Exam Rules - Corporation Flashcards
What is the business judgment rule
Protects a director’s decision if the decision was made with good faith business judgment of the best interests of the corporation. To overcome this protection, the challenging party must show fraud, self-dealing, or bad faith
How can a corporation remove a director
Directors can be removed with or without cause. Unless the AIC provide otherwise, a majority fo the embmers must vote in favor of the removal of a director
What can a corporation NOT indemnify a director against
Willful misconduct or a knowing violation of criminal law
What does the duty of loyalty encompass
A director will not (1) compete with the corporation (2) advance an interest adverse to the corporation and (3) usurp a corporate opportunity, or otherwise use corporate property or business to derive a personal benefit without notifying the partnership.
What is a defense to a violation of the duty of loyalty
(1) the material facts were known and disclosed to the board, and the transaction approved by disinterested directors or (2) the transaction was fair to the corporation.
Who is disinterested director
no (1) personal financial interest in the matter or (2) a familial, financial, professional, employment or other relationship with a person who has a financial interest in the matter that would reasonably be expected to impair the objectivity of the director’s judgment.
What does it mean for a transaction to be “fair” to the corporation
whether the transaction would have been approved by a disinterested board of directors at the time the transaction was entered into.
What right does a shareholder have to inspect corporate records
In Virginia, certain shareholders have the right to inspect and copy corporate documents, so long as the shareholder sends a signed written request at least 10 business days in advance and has a proper purpose for doing so.
Which shareholders can inspect corporate documents
the shareholder must have been a shareholder for at least six months or must be the record owner or beneficial owner of at least five percent of the outstanding shares.
When must notice of a meeting be given
10-60 days before the meeting date
How can a shareholder waive their right to notice of a meeting
A shareholder may waive notice either in writing or by attending the meeting.
How can a shareholder preserve the objection to improper notice
However, a shareholder may attend a meeting to object to the lack of notice or defective notice if the objection is made at the beginning of the meeting.
What must the AOI include
(1) signed by one incorporator and filed with the State Corporation Commission of VA (2) include the corporate name, its principal office, the number of shares authorized to issue, and the identity of the resident agent (3) MAY include a statement of purpose (4) enumerate the corporation’s powers
How can a corporation restrict stock transfers
The restriction must be (1) valid (no undue restraints on alienation); (2) reasonable (absolute restrictions are void); and (3) enforceable (restriction must be noted on the share certificate)
What is a voting trust
A voting trust is when the shareholder’s shares are transferred to a trustee who votes the shares and distributes dividends according to the terms of the trust
