CORPS REVISED Flashcards

1
Q

Who is liable for pre-incorporation transactions?

A

Promoters (they are fiduciaries) unless a later novation.

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2
Q

The articles of incorporation must include

A

the name, the agents, names and addresses of incorporates, duration, the purpose (usually any lawful activity) and authorized shares

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3
Q

When is the corporation incorporated?

A

When the secretary of state accepts the fee and files the articles

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4
Q

If by laws and articles of incorporation conflict, which wins?

A

Articles

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5
Q

What is the de facto corporation rule?

A

When a corporation isnt properly formed but acts as a corp, it will be treated as a corp if there was a good faith attempt to incorporate and there was no actual knowledge of the faulty corporate status.

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6
Q

What are the three factors to pierce the veil?

A

Whether C is alter ego or “mere instrumentality” of C , and whether there is unity of interst between C and its members

Factors: undercaptializtion, disregard of C formalities, self-dealing, fraudulent dealing with corporate creditors

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7
Q

What are issued shares?

A

Number of authorized shares actually sold

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8
Q

What are outstanding shares?

A

Shares that were once issued and remain in the possession of shareholders

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9
Q

What are treasury shares?

A

Shares one issued but subsequently reacquired by the corporation

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10
Q

Par value is?

A

The minimum value to sell a share at (it is not required)

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11
Q

Watered stock is?

A

Stock sold for less than the par value. Shareholders who buy watered stock are liable to creditors of the corp.

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12
Q

How long is a stock subscription irrevocable for pre incorporation?

A

six months

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13
Q

Preemptive rights allow what

A

The person to maintain their percentage of ownership when new shares issue

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14
Q

Who can authorize dividends?

A

Directors unless would cause insolvency

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15
Q

Must every corp hold an annual meeting?

A

Yes.

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16
Q

Special meetings are for?

A

Voting on fundamental changes

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17
Q

Notice for meetings must occur?

A

no fewer than 10 days and no more than 60 days before the meeting

18
Q

Directors must set a record date when?

A

no fewer than 10 days before the meeting and no more than 70 days before the meeting

19
Q

A proxy must be?

A

In writing, signed by the shareholder as of the record date, sent to the secretary, state that it authorizes another to vote, and cannot be valid for more than 11 mos

20
Q

Quorum of shareholders is?

A

A majority of the outstanding shares, not shareholders

21
Q

Necessary vote of shareholders is?

A

When more of the votes of a shareholder quorum for the proposal exceed the votes against

22
Q

Shareholders can inspect corp records so long as they?

A

State a proper purpose

23
Q

Shareholders can sue

A

Directly or derivatively (on behalf of the corp)

24
Q

Derivative law suits require

A

Claim made in corp name

contemporaneous stock ownership, was a shareholder at time of harm,

fairly represents interests of the corp, and

made a demand to board unless it would have been futile

25
Q

A controlling shareholder may owe a duty to a minority shareholder if

A

There is sale of stock to an outsider or lotter, the shareholder is transacting with the corporation (duty of fair dealing)

26
Q

For directors, a quorum is

A

A majority of the total number of directors

27
Q

Directors may dissent and avoid liability by

A

Entering dissent in minutes of the meeting, filing a written dissent before the meeting adjourns, or provide a written dissent to the secretary

28
Q

Directors and officers owe what to the corporation?

A

A fiduciary duty of care (duty of care and duty of loyalty)

29
Q

The business judgment rule is?

A

Absent fraud, illegality or self dealing, courts will not disturb good-faith business decisions

30
Q

A self-interested transaction may be upheld if?

A

It is ratified by a majority of disinterested directors or shareholders.

31
Q

Fundamental changes require approval of?

A

Both shareholders and directors

32
Q

Merger is

A

when two or more corps combine and one survives assuming the assets and liabilities of the others

33
Q

Consolidation is

A

the combination of two or more corps when neither survives and a new one is created assuming the assets and liabilities

34
Q

Involuntary dissolution can occur by?

A

Creditors showing a corp is not paying its debts, shareholders show the corp is wasting assets, the directors are committing fraud, or the directors and shareholders deadlock.

35
Q

Appraisal rights are?

A

When a shareholder dissents from a fundamental change he can demand his shares to be purchased by the corp for FMV.

36
Q

LLCs require filing ___ and its owners are called ____ instead of shareholders?

A

An operating agreement; Members.

37
Q

When members agree to voluntarily dissolve an (LLC) entity, the entity must … (2 things)

A

Wind up its affairs and liquidate its business. Only after the entity’s debts and obligations to creditors have been paid may the members receive a portion of the liquidated value of the LLC.

38
Q

What notice is required for a special meeting?

A

Unless the articles of incorporation or bylaws provide otherwise, notice must be provided at least two days prior to the meeting and should state the date, time, and place of the meeting. The notice need not describe the purpose of the special meeting.

39
Q

Is telephonic attendence at a board meeting sufficient for a quorum?

A

Yes, but only if everyone can hear everyone else

40
Q

Duty of Care

A

Duty to act like a reasonably prudent person who possesses similar skilsl under similar circusmtances

41
Q

Business Judgment Rule

A

Rebuttable presumption that D acted in best interests of Corp;

Factors to overcome: lack of good faith, not informed to extent reasonbly necessary, failure to devote attention, etc.

42
Q

Duty of loyalty

A

Avoid self-dealing ,usurpation of C opprortunity

Defenses: deiclosure and majority approval of shareholders or BOD, fairness of transaction to the C