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Bar > Corporations + Agency + Partnerships + Trusts > Flashcards

Corporations + Agency + Partnerships + Trusts Flashcards

1
Q

Business Judgment Rule (2)

A

Rebuttable presumption that in the absence of fraud, illegality, or self-dealing, courts will not disturb good-faith decisions, and directors and officers are shielded from liability. Those with special skills must use them

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2
Q

Reliance defense: director/officer duty of care (3)

A

Entitled to rely on (a) expertise of officers/other employees (b) outside experts (c) committees of the board

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3
Q

Fiduciary duty of care standard

A

Act with the car that a person in a like position would reasonably believe appropriate under similar circumstances

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4
Q

Duty of loyalty definition

A

Directors and officers may not receive an unfair benefit to the detriment of the corporation without effective disclosure or ratification

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5
Q

Self-dealing transactions can be upheld if any of these are met: (3)

A

(a) disclosed and ratified by a majority of disinterested directors (b) “ “ disinterested shareholders (c) can demonstrate the transaction was fair

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6
Q

Process for approving of a fundamental change of a corporation?

A

(1) Board adopts a resolution proposing the change (2) Special meeting is called by board, officer, shareholders (3) Notice of a special meeting is sent to shareholders (4) a majority of shares entitled to votes approves

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7
Q

Special meeting requirements

A

(1) Notice sent to shareholders (10 days > 60 days; date time location purpose) (2) record date is set < 70 days before meeting (3) quorum at start of meeting (4) necessary vote

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8
Q

Shareholder voting proxy requirements (5)

A

In writing; signed by shareholder; sent to secretary; authorizes to vote; valid for 11 months max

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9
Q

Self-dealing transaction definition

A

Officer/director receives compensation directly from the corporation

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10
Q

Usurpation of corporate opportunity definition

A

Officer/director prevents from business coming into the corporation

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11
Q

In which circumstances does a shareholder meeting not need to occur?

A

Unanimous written consent by shareholders

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12
Q

Who can make a distribution, and liable for unlawful distribution?

A

Board of directors only; liable personally, joint and severally

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13
Q

Do shareholders have the right to distributions?

A

NO

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14
Q

When can a distribution NOT be made? (2)

A

The corporation is insolvent; the distribution would make the corporation insolvent

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14
Q

When can a distribution NOT be made? (2)

A

The corporation is insolvent; the distribution would make the corporation insolvent

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15
Q

Who owns an LLC?

A

Members (not shareholders)

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16
Q

How is an LLC taxed?

A

Like a partnership; aka, you tax the members directly, not its profits, and you tax the entity only once

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17
Q

Limitations on number of shareholders/members: S corp v. LLC?

A

S corp has a limit; LLC does not.

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17
Q

Limitations on number of shareholders/members: S corp v. LLC?

A

S corp has a limit; LLC does not.

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18
Q

Exceptions to promoters’ personal liability for pre-incorporation agreements (2)

A

(a) novation (b) adoption of K by corporation

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18
Q

Exceptions to promoters’ personal liability for pre-incorporation agreements (2)

A

(a) novation (b) adoption of K by corporation

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19
Q

Articles of incorporation requirements (6)

A

Name; agent; names/addresses of incorporators; duration; purpose; authorized shares

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20
Q

Ultra vires

A

If a corp. acts outside of its stated purpose, its acts are unenforceable by the shareholders, state, or the corp. (but NOT third parties)

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21
Q

When does incorporation begin

A

When Secretary of State accepts the fee and files the articles

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22
Q

De facto corporation requirements

A

(a) organizers made a good faith effort (b) had no knowledge that they did not comply

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23
Q

Veil piercing

A

Shareholders are not generally liable for actions of the corporation, unless it would be fair and reasonable to do so under the totality of the circumstances

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23
Q

Quorum

A

a majority of outstanding shares must be represented at the start of the meeting

24
Q

Necessary vote

A

Votes cast in favor exceed votes cast against

25
Q

Corporation by estoppel

A

If a third party has treated an entity like it is a corporation, they’re estopped from later seeking personal liability against the officer/director

26
Q

Veil piercing factors (5)

A

fraud; use of corporate assets as own assets; disregard of corporate formalities; undercapitalization at the time of formation; siphoning funds

27
Q

Remedies for breach of duty of loyalty: Self-dealing

A

Rescind the transaction; damages from interested director/officer

28
Q

Derivative lawsuit requirements

A

(a) (Standing) shareholder has contemporaneous ownership throughout each stage of the litigation (b) fairly represents the interest of the corporation (c) demands the board to bring a lawsuit first (unless futile)

29
Q

Derivative lawsuit definition

A

A shareholder sues on behalf of the corporation for alleged unlawful acts done to the corporation. Recovery goes to the corporation.

