Directors and Officers and Shareholders Flashcards
how many board memembers MUST there be?
at least 1
who do shareholders elect
directrs
when can shareholders REMOVE a director>
ANY FUCKING TIME. with or without case, even before term expires
can shareholders remove a director before their term expires
YES
what is required for valid meeting>
1) unless all directors consent in writing to act w/o meeting, a meeting is required
2) notice of directors meeting can be set in bylaws
3) proxies ARE NOT allowed. No voting agreements. But conference calls ok
4) qurom: must have MAJORITY of ALL directors to take action
5) vote: to pass a resolution, only majority VOTE of those present (majority of those present)
6) each director is presumed to have concurred in board action unless her dissent or abstention is record in writing
are proxies allowed for directors meeting
NO
are voting agreements valid for directors meetings
NO
what is the quom requirement for directors meetings
must have a MAJORITY of all directors to take action (unless # is different in bylaws)
what vote needs to be required in directors meeting to pass resolution
MAJORITY VOTE OF THOSE PRESENT
what if there are 9 directors how many must be present to give quom and to vote>
Quom: at least 5/9 directors must be present
vote: if 5 are present for quom, at least 3 must vote for resolution in order it to pass
do directors have a duty to manage?
YES. Directors may delegate management functions to a committee of one or more directors that recommends action to the board
what is the business judgment rule?
a presumption that directors manage the corporation in good faith and in the best interests of the corporation and its shareholders
will directors be liable for innocent mistakes under the business judgment rule?
NO
are directors fiduciaries?
YES. owe duty of care and loyalty
what duty of care is owed to directors
must act with care that a PRUDENT person would in managing the business, unless the articles have limited director liability fora breach of duty of care
can the articles of incorporation limit the directors duty of care?
YES
can the articles limit the directors duty of loyalty?
NO. Can only limit the duty of care not loyalty
what is the duty of loyalty for a director?
may not RECEIVE an UNFAIR benefit to the detriment of the corporation or its shareholders. Unless there has been
1) material disclosure and
2) independent ratification
when can a director get an unfair bnefit at the detriment of the corporation or its shareholders?
IF director gives
1) material advanced disclosure! and
2) independent ratification
what are the directors duty of loyalty prevent>
1) self dealing
2) usurping corporate opportunities
what is the duty of loyalty for self dealing
director who receives an UNFAIR benefit to herself (or her relative or another one of her business) in a transaction with her own corporation
what is duty of loyalty for usurping corporate 1) authorized shares
2) purpose
3) Agent
4) incorporator
5) name
director receives an UNFAIR benefit by usurping for herself an opportunity which the corporation would have pursed
what are the 2 defenses a Director may use when they received an unfair benefit and breached duty of loyalty
1) proving that their conduct was FAIR to the corporation and
2) ratification
what needs to be met for ratification defenses under duty of loyalty breach and unfair benefit to director
by obtaining INDEPENDENT ratification through
1) majority vote of INDEPENDENT DIRECTORS or
2) majority vote of at least 2 INDEPENDENT DIRECTORS or
3) majority vote of shares held by INDEPENDENT shareholders
do officers hold the same duties as directors?
YES
are officers agents of the corp
YES and bind the corporation by their activities
do directors have virtual unlimited power to select officers and remove them?
YES at any time. But the corporation will be liable for breach of K damages.
can a director or officer who has incurred costs, attorneys fees, and a judgment or settlement in course of corporate business, seek to reimbursement from corp
sometimes
when can the corp NEVER indemnify a director who
is held liable to own corporation
when MUST the corp. MUST ALWAYS indemnify officer or director
if
1) liability to 3rd party or settlement with the corp
2) Directors or officer shows acted in good faith and believed was in corp’s BEST INTEREST
who may determine w/e to grant permissive idemnity>
1) majority vote of INDEPENDENT DIRECTORS;
2) majority vote of a committee of at least 2 INDEPENDENT DIRECTORS; or
3) majority vote of shares held by independent shareholders; or
4) a special lawyers opinion could recommend it and get it as well
what is a derivative suit
a shareholder suing to ENFORCE the corporations cause of action
what are the 3 requirements for shareholder bringing a derivative suit?
1) contemporaneous stock ownership
2) adequacy
3) must MAKE DEMAND ON DIRECTORS that they cause their own corp to bring suit
- cannot bring suit until 90 days have passed on the demand (x/c 1) shareholder has received notice that corporation has rejected demand
- x/c 2: irreparable injury to the corporation would result by waiting the 90 days to pass
what is the requirement of derivative suit for contemporaneous stock ownership
must own at least 1 share of stock when claim arose and
2) throughout entire litigation
what is the derivative action suit requirement for adequacy
stock holder who brings suit MUST fairly and adequately represent corporations OWN interest
when must demand be made for derivative suit on directors
demand must be made OR at least 90 days have passed since demand was made
in IL when can a shareholder not make a demand on directors for derivative suit
demand can be excused IF alleged with particularity that demand would be FUTILE
For voting of shareholders does it matter who owns share at time voting occurs?
NO
who has rights to vote as shareholder?
only RECORD DATE owner votes
what is a record date owner
record date is the elibigity cut off ate set by board on any day w/i 70 day period leading up to vote
in IL what is the record date
set by board on any day b/w 10 days and 60- days in advance of meting
