Directors and Officers Flashcards
Can individual directors act for the corp.?
No. 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).
What is a Quorum?
Minimum number of directors required for Board action to occur.
A majority of directors constitutes a quorum (unless otherwise provided in Articles or bylaws)
Board action occurs upon the affirmative vote of a majority of the directors present at the meeting.
When can the Board act without calling a meeting?
The Board can act without calling a meeting if EVERY director gives signed, written consent (unless otherwise provided in Articles or bylaws).
Who has the power to declare dividends?
The Board has the sole power to declare dividends (unless otherwise provided in Articles)
What notice is required for board meetings?
Regular meetings – no notice is needed (unless otherwise provided in Articles or bylaws)
Special meetings – at least 2 days notice of date/time/place of special meeting (unless otherwise provided in Articles or bylaws).
+ Need not give notice of purpose of special meeting EXCEPT for meetings at which removal of a director is to be considered.
Can a director waive the notice requirement 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.
What power do officers have?
Corporate 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 K’s that are reasonably related to performing their duties.
What fiduciary duties do directors and officers have?
Duty of Care
Duty of Loyalty
Duty of Care
Directors and officers must act:
+ in good faith
+ with the care an ordinary prudent person would exercise in similar circumstances; AND
+ in a manner reasonably believed to be in the best interest of the corp.
– Directors/officers may rely on info, reports, recordings, and financial data prepared by someone reliable and competent in the matter.
Business Judgment Rule
Rebuttable presumption that directors and officers acted:
+ on an informed basis;
+ in good faith; AND
+ in an honest belief that the decision was in the corp.’s best interest
Duty of Loyalty
Directors, officers, and employees must act loyal to the corp. and not promote their own interest in a way that harms the corp.
When do conflicts of interest occur?
Conflicts of interest typically occur when:
+ transacting business with the corp. (i.e., self-dealing);
+ usurping a corp. business opportunity; OR
+ directly competing with the corp.
What are the factors in determining whether something is a “corp. opportunity”?
Whether the:
+ opportunity was discovered while acting in capacity as director/officer
+ business is closely related to that of corp.
+ Board expressed interest in acquiring such a business
+ opportunity is in the corp.’s line of business
+ opportunity was developed or discovered using corp. funds or facilities.
Can a conflict-of-interest transaction ever be acceptable?
After full disclosure, the non-interested directors may authorize the conflict-of-interest transaction by a majority vote.
The director or officer must disclose all material facts of the transaction.
