FL Bus Orgs Flashcards
What do participating preferred shareholders get?
Receive the dividends granted to all preferred shareholders + a BONUS
- BONUS = after preferred & common shareholders receive their dividend, participating preferred also receive a dividend equal to that granted to common shares
When is a corporation considered closely held?
Corporation with 100 or fewer shareholders at time of shareholder agreement
Can a closely held corporation eliminate or restrict the discretion or powers of board?
Yes
When can the board amend the articles without shareholder approval?
- corporation has NOT issued shares; AND
- directors vote for amendment in the majority
Explain section 16(b) of securities exchange act?
- narrowly aimed at “short-swing” profit insiders
- establishes rule providing for recovery by corporation of any profits realized by insiders from any purchase or sale, or sale & repurchase, or coporations securities within 6 month period
- intended to prevent short-swing trading by insiders through its application to all such trading
- imposes liability without fraud or negligence
De facto merger doctrine entitles shareholders to what?
Entitles the shareholders of a corporation purchasing assets of another to:
1. voting; AND
2. appraisal rights
Who is liable for the debts of a business trust in FL?
Trustee primarily, & trust couples derivatively
FL’s control share acquisition applies to who?
Any issuing public corporation (target corporation) having:
1. 100 or more shareholders
2. PPB or office or substantial assets in FL; AND
3. either 1000 shareholders or move or more than 10% of its shareholders resident in FL
corporations can opt out, if before takeover
When are appraisal rights NOT available?
- shares traded on a national securities exchange; OR
- shares have at least 2000 shareholders & the outstanding shares of the class or series has a market value of $20 million or more
What is an appraisal right?
Right of shareholder to compel the corporation to buy their shares at a fair value if they are dissatisfied with terms of a fundamental corporate change
What must a shareholder do if they wanna exercise their appraisal rights?
- MUST deliver written notice of intent to demand payment for their shares if proposed action taken (must be done before vote takes place); AND
- cannot vote in favor of the proposed action
When can a corporation amend its articles or bylaws?
at any time
An amendment to bylaws or articles may include what provisions?
ANY provision that would be lawful and proper to include in original articles at time of making the amendment
Who is required to vote to approve amendments to bylaws or articles?
1- First Step
- amendment MUST be adopted by board
2 - Second Step
- board recommends to shareholders (unless conflict of interest)
3 - Third Step
- amendment MUST be approved by (a) an absolute majority of the total shares entitled to role, and (b) if amendment adversely affects a particular class of shareholders, they must vote too (absolute majority)
What is a short form merger?
The majority of an 80% or more owned subsidiary into a parent or another subsidiary the parent owns
no board or shareholder approval required
How is voluntary dissolution accomplished?
Either with:
1. approval of board & absolute majority of shares; OR
2. written consent of an absolute majority of shares
What are reasons for involuntary dissolution?
- deadlock of directors AND (1) the corporation is threatened with irreparable injury, OR (2) corporations business & affairs CANNOT be conducted to the advantage of shareholders because of deadlock;
- shareholders deadlocked in voting power & unable to elect successor directors;
- waste or misappropriation of corporation assets
- director or those involved in control of corporation are acting, will act, or have acted ilegally or fraudulently
If a party successfully argues one ground for involuntary dissolution, is court required to dissolve?
NO! Discretionary for court to decide
Who can seek administrative dissolution, & for what reason?
STATE
1. corporation fraud, ilegallity, or abuse of corporation powers; OR
2. failure to file an annual report
Can a non-profit pay dividends?
NO
CAN loan money to directors
How is a corporation ordinarily created?
- delivering articles of incorporation to secretary of state
- file with state articles of incorporation
- pay filing fee
Where do you file the articles of incorporation?
Department of State
When does corporate existence begin?
When department of state files articles
What must the articles of incorporation include?
- corporation name - must have “corp,” comp,” or “inc”
- Corporations street & mailing address
- number of shares the corporation is authorized to issue
- address of corporations initial registered office
- name of registered agent
- name & addy of each incorporator
What meeting do incorporators hold when creating corporation?
Notice?
