Directors and Officers Flashcards
What must the management of the corporation’s business be under?
The direction of the corporation’s board of directors.
What constitutes an act of the board?
Requires the participation of a quorum of the board.
What is a quorum?
The minimal portion of the authorized number of directors required to be present for board action.
What is required for an act of the board to occur at a meeting?
The affirmative vote of a majority of directors present.
True or False: Individual directors have the power to set corporation policy.
False.
What is necessary for special meetings of the board?
At least two days’ notice of the date, time, and place.
What does the waiver of notice allow?
It allows a director to attend or participate in a meeting without objection to the notice.
What discretion does the board have regarding dividends?
The board has discretion to decide whether and when to declare a dividend.
What are the powers of a corporate officer considered?
The powers of an agent.
What is the ultra vires doctrine?
A corporation cannot be obliged to undertake a contract or activity beyond the scope of its powers.
In what instances can the limits of a corporation’s authority be challenged?
In proceedings by shareholders, the corporation, or the attorney general.
What is the Duty of Care for directors and officers?
To discharge their duties in good faith and with care that a prudent person would use.
What does the Business Judgment Rule create?
A rebuttable presumption that directors acted on an informed basis and in good faith.
What is the Duty of Loyalty?
The requirement for officers and directors to be loyal to the corporation and not promote their own interests.
What defines a ‘Conflicting Interest Transaction’?
A transaction between a director or officer and the corporation where the director or officer has a material financial interest.
What must directors or officers disclose in a conflict of interest transaction?
All material facts regarding the conflict.
When is a corporate opportunity usurped?
When directors or officers take business opportunities that belong to the corporation.
What factors determine if a business opportunity belongs to the corporation?
Relation to business, board interest, awareness during capacity, and use of corporate resources.
True or False: Competition by a director or officer is always a breach of fiduciary duty.
False.
What liabilities do directors and officers generally have?
Liable for damages arising from violations of fiduciary duties or unauthorized actions.
What may a court award if a corporate opportunity is usurped?
Damages or profit derived from the misappropriation.
What limits can be placed on the personal liability of corporate management?
Significant limits may be included in the articles of incorporation.
