Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

Business Associations - Fall 2022 (Dexter) > Corporations (Governance) > Flashcards

Corporations (Governance) Flashcards

1
Q

Corporations (Governance)

Shareholder Rights

A

Shareholders do not have management or control rights

Shareholders participate indirectly in corporate governance through voting

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

Corporations (Governance)

Shareholder Protections

A

Unhappy shareholders may sell their shares or try to turn out the board

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

Corporations (Governance)

Shareholder Meetings:
Who can call a Special Meeting

A
  1. Board of Directors
  2. Shareholders with more than 10% ownership
  3. Any person authorized in the Articles of Incorporation or Bylaws
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

Corporations (Governance)

Shareholder Meetings:
Location

A

The bylaws either designate a location or provide that the directors will determine the location

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

Corporations (Governance)

Shareholder Meetings:
Notice of Meetings

A

Shareholders are entitled to notice of all meetings in which they can vote

Failure to provide notice can cause a meeting to be declared invalid

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

Corporations (Governance)

Shareholder Meetings:
Shareholders Entitled to Notice

A

Unless the state corporations code or the articles of incorporation require otherwise, the corporate is generally only required to give notice to shareholders entitled to vote at a meeting. MBCA § 7.05(a)

Voting shareholders of record as of the record date are entitled to notice.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

Corporations (Governance)

Shareholder Meetings:
Substantive & Procedural Notice Requirements

A

Substantive:
Notice must specify the purpose, date, time, and place

Procedural:
Notice must be given no fewer than 10 days, nor more than 60 days before the meeting date

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

Corporations (Governance)

Shareholder Meeting:
Effect of Defective or Improper Notice

A

Shareholder who have not recieve proper notice may attack the meeting, unless*

  1. The shareholders attend the meeting
  2. The shareholders provide written waivers or ratification/consent in writing
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

Corporations (Governance)

Shareholder Meeting:
Quorum

Potential Modifications & Outcomes

A

No action can be taken at any shareholder meeting unless a certain minimum number of shares is present (quorum)

If no quorum –> meeting cannot be held

If quorum –> meeting may be held and quorum cannot be destroyed by shareholders leaving the meeting

Modifications: Unless the articles of incorporation specify otherwise, a quorum is a majority of votes entitled to be cast on a given matter

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

Corporations (Governance)

Proxy Voting:
Proxy Battles

A

A fight for control of the company that is reflected in competing proxy statements or competing proposals in the company’s proxy statement.

Often occurs in connection with hostile takeovers

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

Corporations (Governance)

Proxy Voting:
Proxy Revocation

A

Proxies can be revoked by:

  1. Written revocation
  2. Showing up to vote in person
  3. Signing a subsequently-dated proxy
  4. Dying or becoming incapacitated
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

Corporations (Governance)

Proxy Voting:
Proxy Expiration

A

If the proxy does not state a duration, it automatically expires 11 months after it is received by the corporation, unless the proxy is irrevocable under applicable state law

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

Corporations (Governance)

Proxy Voting:
Irrevocable Proxies

A

A proxy is irrevocable if:

  1. It states it is irrevocable
  2. It is coupled with interest (aka the proxy is the loan interest)
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

Corporations (Governance)

Shareholder Voting:
Shareholder Voting Rights

A

Shareholder voting rights are limited and generally include:

  1. Charter Amendment
  2. Shareholder-initiated Bylaw Amendments
  3. Certain Mergers
  4. Sales of all or substantially all Corporate Assets not in the ordinary course of business
  5. Dissolution

Shareholder voting rights may be expanded by the charter or bylaws

The board may choose to put an issue to a shareholder vote

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

Corporations (Governance)

Shareholder Voting:
Voting for Directors

A

Straight Voting vs. Cumulative Voting

Majority vs. Plurality Requirement

NOTE: Plurality is generally default

“separate vote on each seat” = “seat-by-seat” voting

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

Corporations (Governance)

Shareholder Voting:
Class Voting

A

Classes or series of stock may vote as separate units

At least one class of share must have full voting rights

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

Corporations (Governance)

