Corporations Essay Specific

Question 1

What does MI statute provide in regard to minority shareholders bring suit for oppression?

Answer 1

“only for conduct that substantially interfers with the interest of the shareholder as a shareholder.”

Question 2

What is a shareholders right to inspect corporate records?

Answer 2

• Shareholder needs to provide a proper purpose
  
  • Proper purpose: a reason that reasonably related to the persons interest as a shareholder. Seeks protection of the shareholders interest and that of other shareholders in the corporation, and is not contrary to the corporations interests.

Question 3

By MI statute how long does a corp have to respond to a records request?

Answer 3

the corporation must either approve or reject the request within the five-day period.

But, if the request does not comply with the statute (requiring a proper purpose) the corporations response does not give basis for relief requested.

Question 4

Does MI statute require the corporation to provide the officer’s income tax returns?

Answer 4

No.

Question 5

What is a derivative proceeding?

Answer 5

“a civil suit in the right of a domestic corporation or a foreign corporation that is authorized to or does transact business in this state.”

Question 6

A SH may not commence or maintain a derivative suit unless the SH:

Answer 6

(1) was a shareholder of the corporation at the time of the act or omission complained of,
(2) fairly and adequately represents the interests of the corporation in enforcing the right of the corporation, and
(3) continues to be a shareholder until the time of judgment.

Question 7

Factors a court uses in determining if a SH “fairly and adequately represents the interests of the corp in enforcing the right of the corporation:

Answer 7

1. SH must have capacity ti vigorously and conscientiously prosecute a derivative proceeding free from personal interests
2. degree of support from other SH’s
3. remedy sought
4. indications that the plaintiff is not the true party in interest

Question 8

Procedural requirements for a SH derivative action:

Answer 8

(1) a written demand has been made upon the corporation to take suitable action, and
(2) 90 days have passed “from the date the demand was made unless the shareholder has earlier been notified that the demand has been rejected by the corporation or unless irreparable injury to the corporation would result by waiting for the expiration of the 90-day period.”

Question 9

The American Rule regarding attorney’s fees

Answer 9

Attorney’s fees are generally not recoverable from the losing party absent an exception set fourth in a statute or court rule

Question 10

Will a SH be paid back for a derivative suit?

Answer 10

at the conclusion of the derivative proceeding, the court may order “[t]he corporation to pay the plaintiff’s reasonable expenses, including reasonable attorney fees, incurred in the proceeding if it finds that the proceeding has resulted in a substantial benefit to the corporation.”

Question 11

How to pierce the corporate veil in MI:

Answer 11

(I) the corporate entity is merely an agent or instrumentality of its shareholders or another entity;

(2) the corporate entity was used to commit a fraud or wrong; and
(3) the plaintiff suffered an unjust loss or injury.

Question 12

Is fraud required to pierce the corporate veil?

Answer 12

Not necessarily, the court of appeals held that plaintiff could pierce the corporate veil if it showed that the corporate defendant was “defendants’ ‘agent,’ ‘mere instrumentality’, or device to avoid legal obligations.”

Question 13

What Michigan Act guides the governance of corporations?

Answer 13

Michigan Business Corporation Act

Question 14

What is the equity insolvency test?

Answer 14

equity insolvency test provides that a corporation may not legally make a distribution if, after giving effect thereto, the corporation would be unable to pay its debts as they become due in the usual course of its business.

Question 15

What is the “balance sheet test”?

Answer 15

the corporation’s total assets would be less than the sum of its total liabilities plus (unless the articles of incorporation permit otherwise) the amount that would be needed, if the corporation were to be dissolved at the time as of the distribution, to satisfy the preferential rights upon dissolution of shareholders whose preferential rights are superior to those receiving the distribution

Question 16

2 limitations on a corporations ability to make distributions?

Answer 16

1. equity insolvency test

2. balance sheet test

Question 17

a director must discharge the duties of his or her position in

Answer 17

good faith, with the care and ordinarily prudent person in like position would exercise under similar circumstances, and in a manner reasonably believed to be in the best interests of the corporation.

Question 18

business judgment rule

Answer 18

absent any evidence of fraud, bad faith or self-dealing (in the usual sense of personal profit or betterment), there is a presumption that the directors of a corporation acted in good faith and in the honest belief that the action taken was in the best interest of the corporation.

In each case, a director’s claim of good faith reliance will be measured by reasonable belief in the completeness and accuracy of information, the reliability and competency of the individual, or the committee’s performance within its designated authority and in a way that the director believes merits confidence.

Question 19

What are qualities of a closely held corporation in MI?

Answer 19

1. Shareholders participate in the management of the corporation,
   and
2. family members control the majority of stock,

Question 20

When do MI tend to allow a Plaintiff to pierce the corporate veil?

Answer 20

1. The corporate entity must be found to be a mere instrumentality of another individual or entity.
2. The corporate entity was used to commit an injustice, wrong or fraud, and there must have been an unjust injury or loss to the plaintiff.
3. All facts and circumstances surround the corporation, its economic justification and its operation must be considered to determine if the corporate structure has been abused.

Step 1: Do the facts show that a board of director exercised complete dominion and control over the property of the corp?
Step 2: Did the director use the corporate entity to commit a wrong or fraud?