ORGANIZATIONAL MEETING held to elect directors
- then elect officers & bylaws
2 day notice
Who elects officers or adopt bylaws?
Incorporators OR the new directors
If a registered agent dies, who must a party serve?
FL Secretary of State
How are corporations taxed?
Corporations are taxed as entities, separte & apart from their shareholders
Can you use “ltd” to connotate a corporation?
NO!
used for LLC
When does the Ultra Vires Acts get triggered in a MCQ?
When the corporation is given a limited purpose
- acting outisde, is violation of ultra vires
beyond corporate purpose
What must corporations, that are qualified to do business in FL, file annually?
An annual report with the department of state disclosing:
1. corporation name & state/county of incorporation
2. date of incorporation
3. address of principal office
4. federal employee ID number
5. names & business street address of principal office & director
6. address of registered office & name
What happens when a corportion fails to file the annual report?
- they may NOT bring an action in FL court (until filed)
- risks administrative dissolution
What can serve as a safety net if there is something that causes a defect in the formation of the corporation?
- de facto corporation
- corporation by estoppel
When can a party use the de facto corporation as a defense to a defect in the formation of the corporation?
De Facto Corporation may be found to exist even if there is a substantial defect in formation, IF:
1. there has been a good faith effort to incorporate
2. colorable compliance with law
3. actual use of corporation status (an act on corporations behalf)
CANNOT be used if D knew of incorporation (jointly/severally liable)
What’s a corporation by estoppel?
An equitable doctrine that may be applied when persons have dealt with a defectively formed corporation as if it were a legal corporation
estopped from later arguing that its NOT a corporation
What type of claims does corporation by estoppel protect shareholders against?
Contract Claims
NOT tort claims
Who can amend the bylaws?
Directors or shareholders
- UNLESS power reserved to shareholders in articles of incorporation
Can shareholders adopt the initial bylaws?
ONLY IF power is reserved in articles of incorporation
it’s usually incorporator(s) or directors
If bylaws & Articles of Incorporation conflict, what controls?
Articles of incorporation
Who & what can a party seek if a corporation acts beyond the corporations purposes or powers?
Shareholders of state (department of legal affairs)
Can seek an injunction
Can officers and/or directors be personally liable in a direct or derivative action by the corporation?
YES!
- both officers & directors can be held personally liable
For what things can a corporation be liable?
- liable for contracts
- liable for torts committed by their agents
- liable for punitive damages
When can a corporation be liable for punitive damages?
Liable IF:
1. an employee or agent engages in intentional misconduct or is grossly negligent; AND
2. corporation participates in or condones the conduct or is itsefl grossly negligent
Who is a promoter?
One who undertakes to form a corporation & to procure the necessary capital & other items
Who is NOT considered a promoter?
Attorney’s acting in a professional capacity
Who is an incorporator of a corporation?
One who signs the articles of incorporation
may or may not be promoter
Is a corporation liable on a contract made by a promoter?
NO! Unless corporation adopts contract as its own either:
1. expressly (board passes a resolution adopting contract)
2. impliedly (corporation knowingly accepts the benefit of contract)
Is a promoter liable on a preincorporation contract?
YES, always!
- UNLESS there’s a novation (all parties agree)
Who do promoters owe a fiduciary duty to?
Corporation
can’t make secret profit in dealing and MUST act in good faith
What must foreign corporations do when transacting business in FL?
MUST qualify to do business in FL
How does a foreign corporation qualify to do business in FL
requirements?
They MUST get a certificate of authority from Department of state
_
MUST provide:
1. information from articles of incorporation; AND
2. be in good standing in home state
What does it mean to transact business in FL?
Engaging in intrastate transactions in FL on a regular basis
What happens if a foreign corporation transacts business in FL without authority?
- They are NOT permitted to sue in FL court (they CAN be sued)
- state CAN sue to recover the amount of all fees & taxes that would have been due upon qualification + a forfeiture of $500-$1000 per year in which corporation failed to qualify
What are shares?
Shares or Stocks:
- represent ownership interests
- may be transferred freely UNLESS otherwise specified in the articles of incorporation
What are long-term debts?