Shareholder Voting:
Disproportionate Voting (Dual-Class Voting)

A

Exists when one class has disproportionate voting power compared to another class

Generally criticized for allowing founders and insiders to exercise unchecked control

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

Corporations (Governance)

Shareholder Voting:
Voting Agreements

A

Shareholders can make private agreements to pool their votes by agreeing to vote in a certain manner

Relatively little regulation

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

Corporations (Governance)

Shareholder Voting:
Voting Trusts

Trustee Authority & Liability and Voter Rights Relinquished & Retained

A

Shareholders transfer their voting rights to a trustee via a written agreement

Voter Rights Relinquished: Voting & Notice

Voter Rights Retained: Dividends & other Ownership Rights

Trustee Authority:
1. Exercise independent judgment
2. Obtain a consensus, or
3. Vote as specified in the agreement

Trustee Liability:
Trustee has fiduciary duties to the trust, but is generally not liable for acts of gross negilgence or recklessness

20
Q

Corporations (Governance)

Shareholder Voting:
Voting Agreements vs. Trusts

A
...
21
Q

Corporations (Governance)

Board of Directors:
General Responsibilities

A
  1. Managing the business and affairs of the company
  2. Making key decisions and delegating the day-to-day functions to Management
  3. May have committee functions
22
Q

Corporations (Governance)

Board of Directors:
Common Functions & Responsibilities

A
  1. Select, evaluate, and replace corporate officers (or management)
  2. Determine officer and senior management compensation
  3. Review and approve financial objectives, strategies and plans, and when to seek loans
  4. Provide advice and counsel to management on important policies, strategies, business plans, etc
  5. Select and recommend directors for shareholder approval
  6. Initiate extraordinary matters, such as mergers or the purchase/sale of corporate assets
  7. Exercise responsibility for corporate operations, including entering into contracts and buying/selling real and personal property
  8. Review adequacy of internal controls
23
Q

Corporations (Governance)

Board of Directors:
Board Composition

A
  1. Number: One or more, usually an odd number, and determined in the bylaws
  2. Insider & Outside Directors
  3. Listing Standards (for Public Companies–qualifications & independence)
24
Q

Corporations (Governance)

Board of Directors:
Insider Directors

A

Directors who are also officers, employees, and/or significant shareholders of the corporation

25
Q

Corporations (Governance)

Board of Directors:
Outside Directors

A

Directors who have no other relationship with the corporation other than their directorship

26
Q

Corporations (Governance)

Board of Directors:
Committee Functions
Limited Authority

A

Committees have limited authority, especially regarding actions that substantially effect shareholders

Nondelegable Committee Actions
1. Authorizing distributions
2. Amending the bylaws
3. Filing board vacancies
4. Approving matters requiring shareholder approval

27
Q

Corporations (Governance)

Board of Directors:
Committee Functions
Common Committees

A
  1. Audit Committee
  2. Compensation Committee
  3. Special Litigation Committee
  4. Executive Committees
  5. Nominating and Governance Committees
28
Q

Corporations (Governance)

Board of Directors:
Committee Functions
Audit Committee Functions

A
  1. Reviews financial matters
  2. Selects corporate auditors
  3. Supervises audits
29
Q

Corporations (Governance)

Board of Directors:
Director Removal

A

Director removal may be for cause or without cause

Generally, directors cannot remove other directors

30
Q

Corporations (Governance)

Board of Directors:
Shareholder Removal of Directors

A

A director may be removed by shareholders:

  1. At a special meeting called for the purpose of removing the director
    OR
  2. By court order (business judgment rule)
31
Q

Corporations (Governance)

Board of Directors:
Vacancies

A

Vacancies are filed either by shareholder vote or remaining directors

If numerous vacancies exist and the remaining directors do not constitute a quorum, they still may fill vacancies by a majority vote of all remaining directors. MBCA § 8.10(a)(3)

32
Q

Corporations (Governance)

Board of Directors:
Resignation

A

Directors may resign at any time by providing written notice to the corporation

33
Q

Corporations (Governance)

Board of Directors:
Staggered vs. Non-Staggered Boards

Benefits & Negatives

A

Under default rules, directors typically stand for election each year, unless terms are staggered.

