Directors and Officers

Question 1

How many directors do you need?

Answer 1

At least one natural person or however many the bylaws, shareholders or board determines

Question 2

Who elects the initial director/s and who then elects subsequent directors?

Answer 2

Incorporator elects the initial director/s and shareholders subsequent directors at the annual meeting.

Question 3

Where can we establish different classes of directors?

Answer 3

In the certificate or by shareholder bylaw

Question 4

Who can remove directors?

Answer 4

Shareholders can and board can if certificate or shareholder bylaw allows

Question 5

Can a director be removed without cause?

Answer 5

Yes, shareholders can do this if certificate or bylaws allow

Question 6

How is a vacancy on the board filled?

Answer 6

The board can select a replacement or if shareholders have removed without cause, shareholders select a new one.

Question 7

Is an individual director an agent of the corporation?

Answer 7

No an individual director isn’t, they have no power to bind corporation to anything and have to act as a group. Any act must be by unanimous written consent or consent at a meeting.

Question 8

Can directors purport to take an act through conversations?

Answer 8

No, those conversations would be void if they tried it on.

Question 9

Where can a meeting of directors be held?

Answer 9

Anywhere and over the phone

Question 10

Is there a notice requirement for a regular meeting of directors?

Answer 10

No notice requirement for regulated meeting of board set out in bylaws or by board.

Question 11

Is there a notice requirement for special meetings?

Does that notice have to state purpose?

Answer 11

Yes, there must be notice as required by the bylaws stating time and place.

Notice doesn’t need to state purpose unless the bylaws require it.

Question 12

What if the notice requirement for special meetings is not met?

Answer 12

Any decisions made are void unless the director not given notice waives the notice in writing or attends meeting without protest prior to commencement of meeting.

Question 13

Can you have proxies or voting agreements between directors?

Answer 13

NOOOOO! uh UH

Question 14

The board has authority to take action at a board meeting provided the what three things are present?

Answer 14

1) proper notice was provided
2) a quorum of the board was present
3) majority of quorum agree with board action

Question 15

Once there is a majority or quorum of the board what is needed to pass a resolution?

Answer 15

A majority of those present.

Question 16

Can the quorum be broken in the meeting?

Answer 16

Yes, if one leaves a meeting.

Question 17

Can the quorum requirement be reduced or increased?

Answer 17

Yes, to less than majority by certificate or bylaws. Yes to increase but only in the certificate.

Question 18

What can the quorum never been lower than?

Answer 18

Fewer that 1/3 of the board.

Question 19

Can you decrease the requirement that passing a resolution requires a majority of the quorum?

Answer 19

No

Question 20

Can the board delegate?

Answer 20

Yes they can if the certificate or bylaws allow.

Question 21

What can the board delegate and who to?

Answer 21

Substantial management functions to a committee or one or more directors.

Question 22

What can’t a committee do?

Answer 22

Set director compensation, fill a board vacancy, submit fundamental changes to S/H and amend bylaws.

Question 23

What is the duty of care standard for a director?

Answer 23

A director must discharge her duties in good faith and with the degree of diligence, care and skill that an ordinarily prudent person would exercise under similar circumstances in like position

Question 24

What is director nonfeasance?

Answer 24

Director does nothing, doesn’t attend meetings. To find them liable you would have to show the breach caused a loss to the corporation

Question 25

What is director misfeasance?

Answer 25

Board does something that hurts the corporation BUT this is subject to the business judgment rule

Question 26

What is the business judgment rule?

Answer 26

The court will not second guess a business devision if it was made in good faith, reasonably informed and had a rational basis.

Question 27

What is the duty of loyalty standard for a director?

Answer 27

A director must act in good faith and with the conscientiousness, fairness and morality and honestly that the law requires of fiduciaries.

Question 28

Does the business judgment rule apply with duty of loyalty?

Answer 28

No, you can never apply this when the director has a conflict of interest.

Question 29

What is an interested director transaction?

Answer 29

any deal between corporation and its directors

Question 30

What can stop an interested director transaction from being set aside?

Answer 30

1) showing that the deal was fair and reasonable to the corporation when approved; and
2) the material facts and her interest were disclosed or known and the deal was approved by:
a) shareholder action;
b) Board approval by sufficient vote not counting interested directors;
c) Unanimous vote of disinterested directors if disinterested directors insufficient to take board act (interested directors count towards quorum but not vote).

Question 31

Can the the director compete with the corporation?

Answer 31

No, if you do you get constructive trust on profits and you have to account for them.

Question 32

Can i take a corporate opportunity before the business objects?

Answer 32

No.

Question 33

What is the definition of a corporate opportunity?

Answer 33

something the corporation needs, has an interest in or tangible expectancy in or that is logically related to its business.

Question 34

A director is presumed to have concurred with the board unless what is done?

Answer 34

The dissent is noted in writing in corporate records. The dissent must be int eh minutes, in writing to secretary at meeting or registered letter to secretary promptly after adjournment.

Question 35

What duty of care do officers owe?

Answer 35

Same as directors: discharge her duties in good faith and with the degree of diligence, care and skill that an ordinarily prudent person would exercise under similar circumstances in like position

Question 36

What duty of loyalty do officers owe?

Answer 36

Same as directors: must act in good faith and with the conscientiousness, fairness and morality and honestly that the law requires of fiduciaries.

Question 37

Are officers agents of the corporation?

Answer 37

Yes and can bind corporation if they have authority to do so.

Question 38

Who elects and removes officers?

Answer 38

The board does unless the certificate states that the shareholders can. Different to directors of course where the shareholders perform this task.

Question 39

When might a shareholder be able to remove an officer?

Answer 39

If they hold 10% of shares or more they may sue for a judgment removing an officer for cause.

Question 40

Who sets compensation of officers?

Answer 40

The board.

Question 41

If you are sued in your capacity as officer or director or on behalf of corporation can you get reimbursed?

Answer 41

Not if you were held liable to corporation, but you can where you win judgment on merits or otherwise.

Question 42

What if your case settles, can director or officer get reimbursement?

Answer 42

Board with quorum decides, or if no quorum, shareholders or quorum of disinterested directors, or the board pursuant to a report from independent legal counsel, or court order.

Question 43

Can the corporation initially pay for a director?

Answer 43

Yes they can, but must be repaid if director loses.

Question 44

Can the certificate or bylaws provide for indemnification by resolution of board or shareholders by agreement?

Answer 44

Yes they can unless the director/officer acted in bad faith.