Director and Officer Powers Flashcards
Mini Outline – Director and Officer powers
(1) director powers
(2) officer powers
(3) ultra vires doctrine
Power of individual directors
The Board must act collectively and individual directors don’t have the power to act for the corp. (unless otherwise provided in Articles or bylaws)
Quorum definition
minimum number of directors required for Board action to occur
Quorum requirement for board of directors
A majority of directors constitutes a quorum (unless otherwise provided in Articles or bylaws)
Voting rule for board action
Board action occurs upon the affirmative vote of a majority of the directors PRESENT at the meeting
Board action without meeting
The Board can act without calling a meeting if every director gives signed, written consent (unless otherwise provided in Articles or bylaws)
Kinds of board meetings
Regular meetings
Special meetings
Notice rule for regular meetings
No notice is needed for regular meetings (unless otherwise provided in Articles or bylaws)
Notice rule for special meetings
At least two days’ notice of the date, time, and place of the special meeting (unless otherwise provided in Articles or bylaws)
Need not give notice of the purpose of the meeting EXCEPT for meetings at which the removal of a director is to be considered
Waiving notice rule for board meetings
A director entitled to notice can waive that right in a signed writing
A director also waives notice by attending or participating in the meeting and not promptly objecting to the meeting
Even if the director promptly objects, a director waives notice by voting and assenting to the action taken at the meeting
Officer powers
Officers are agents of the corp. and may enter into any transaction that is expressly or implicitly authorized
Officers have the implied authority to enter contracts that are reasonably related to performing their duties
Ultra vires doctrine
A corporation is not obligated to undertake a contract or activity beyond the scope of its powers
Yet, the limits of a corp’s authority can be challenged under the MBCA
Ultra vires challenges to corp authority
Under the MBCA, the limits of a corp.’s authority may be challenged in the following
instances:
- in a proceeding by a shareholder to enjoin the act;
- in a proceeding by the corp. (directly or derivatively) against a current or former director, officer, employee, or agent of the corp.; and
- in a proceeding by the attorney general on the grounds that the corp. obtained its Articles by fraud or the corp. has continued to exceed or abuse its authority