Benefits

Because the board is not completely replaced at one time, it:

  1. Provides continuity of expertise
  2. Allows directors to focus on long-term goals rather than fearing ouster
  3. Makes hostile takeover more difficult

Negatives

  1. Serves to entrench directors
  2. **Deters acquisition bids **that may enhance shareholder value
  3. Annually elected directors may be more accountable to shareholders
34
Q

Corporations (Governance)

Board of Directors:
How Directors Act on Behalf of the Company

aka how decisions are made

A
  1. Voting at meetings (regular & special) where quorum is present,
    OR
  2. Unanimous written consent
35
Q

Corporations (Governance)

Board of Directors:
Purpose of Regular Meetings

A

Most Boards meet at regularly scheduled intervals in order to:

  1. Conduct regular business
  2. Manage the corporation, and
  3. Appoint new officers
36
Q

Corporations (Governance)

Board of Directors:
Purpose of Special Meetings

A

Typically called to discuss matters that cannot wait until the next regular meeting, such as time-sensitive and significant potential corporate transactions

37
Q

Corporations (Governance)

Board of Directors:
Director Notice of Meetings

A

Directors are not entitled to notice of regular meetings

Directors are entitled to notice of special meetings at least 2 days prior to the meeting, unless otherwise specified in the articles of incorporation or bylaws

38
Q

Corporations (Governance)

Board of Directors:
Waiver of Notice of Meeting

A

A director can waive notice:

  1. Before or after the meeting
  2. In writing
  3. Signed
  4. Filed

A director’s attendance constitutes a waiver, unless objection made at beginning of meeting

39
Q

Corporations (Governance)

Board of Directors:
Quorum

A

Directors cannot validly take action at any meeting unless a quorum is present

Generally consists of a majority of the number of directors as determed in the articles or bylaws, regardless of vacancies

The articles or bylaws may vary the quorum requirements to:
1. More than a majority
2. Not Less than one-third

Bylaws: 9directors; Reality: 5directors -> need 5directors for majority

40
Q

Corporations (Governance)

Board of Directors:
Quorum for Director Vacancies

A

Quorum requirements are typically relaxedwith regard to filling vacancies (affirmative vote of remaining directors)

41
Q

Corporations (Governance)

Board of Directors:
Director Vote by Proxy

A

Generally, directors cannot act or vote by proxy because it would violate their fiduciary duties to make fully informed decisions

42
Q

Corporations (Governance)

Board of Directors:
Compensation

A

Most statutes allow for director compensation:

  1. Pursuant to the articles or bylaws, **or **
  2. By shareholder or board action

Generally, directors may** fix their own compensation** unless otherwise provided in the articles or bylaws

43
Q

Corporations (Governance)

Officers (Management):
Functions & Responsibilities

A

Responsible for implementing board policies and decisions

Carry out day-to-day functions delegated by the board or set forth in the bylaws

Officers are agents of the corporation

44
Q

Corporations (Governance)

Officers:
Selection & Removal

A

Officers are selected, supervised, and removed by the board

Details regarding officer selection are generally included in the bylaws

Directors select replacements to fill vacancies, but some senior officers amy be allowed by the board to appoint other inferior or assistant officers

45
Q

Corporations (Governance)

Officers:
Agent Authority

Actual, Apparent, & Inherent

A

Actual Authority - Set forth in Bylaws; explicitly delegated by the board

Apparent Authority - Based on job title or other board manifestations

Inherent Authority - Based on job title or other delegated authority

46
Q

Corporations (Governance)

Officers:
Duties, Obligations, & Liability

A
  1. Duty of Care
  2. Duty of Loyalty
  3. Obligations of Good Faith and Fair Dealing

Officers are generally protected by the business judgment rule

Business Associations - Fall 2022 (Dexter) (13 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions