Directors & Officers (FP #3) Flashcards
(ADD p. 20-21)
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The Board must act _____.
As a group
How can individual directors act (since no authority to speak for or bind corporation)?
1) unanimous written agreement
OR
2) At meeting that satisfies quorum and voting requirements
For special meetings ______.
At least 2 days’ written notice of date, time, AND place (need not state purpose of meeting)
For regular meetings _____.
Notice is NOT required
Can directors give proxies or enter voting agreements for how they’ll vote?
No (FD violation)
What happens when notice isn’t given?
Meeting events voidale UNLESS directors w/o notice waive defect 1) in writing any time OR 2) attending meeting without objection at outset
What is a quorum?
Majority of all directors (unless bylaws state otherwise, but no fewer than 1/3 of board members)
What’s a broken quorum?
When people leave and quorum lost; board can’t take act at meeting once this happens
If quorum present at meeting, what’s required to pass resolution?
majority of PRESENT members
For any action required to be taken by directors at formal meeting, may be taken by ______.
unanimous consent in writing without meeting
Actual authority for directors can arise only if _____.
1) proper notice given for director meeting AND majority of present directors approved OR
2) unanimous written consent of directors
What is the Board’s role?
Manages the corporation, including the creation of committees
What actions can a committee NOT take?
1) declare distribution
2) fill board vacancy
3) recommend fundamental change to shareholders
FD standard for directors to corporation?
A director must discharge her duties in good faith AND with reasonable belief that her actions in best interest of the corporation. (DofL). She must also use the care that a person in like position would reasonably believe appropriate under the circumstances (DofC).
Who has burden for proving Duty of Care breach?
Challenger
2 common scenarios for breach of duty of care?
1) nonfeasance: D does nothing
2) misfeasance: where Board makes decision that hurts business
What is the Business Judgment Rule (BJR)?
Concept that protects directors from liability IF business decision made in GF, was informed, AND had rational basis
Does BJR apply to Duty of Loyalty?
No
What information may director rely on when discharging duties?
Opinions/reports/statements IF prepared/presented by
1) corporate officers/employees whom director reasonably believes to be reliable and competent
2) legal counsel, etc. as to matters director reasonably believes are within their professional competence OR
3) board committee of which director not member if director reasonably believes committee merits confidence
Who has burden for showing Duty of Loyalty?
Defendant
What constitutes a conflicting trxn?
Any trxn between corporation AND 1) a director, 2) director’s close relative OR 3) director’s other business
STOPPED at bottom of p. 27
