Formation Flashcards
Generally, how is a C formed?
It is a legal entity created by complying the statute governing incorporation.
What are the major characteristics of a corporation?
They are:
- freely transferable shares;
- a continuous existence, despite the death of individual SHs;
- limited liability of the SHs; and
- centralized management of assets by directors and officers.
Another characteristic is that the corporation is a distinct entity from its SHs.
Corporations are subject to double taxation. The earnings are taxed and the dividends are taxed.
What is the purpose of the corporation?
A C may be incorporated or organized to conduct or promote any lawful business or purpose.
What are the powers of the C?
The general statutory powers granted to Oklahoma Cs include all pwoers and privileges granted by the OGCA or by another law or by the C’s certificate of incorporation.
The specific statutory powers granted to Oklahoma Cs include the power to sue and be sued, own property, enter into contracts, borrow and lend money, make charitable gifts and further corporate interests, and buy insurance on the life of an officer, director, or SH.
What is the duration of the C?
Unless its certificate of incorporation provides otherwise, a C has perpetual duration and succession by its corporate name.
What are the incorporation requirements?
One or more persons, PS, associations, or Cs may act as the incorporator or incorporators by delivering a certificate of incorporation to the secretary of state for filing.
An incorporator is a person or entity that assists in creating, developing, and organizing an enterprise into a C.
What are the powers of incorporators?
If initial directors are named in the certificate, the initial directors serve until the first annual meeting of the SHs or until their successors are elected and qualified.
However, if there are no named initial directors, the incorporator(s), until the directors are elected, will manage the affairs of the C and may do whatever is necessary and proper to perfect the organization of the C, including the adoption of the original bylaws of the C and the election of directors.
What are the mandatory provisions of a certificate of incorporation?
The certificate of incorporation must set forth the following:
1. the corporate name;
The name must contain an appropriate name or abbreviations.
A trade name may be used if a report is filed with the secretary of state.
The name must be distinguished from other corporate names.
- the name and address of the C’s registered agent, including the address of the C’s registered office and the county in which the office is located;
A corporation must continually maintain both a registered agent and a registered office in Oklahoma. The registered office can be the same office as the C’s place of business.
The registered agent may be:
a. the domestic C itself;
b. an individual resident of Oklahoma; or
c. a domestic or qualified foreign C, LLC, LLP, or LP.
Each registered agent must maintain a business office identical with the registered office that is open during regular business hours to accept service of process and perform the functions of a registered agent.
- the number of shares the C is authorized to issue;
If more than one class of shares is authorized, the CoI must state the rights, preferences, qualifications, restrictions, and limitations of each class of shares.
- the name and mailing address of each incorporator; and
- if the powers of the incorporator or incorporators are to terminate upon the filing of the CoI, the names and mailing addresses of the persons who are to serve as directors until the first annual meeting of SHs or until their successors are elected and qualify.
What are the optional provisions of CoI?
The CoI may set forth the following provisions:
- for the management of the business and for the conduct of the affairs of the C, and provisions creating, defining, limiting, and regulating the powers of the C, the directors, and the SHs, if such provisions are not contrary to the laws of the state;
- authorizing compromise arrangements between the corporation and its creditors;
- granting to the holders of the stock of the C, or the holders of any class or series of a class thereof, preemptive rights;
- requiring, for any corporate action, the vote of a larger portion of the stock or of any class or series thereof, or of any other securities having voting power, or a larger number of the directors, than is required by the OGCA;
- limiting the duration of the C’s existence to a specified date;
- imposing personal liability for the debts of the C on its SHs or members to a specified extent and upon specified conditions; or
- eliminating or limiting the personal liability of a director to the C or its SHs for monetary damages for breach of fiduciary duty as a director.
What liabilities of a director may a provision not eliminate or limit?
No provision may eliminate or limit the liability of a director for:
- any breach of the director’s duty of loyalty to the C or its SHs;
- acts or omission not in good faith or which involve intentional misconduct or a knowing violation of law;
- unlawful payment of dividends; or
- any transaction from which the director derived an improper personal benefit.
What is not required in the CoI?
There is no requirement to set forth any of the general or specific powers conferred by the OGCA.
What elective provisions must be in the CoI to be effective?
