CORPS Flashcards
What is a promotor and what is their liability
Promotors are individuals who make efforts to gain capital and following for the corporation before in existence. They are personally liable for all pre-incopration transactions unless C does a subsequent novation. Can also expressly assume liabilities or impliedly by acceptance of benefits.
How does a Corporation become Incorporated
Articles of Incorporation must be filed with the State Corporation Commission which includes name of corporation, name of resident VA agent, location of principal office in Virginia, and the number of shares authorized.
What do incorporators do and what is their liability?
Incorporators merely sign and file the Articles of Incorporation with the State Corporation Commission. They are never personally liable for acts of the promotor.
Who selects BOD and how many are required?
Can have as few as one
SH’s select director at annual meeting
Term typically 1 year but can be set by articles or bylaws
BOD are only entitled to notice of what meeting?
A director is only entitled to notice on special meetings
What are the voting requirements in a meeting?
Generally a quorum (majority of all directors) is required however may be lowered but not below 1/3 of directors present
What are directors not allowed to do in Committees?
BD can generally authorize actions through committees however they may not authorize distributions, repeal bylaws, take vote that require SH approval, merger, amend articles, etc.
When will director breach the duty of loyalty?
D will breach if director engages in self dealing or usurps corporate opportunities
When will Director breach duty of care?
When D does not act with care that a prudent person would use with regard to his own business.
What are the meeting requirements?
Annual and Special meetings must contain the time and place and must be given 10-60 days prior.
IF SPECIAL MEETING MUST ALSO INCLUDE PURPOSE AND 25-60 DAYS IN ADVANCE FOR CORP FUNDAMENTAL CHANGE
What is the result if notice was not given to SH for meeting?
Without notice and as long as SH did not waive notice the action taken at the meeting will be void.
Can a director limit personal injury liability for a corporation?
No, In Virginia a contract provision that purports to release a defendant from liability for personal injury caused by the defendants future negligence is prohibited. However, releasing liability for property damage is permissible.
What notice is required for a SH to inspect and copy corp documents?
A SH in a stock corp has the right to inspect and copy corp documents so long as the SH sends a signed written request at least 10 business days in advance.
Proper purpose must be had which is one that relates to the SH’s interest
NOTE: For some corp records inclusion minutes of board of directors meetings and the list of SH record the SH must have been a SH for 6 months.
What is the duty of loyalty is there a safe harbor?
The duty of loyalty forbids a director from engaging in a conflict of action transaction with his own C
Yes, The safe harbor provision states if the director discloses all material facts and the committee or the board approved the transaction, SH’s were aware, or it was fair to the C
Fair to the corporation: Transaction would have been approved by a disinterested BD and same result would have occurred b/w two parties under equal bargaining power not acting under duress.
Validity of Transfer Restrictions
The validity of a transfer restriction depends on the lawful purpose of the restriction and whether it creates an undue restraint upon alienation of the shares.
Note: Absolute Alienations are unreasonable and void.