BONDS (represent creditor interests)
What is an issuance?
An issuance is when a corporation sells its own shares
What are issued and outstanding shares?
1 - Issued Shares
- shares a corporation actually sells
2 - Outstanding Shares
- issued shares corporation has NOT reacquired - still in hands of shareholders
Who can authorize the issuance of stocks?
1 - Board of directors
2 - Shareholders
- if provided by articles of incorporation
Explain each category of stock
1 - Common Stock
- right to vote
2 - Preferred Stock
- rights to distribution of dividends or assets preferential to those assigned to common shares
What is a subscription contract?
A contract under which the subscriber agrees to purchase a certain number of shares from the corporation at a specified price
How long are preincoporation subscription agreements irrevocable for?
6 months
UNLESS agreement provides otherwise
Are post-incorporation subscriptions revocable?
Yes
UNTIL the board accepts them
When is a subscription enforceable?
once board accepts it
When can the corporation sue or sell the shares to someone else when subscriber doesn’t make payment?
If payment is NOT made within 20 days after the corporation makes a written demand
What is “par value”?
minimum issuance price
Is there a mandatory “par value”?
Not in Florida!
but a corporation may elect to have a par value for its shares
When does watered stock result?
When someone pays LESS than par value for the shares bought
What can a corporation do if stock is sold for less than par value?
They can get the remaining money to meet par value from:
1. person who bought shares; OR
2. directors, if they accepted less than par value
What is treasury stock?
Previously outstanding stock that is brought back from stockholders by the issuing company
-
may be cancelled or resold for any price because par value does NOT apply to this type of stock
What are preemptive rights?
Rights that entitle shareholder to purchase a number of shares of new stock or treasury shares that are being issued, sufficient to maintain their relative voting strength (trying to keep same % of shares)
protects against dilution!
How are preemptive rights granted?
If granted by articles of incorporation
only applicable if new shares issued for money
Can a shareholder waive his preemptive right? Is it revocable?
Yes, shareholder can waive!
CANNOT revoke if waiver is written
Who can be a director?
any NATURAL PERSON 18+ years of age
What is the minimum number of directors a corporation must have?
ONE
Who elects directors?
Shareholders @ the annual meeting
Who can remove directors?
Shareholders can remove:
- at any time
- with or without cause (unless articles of incorporation say it must be for cause)
If directors were elected by a certain class of stock, who can remove them?
They may be removed by said class of stock that elected them (by vote)
How is a vacancy on the board of directors filled?
By either:
1. remaining directors; OR
2. shareholders
UNLESS AoI provide otherwise
When are directors NOT required to meet & act as a board?
when ALL directors consent in writing
Explain notice requirements for Board of director meetings
No notice needed for regular meetings
- 2 day written notice for special meetings (doesn’t need to state purpose)
What is a Quorum?
board of directors
Number of directors needed to take action – usually by majority UNLESS:
1. quorum mandated by AoI or byalws
2. CANNOT be less than 1/3 votes
number needed at time of vote !!!
When directors vote, can they vote by proxy or by agreement?
No, it is prohibited
What does the board of directors do? Powers?
manage corporate affairs, and their powers include:
1. power to elect & remove officers (w/ or w/out cause)
2. power to issue or buy back shares
3. right to inspect books
4. power to issue dividends
5. set broad oversight, exercise oversight
Can individual directors bind corporation in contract?
NO! not agents
only board as a whole can bind corporation in K
Can directors delegate their powers?
Yes
ex: delegate to committee
What powers held by directors CANNOT be delegated to a committee?
- amending bylaws
- fill vacancies on board or committee
- authorize the reacquisition of shares (except w/in limits set by board)
What duties do directors owe to corporations?
1 - Duty of Care
- exercise care & skill an ordinarily prudent person in a like position would reasonably believe appropriate in like circumstances
2 - Duty of Loyalty
- act in good faith & w/ a reasonable belief that what they do is in corporations best interest
What are instances that result in a director breaching their duty of care?
- Nonfeasance –> when director does nothing (director consistently fails to attend meetings)
- Misfeasance –> when director does something that causes the corporation loss
