Corps 2 Flashcards
*QUORUM in Bd:
+CA:
Unless BYLAWS say otherwise, Bd. may
Pass RESOLUTIONS ONLY w/
a MAJ vote of the QUORUM.
[=maj. of Dirs. at start of Mtg.]
CA: Else Bd. Action is VOID.
CCA: RATIFIED by SH Later.
S/H MANAGEMENT in
Closely Held Corps:
(=few SH
&
no publicly traded stock)
SHs can enter into a UNANIMOUS SH AGREEMENT that provides for SH MANAGEMENT
*1) MAJ./Controlling SH owes Duty to MIN. SHs to NOT … +FD is Breached by … +REMEDY…:
2) IF CLOSELY HELD Co:
Maj. SH owes Min. SH ALSO a:
a) DoL + b) DoC (like PShip).
1) BENEFIT to the DETRIMENT of the MIN. SHs
2) Selling Stock “at a PREMIUM”: to LOOTERS
[=w/o investigating the Buyer who abuses ctrl to Loot.
+/Selling at shares PREMIUM in exchange for Bd POSITION. ]
REMEDY: Disgorgement /DMG.
**A SH may file 1) a DERIVATIVE suit for … +CA:
Note: Also avail. against MANAGERS of an LLC who breach their FD.
[Trigger: Co! has been HARMED (Tort, DMG)]
breach of [DoL/DoC] on behalf of Co OR
2) DIRECT Action if: Dirs. breached a FD owed to him as a SH
•If DERIVATIVE: SH must
1) have OWNED stock when CoA arose & THRU LIT, and
2) make a written DEMAND that Dirs bring suit, UNLESS it’d be FUTILE [Dirs would be Ds].
CA: TOTAL BAR if:
DISinterested Dirs Decide in GF:
Suit isNOT in Co’s BEST interest [LIT$$$»_space;Co’s recovery].
*SH VOTING:
(If AoI & Bylaws are Silent) SH Action requires (in Person or by Proxy) a …:
[Generally, SH QUORUM is NOT lost if Some Leave the Meeting.]
1) QUORUM of shares present at mtg’s Start
2) Modern Trend: Maj. of shares ACTUALLY Voted on a PROPOSAL to bind Co.
3) Alternat.: SHs may vote by a WRITTEN, UNANIMOUS consent =w/o MEETING.
Annual SH meetings: are held to elect Dirs.
*SPECIAL Meetings:
are CALLED by:
1) BoD 2) PREZ., or 3) SH holding 10% SH of VOTING shares.
FAILURE to give timely NOTICE (of Time, Location & Purpose) to every SH …:
[NOTE: Only stated Purpose can be transacted at MTG.]
VOIDS ACTION taken at the meeting, unless SH: expr/impl. WAIVE the Notice DEFECT [ 1) Written & Signed 2) IMPLIED Waiver: ATTENDED the MTG w/o Obj.]
*SH Voting:
A SH as of RECORD DATE (10d-70d before mtg) may vote at the ANNUAL meeting & Other agreed meetings. CA: *PROXY …:
1) *must be SIGNED, WRITTEN if another person is to vote a SH’s shares for him.
2) *PROXY is REVOCABLE,
[by SH showing up
/Subsequent instr. CCA:]
UNLESS COUPLED w/ an interest [sold].
SHs can agree to vote alike through a: a) VOTING AGREEMENT b) Stock Transfer Restriction AGT ([to exclude outsiders]). A VOTING TRUST allows ...: [Trigger: SH agree to vote shares alike to increase influence.]
a Trustee to vote for the Block (Valid max. 10yrs) if there’s:
1) a WRITTEN Trust AGT
[controls how shares will be voted]
2) & a COPY is given to Co.
Cf: *Dirs. may enter into a valid & enf. SH’s AGT to elect each other as Dirs.
(ISSUE: Valid? => If yes, it’s enf.)
POOLING AGTs are VALID …+CA:
=SHs agree to vote their shares to elect each other onto the Bd.
i.e., enforceable if:
1) WRITTEN & 2) SIGNED
CA: INTRUDE Ds’ Functions
[=Agt 2Appoint O/Elect Prez.
CCA: CloselyHCo:
May USURP Ds’ functions if:
1) ALL SH Sign. &
2) ALL Dirs are also SH]
Stock TRANSFER RESTRICTION AGTS. GR: A Co can …
CA: INVALID if …:
RESTRICT the TRANSFER of SHARES for any REASONABLE purpose (to exclude Outsiders).
[“Co has a 1st purchase option” =right of 1st refusal.
CA: ABSOLUTE Restr. =UNenforceable
(“can never sell w/o prior written consent of all SHs”)].
*SH Inspection Rights:
A SH has a RIGHT to INSPECT
the Co’s BOOKS
for a PROPER PURPOSE.
[=related to his ECONOMIC STATUS as a SH]
CA: To become a competitor.
Remedy: DMG. Fines.
Dividends & OPTIONS +CAx3:
[ Pay to SHs: 1) DIVIDEND (from Co’s profits)
2) REPURCHASE (of SH’s stock)
3) REDEMPTION of stock (=forced sale to Co at $ Set in AoI).
CA: DISTRIBUTION mustNOT make Co INSOLVENT. ]
1) SH have NO Right to have Dividends Declared.
=Dirs’ SOLE Discretion.
2) Bd. may ISSUE Stock OPTIONS on whatever TERMS it chooses. BUT NOT:
CA1: MORE Stock than AoI authorizes.
CA2: PREFERRED Stock, Unless AoI so provide.
CA3: NOT pay DIVIDENDS from STATED CAPITAL.
SH may REMOVE Dirs.
[+CA: If Dir was elected through CUMULATIVE voting ….:]
Cf. The Bd. may fire OFFICERS w/ or w/o cause
(even if it’s a breach of K. => O gets DMG).
w/ or w/o CAUSE by MAJ. VOTE of voting shares.
CA:… he canNOT be REMOVED if the votes cast AGAINST removal would be sufficient to ELECT him by cumul. voting.
[PP: protect cumulative voting].
