Corporations and LLC Flashcards
What is the key principle regarding incorporation?
The articles of incorporation are filed with the state and control over bylaws in case of conflict.
Who is liable for contracts entered into prior to incorporation?
The promoter is liable unless the corporation expressly or impliedly adopts the contract.
What roles do shareholders have in a corporation?
Shareholders are owners who generally do not manage the corporation and only have annual meetings.
What is required for a shareholder meeting notice?
Written notice is required 10−60 days prior and must state the time, place, and purpose of the meeting.
What is a quorum in the context of shareholder voting?
A quorum is a majority of all outstanding( total amout of all share issued ) shares required to vote.
What powers do directors have in a corporation?
Directors manage the corporation and can exercise all corporate powers not limited by articles or agreements.
Can directors vote by proxy?
No, directors cannot vote by proxy or agreement.
What is the duty of care in corporate governance business-judgment rule: ?
Directors must act on an informed basis, in good faith, and with the honest belief that their actions are in the company’s best interest.
What is the presumption under the business-judgment rule?
There is a presumption that directors acted on an informed basis and in good faith in making business decisions.
What creates a duty of loyalty issue for directors?
A director’s material financial interest in a contract, competing with the corporation, or usurping a corporate opportunity.
What are the defenses to liability for breach of the duty of loyalty?
Approval by disinterested directors, approval by disinterested shareholders, or if the transaction is fair to the corporation.
What can an LLC operating agreement waive?
An LLC operating agreement may waive the duty of loyalty, allowing members to open competing businesses.
What is required for a resolution to pass in a shareholder vote?
A quorum must be present, and more votes must be cast in favor than against the resolution.
Who votes in a shareholder meeting?
The record owner on the record date.
What is the process for voting by proxy?
A shareholder can appoint a proxy in writing or via electronic transmission, and the proxy is generally revocable.
True or False: A proxy is not revocable if it explicitly states it’s irrevocable and is coupled with an interest.
True
What can shareholders sue for against the corporation?
Shareholders may file an action for illegal, fraudulent, or willfully unfair acts by directors.
What is a direct suit?
A direct suit is appropriate when the wrong done amounts to a breach of duty owed to the individual personally.
What is a derivative suit?
A derivative suit is when a shareholder enforces the corporation’s rights due to injury caused to the corporation.
a legal action where a shareholder, on behalf of the corporation, sues t
What are the requirements for filing a derivative lawsuit?
Standing to bring a lawsuit, adequacy representing the corporation’s interests, and demand for action.
What is piercing the corporate veil?
Holding shareholders personally liable for corporate debt under limited circumstances.
What must a plaintiff show to pierce the corporate veil?
Shareholders abused the privilege of incorporating, showing undercapitalization, failing to follow formalities, or commingling of assets.
What is a shareholder’s right regarding corporate books and records?
A shareholder has the right to inspect corporate books and records for a proper purpose.
What must a shareholder state when demanding to inspect records?
The purpose, the records desired to inspect, and that the records are directly connected to the purpose.