30
Q

Controlling shareholders’ duty

A

Fiduciary duty to not misuse your power in a way that disadvantages minority shareholders

31
Q

Who gets paid first with bankruptcy proceedings OR dissolution?

A

Secured creditors; unsecured creditors; preferred shareholders; common shareholders

32
Q

When can a shareholder sue when they haven’t been issued a dividend?

A

(a) Breach of fiduciary duties of care + loyalty, aka, when a board acts in bad faith and abuses its discretion (b) there were funds available for the dividend

33
Q

Does adoption relieve a promoter of liability?

A

NO, only novation will do that.

34
Q

Implied adoption

A

When a corporation accepts the benefits of a pre-incorporation contract, there has been an implied adoption of the K by the corporation

35
Q

Partnership Duty of Care

A

A partner owes a duty of care to (a) the partnership and (b) to other partners to refrain from engaging in negligent, reckless, or unlawful conduct

36
Q

Agency relationship is created when: (4)

A

(i) a principal manifests assent to an agent; (ii) the agent acts on the principal’s behalf; (iii) the agent’s actions are subject to the principal’s control; and (iv) the agent manifests assent or otherwise consents.

37
Q

Ratification occurs when: (3)

A

(a) A principal approves a prior act done by their agent (b) principal knows the material facts of the prior act (c) timely

38
Q

3 components of an agency relationship

A

Assent; Benefit; Control.

39
Q

Is consideration required for an agency relationship?

A

No

40
Q

Who can be a principal?

A

Anyone with legal capacity

41
Q

What differentiates an employee from an independent contractor?

A

For employee/agent, the principal has the right to control the agent’s physical conduct of work.

42
Q

When is there actual implied authority?

A

Principal conveys authority for an agent to take whatever steps are necessary to achieve principal’s objectives

43
Q

When is there apparent authority?

A

Principal makes a third party reasonably believe that a principal consents for the agent to act on their behalf

44
Q

When is there ratification? (2)

A

Principal has knowledge of the material terms of a K; principal accepts the contract’s benefits

45
Q

When can an agent be liable under a contract?

A

When the principal is partially disclosed or undisclosed

46
Q

When is a principal NOT liable for a contract?

A

Undisclosed to the third party

47
Q

Liability of general partnership

A

Partnership itself may be liable; all partners are personally and jointly, severally liable for the debts and liabilities of the partnership

48
Q

When is a general partnership formed? (4)

A

Partners share profits; partners INTEND to co-own and share profits; partners AGREE to co-own and share profits; share CONTROL

49
Q

General partnership definition

A

Association of two or more persons to carry on a for-profit business as co-owners

50
Q

Express actual authority

A

Principal expressly gives agent authority to do the specific act in question

51
Q

Implied actual authority

A

Agent has a reasonable understanding that they are authorized to take whatever actions are necessary to achieve the principal’s objectives

52
Q

Apparent authority

A

Principal causes a third party to reasonably believe the agency has the authority to act

53
Q

When will a principal be vicariously liable for their agent’s intentional tort? (3)

A

During work hours; motivated to act for the principal’s benefit; act was within assigned duties

54
Q

When will a principal be DIRECTLY liable to third parties for the acts of their agent? (3)

A

(a) ratification (b) negligent hiring/supervising (c) delegates a non-delegable duty to agent

55
Q

When will a court presume co-ownership for the purposes of partnership formation? (2)

A

Sharing of profits; sharing control

56
Q

Is an incoming partner personally liable for partnership’s liabilities that occurred before the partner joined?

A

No, but they may lose their capital contribution

57
Q

Can a limited partner enter in a K on behalf of a partnership?

A

NO. If they do so they will be treated as a general partner

58
Q

How can you add a general partner?

A

All existing partners must consent (or as otherwise specified)

59
Q

Trustee’s fiduciary duties owed to beneficiaries

A

Duty of care; invest; diversify; make property productive; impartial towards beneficiaries; loyalty

60
Q

Trust Formation Elements (4)

A

Intent; identified property to go in the trust; purpose; ascertainable beneficiaries (class is fine)

61
Q

Charitable trust elements (3)

A

Charitable purpose; indefinite/non-specific beneficiaries; charity follows the trust terms

62
Q

Cy Pres - Charitable Trusts

A

Court can modify charitable trust if (a) trust became impracticable/impossible (charity no longer exists), (b) trust had a general intent (didn’t name one specific charity)

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