In addition to the mandatory provisions, the OGCA provides that certain elective provisions must be in the CoI in order to be effective. These include a provision:
- authorizing compromise arrangements between the C and its creditors;
- granting preemptive rights to SHs, or to the holders of any class or series of shares, to subscribe to any or all additional issues of shares in the C of any or all classes or series, or to any securities of the C convertible into such shares;
- limiting the duration of the C’s existence to a specified date;
- imposing personal liability for debts of the C on its SHs to a specified extent and upon specified conditions;
- limiting or eliminating the liability of corporate directors for negligence;
- vesting in the SHs the power to adopt, amend or repeal corporate bylaws;
- granting corporate powers in addition to the specific corporate powers granted by the OGCA;
- for management of the C other than by or under the direction of a board of directors;
- conferring upon the holders of any class or series of shares the right to elect one or more directors, with a term of office and voting powers which may be greater than or lesser than those of any other director or class of directors;
- permitting the removal without cause of directors of a C with a classified board of directors;
- specifying the voting powers, designations, preferences, rights, qualifications, limitations, or restrictions of any class or series of shares, or authorizing the board of directors by resolution to specify such voting powers, designations, preferences, rights, qualifications, limitations, or restrictions.
- restricting the power of the board of directors to amend the specification of the powers, designations, preferences, qualifications, limitations, or restrictions of a class or series of shares established by board resolution where no shares of such class or series have been issued;
- authorizing the SHs to determine the consideration to be received by the C for the issuance or sale of any shares of the C;
- pertaining to the creation and issuance of options to purchase shares of the C;
- restricting the declaration and payment of dividends by the C;
- permitting the election of directors other than by written ballot;
- providing for more or less than one vote for any share on any matter;
- authorizing cumulative voting at all elections of directors of the C or at elections held under specified circumstances;
- conferring upon the holders of any bonds, debentures, or other corporate obligations the power to vote, to inspect C books, accounts, and other records, and to exercise any other SH rights;
- prohibiting SHs from taking action by written consent in lieu of a meeting or, more narrowly, prohibiting SHs from electing directors by written consent;
- authorizing the amendment of the CoI to increase or decrease the number of authorized shares of a class or classes of stock by majority vote of all shares outstanding;
- prohibiting the reissuance of shares which have been retired by the board of directors, or prohibiting the reissuance of such shares as part of a specific series;
- requiring SH approval approval of a merger for which the OGCA does not require SH approval;
- extending SH appraisal rights to holders of shares of any class or series of stack as a result of an amendment to the CoI, any merger or consolidation to which the C is a party or the sale of all or substantially all of the assets of the C; and
- requiring SH authorization or consent to the mortgage or pledge of the C’s property and assets.
What are the filing requirements for CoI?
The CoI must be filed with the secretary of state with the required fees and taxes.
The CoI must be executed and acknowledged.
The property party to sign the CoI is the incorporator or incorporators if teh document is filed before the election of the initial directors and the CoI does not name initial directors.
Other instruments must be signed by the incorporator’s successor or assign.
If an incorporator is unavailable, any other instrument may be signed by an person for whom, or on whose behalf, the incorporator, in executing the CoI, was acting directly or indirectly as employee or agent, provided that the instrument states that the incorporator is unavailable, the reason he is unavailable, that the person is acting as an employee or agent, and that the person’s signature is authorized and not wrongful.
Acknowledgement may occur:
- formally, by signing the instrument before a notary; or
- informally, by signing the instrument and affirming, under penalty of perjury, that the instrument is his act and deed or the act and deed of the C, as the case may be, and that the facts stated in the instrument are true.
Unless otherwise stated, the corporate existence begins on the date that the CoI is filed if it is filed properly. Any delayed effective date may not be later than 90 days after the date of the filing of the instrument.
When the secretary of state endorses the filing, the endorsement is conclusive of the date of its filing in the absence of fraud.
What is the evidentiary effect of a filing?
A copy of a CoI that has been filed with the secretary of state, when duly certified, is prima facie evidence of:
- due execution, acknowledgement and filing of the instrument;
- observance and performance of all acts and conditions precedent to the effectiveness of the instrument; and
- any other facts required or permitted by law to be stated in the instrument.
What are bylaws?
They are internal rules and regulations enacted by the corporation to govern its actions and its relation to its SHs, directors, and officers.
They may contain any provision, not inconsistent with the law or the CoI, relating to the business of the C, the conduct of its affairs, and its rights or powers or the rights or powers of its SHs, directors, officers, or employees.
