Directors & Officers Flashcards
Meetings
Regular meetings: No notice
Special meetings: Notice required
-failure to give notice means that whatever happens at the meeting is voidable unless notice defect is waived
No proxy voting
Quorum = majority of all directors (can be broken)
Approval at Meeting = majority vote of those present
Elections
Directors are initially named in articles or elected by incorporators. After that, they are elected annually by shareholders.
Officers are elected by the board.
Removals
Directors are removed by shareholders with or without cause (if staggered, with cause).
Officers are removed by directors with or without cause.
Actions
Directors are not agents of the corporation and have no authority to bind the corporation. They must act as a group by unanimous consent in writing or at a meeting that satisfies the quorum and voting requirements.
Officers are agents of the corporation and can bind the corporation if they acted with authority.
Fiduciary Duties
Directors/officers owe the corporation fiduciary duties of care and loyalty.
Duty of Care
The duty of care requires that the director/officer uses care that a person in like position would reasonably believe appropriate under the circumstances. The plaintiff has the burden of proving this breach and, in doing so, must overcome the business judgment rule.
BJR
The business judgment rule is a presumption that a decision may not be challenged if the director acted in good faith, with the care of a person in like position, and in a manner the director reasonably believed to be in the best interests of a corporation.
Duty of Loyalty
The duty of loyalty requires that the director discharge her duties in good faith and with the reasonable belief that her actions are in the best interests of the corporation. The business judgment rule does not apply to the duty of loyalty, and the defendant has the burden to show he did not breach his duty.
Self-Dealing Transactions
A director will not be liable for a self-dealing transaction if he can show that:
-it was fair to the corporation when entered OR
-all relevant facts were disclosed and the deal was approved by either a majority of the disinterested directors or a majority of the disinterested shares that were present (quorum for those meetings = majority of disinterested directors/shareholders)
Usurped Opportunity
A director cannot take advantage of a business opportunity in which the corporation had an interest (close to the line of business) until he tells the board about it and the board rejects it.
