FACT PATTERN 3: DIRECTORS AND OFFICERS (HEAVILY TESTED)- STATUTORY REQUIREMENTS — DIRECTORS Flashcards
What is the minimum requirement to be a director?
You have to be an adult natural person.
How many directors does there need to be of a corporation?
one or more.
Where are the names of the initial directors usually found?
Initial directors are usually named in the articles.
who elects directors thereafter?
Shareholders at the ANNUAL MEETING.
Generally, how often are directors elected?
Generally, the entire board is elected each year
Under what circumstance would the directors not be elected annually?
When there is a staggered board
How is a staggered board usually done?
A staggered board is divided into halves or thirds, with one-half or one-third elected each year.
Where is the company rule authorizing a staggered usually written?
In the Articles of Incorporation
Can shareholders remove directors before their terms expire?
Yes
What vote is required to remove a director before their term expires?
a vote of a majority of the shares entitled to vote.
On what bases can shareholders remove a director?
With or without cause.
Suppose there’s a vacancy on the board (e.g., a director resigns before her term is up). Who selects the person who will serve as a director for the rest of the term?
Generally the board or the shareholders
What if the shareholders create a vacancy on the BOD by by removing a director before their term is up. Who selects the person who will serve as a director for the rest of the term?
the shareholders generally must select the replacement.
What are the only two ways the BOD can take an act?
- Unanimous agreement in writing or
2. At a meeting (which has to satisfy the quorum and voting requirements)
What if directors agree to an act through individual conversations, without a meeting or unanimous written agreement?
That act is void. Unless ratified later validly.
Does a conference call count as a meeting?
yes
If there is a board meeting how do you know what the proper way of giving notice is?
method for giving notice is usually set in the bylaws
Is notice required for regular BOD meetings?
No
Is notice required for special BOD meetings?
Yes
What does the notice have to contain for a special BOD meeting?
The time and the place
Does the notice for the special BOD meeting have to contain the purpose of the meeting?
No.
What happens if there is a failure to give required notice for a special BOD meeting?
Failure to give required notice voids whatever happened at the meeting
Under what circumstance can the failure to give required notice for special BOD meetings not void whatever happened at the meeting?
the directors not notified waive the notice defect
How can directors waive a notice defect for a special BOD meeting?
They can do this in writing anytime or by attending the meeting without objecting.
Can directors give proxies or enter into voting agreements for how they will vote as directors?
No, these are void as against public policy.
What is the the quorum for meetings of the BOD?
must have a majority of all directors to do business (unless a different percentage is set in the bylaws).
How does the board take an act at the meeting?
They pass a resolution
How many of the BOD are needed to pass a resolution at a BOD meeting?
only a majority vote of those present.
So, if there are 9 directors, at least _______ directors must attend the meeting to constitute a quorum. If 5 directors attend, at least ________ must vote for a resolution for it to pass.
5; 3
How can quorum of the BOD be lost?
Quorum of the board can be lost (“broken”) if people leave.
Can the BOD pass further resolutions once quorum is broken by someone walking out of the meeting?
Once a quorum is no longer present, the board cannot take an act at that meeting.
