • SH delivers notice of intent to demand payment for her shares, and cannot vote in favor of action
  • within 10 days after vote, corp must notify dissenting SH when and where to submit their shares. They have been 40-60 days (depending on what notice states)
169
Q

Voluntary dissolution

A

Corporation my voluntarily dissolve and liquidate at any time without judicial supervision. Notice must be given to all known creditors
-Once liquidation is completed, file Notice of dissolution.

170
Q

Involuntary dissolution

A

SH can bring action for judicial dissolution

171
Q

Grounds for involuntary dissolution in large corp (over 35 SH)

A
  • corp is threatened w/irreparable injury and there is a deadlock of the directors
  • SH are deadlocked and unable to elect successor directors
172
Q

Grounds for involuntary dissolution in small corp (less than 35 SH)

A
  • waste or misappropriation of corporate assets
  • directors acting fraudulently or illegally

Court will look at whether it is necessary to prevent irreparable injury and is in the best interest of the corporation

173
Q

What are the rights of a foreign corporation to sue or be sued in Florida

A

-Cannot sue until corp obtains authority in Florida
-Can be sued, and defend an action in Fla even if not authorized to do business here
-

174
Q

Liability of foreign corporation to STATE if it transacts business in Florida w/o authority

A

Liable to state in an amount equal to all fees and taxes that would have been imposed for the years in which it failed to qualify. In addition, the corporation must forfeit to the state between $500 and $1,000 for each year it failed to qualify

Florida Bar by LL (16 decks)

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