directors and officers

Question 1

define staggard board

Answer 1

divided into half or thirds and that part is elected each year
this will be stated in the articles

Question 2

removal of directors

Answer 2

shareholders can remove without or with cause

if its a staggared board usually can only remove with cause

Question 3

Board action

Answer 3

Boards must act as a group
- unanimous agreement in writing OR
- at a maeeting have qourum and vote

Question 4

Board Meetings Notice

Answer 4

Regular meeting - notice not required

Special meeting - need two days’ written notice of date, time, place

Question 5

what happens if you fail to give notice

Answer 5

the things that happened at the meeting are voidable

Question 6

Can notice be waived

Answer 6

yes by
1. in writing at any time
2. by attending the meeting without objecting at the ouset of the meeting

Question 7

what number of people is required for approval action

Answer 7

if a qourum if present then passing only requires a majority of those present

Question 7

define qourum

Answer 7

a majority of all directors unless the by laws say otherwise

can be lost if people leave

Question 8

Fiduciary duties owed to the corporation

Answer 8

1. Duty of loaylty: must discharge her duties in good faith and with the reasonable belief that their actions are in the best interest of the corporation.
2. Duty of Care: She must also use the care that a person in a like position would reasonably believe appropriate under the circumstances

Question 9

Duty of Care

Answer 9

burden on the plaintiff

two scenarios
1. nonfeasance: when a director does nothing
2. misfeasance: board makes a decision that hurts the business

can be absolved by the BJR:

Question 10

define business judgment rule

Answer 10

expect a person in a like position to do approriate homework and if they did then they can be absolved of duty of care

1. can rely on reports or other info made by offiers or employees
2. legal counsel, accountants, or other persons director reasonably believes is within the persons competance
3. committee of the board which director isn’t a member

Question 11

duty of loyalty

Answer 11

Burden on D
scenarios:
- conflicting transactions “self dealing”
- competing ventures

Question 12

duty of loyalty

self dealing

Answer 12

any transaction between the corporation and
1. one of its directors or
2. that director’s close realtive or
3. another business of the directors

Question 13

When will a confliction interest transaction be upheld

Answer 13

1. approved by a majority of the disinterested directors
2. approved by a majority of votes entiled to be cast by disinterested shareholders
   - notice must describe transaction OR
3. judged by circumstances at the time the corporation entered into it was fair

qourum is majority of disinterested directors but doesn’t matter if intereted ones are present

Question 14

remedies for self dealing

Answer 14

1. enjoining the transaction, setting it aside, damages, and other remedies

Question 15

Corporate opportunity doctrine

Answer 15

directors fiduciary duties prohibit them from diverting a business opportunity from their corporation to themselves without first giviing their corporation an opporunity to act

Question 16

what is a corporate opporunity

Answer 16

• something in the corporation’s line of business
• something company has an interest or expectancy in
• if so then the employee must bring it to the board

• lack of financial ability on corps part isn’t a defense
• ## corporation can sue to recover under constructive trust

Question 17

Duty to disclose

Answer 17

disclose material corporate info

Question 18

Director liability

ways around

Answer 18

a director is presumed to concur with board action unless her dissent or abstention is noted in writing in the records meaning
1. meeting minutes
2. delivered in writing to the presiding officer at the meeting
3. written dissent to the corporationimmediately after the meeting

not liable if absent from meeting

Question 19

officers powers

Answer 19

officers are agents of the corporation and their duties are determined by the bylaws

Question 20

selection and removal of officers

Answer 20

selected and removed by the board which also sets their compensation
- can remove with or without cause

liable if the contract is breached though

Question 21

categories of indemnification

Answer 21

1. no indemnification
2. mandatory indemnification
3. permissive indemnification

Question 22

define no indemnification

Answer 22

corp can’t indemnify a director who
1. held liable to the corp
2. held to have receieved an improper benefit

Question 23

define mandatory indemnification

Answer 23

corproation must indemnify a director or officer who was successful in defending a proceeding on teh merits or otherwise agains thte officer or director for reasonable expenses

some states must win whole case other states its to the extent they win

Question 24

permissive indemnification

Answer 24

corp may indemnify a director for reasonable litigation expenses incurred in unsuccessfully defending a suit rbough against the director on account of the position if the director
1. acted in good faith
2. believed that her conduct was in the best interests of the corporation

Question 25

who decides whether to indemnify

Answer 25

• usually a distinerested majority of the board if
• no disinterested qourum then majoriryt of disinterested committee or independent legal counsel

Question 26

Court ordered indemnification

Answer 26

court in which director was sued can order it if its justified in all the circumstances