Governance & Shareholders

Question 1

AOI amendments

Answer 1

• BoD can amend the AOI if no stock has been issued;
• if stock HAS been issued, then BoD adopts the amendments and submits them to SHs for majority approval.

Question 2

What if there is a conflict b/t AOI and bylaws?

Answer 2

AOI controls

Question 3

SH Meeting Req’ts
1. Annual
2. Special
3. Notice

Answer 3

1. Annual: primary purpose is to elect Directors
2. Special: may be called by BoD or SHs who own at least 10% of voting shares
3. Notice: voting SHs must be notified of time/date/place in a timely manner, no less than 10 days and no more than 60 days before the meeting; SH may waive notice either in writing or by attending the meeting.

Question 4

Written consent for voting/adopting, etc?

Answer 4

SHs can take any action that could have been taken at a meeting if they have unanimous written consent of all SHs

Question 5

SH resolutions?

Answer 5

Submitted for SH action at SH meeting;
Can’t bind C or BoD unless amending bylaws;
Can regulate political expenditures

Question 6

Who is eligible to vote?

Answer 6

• Only record owners of voting stock
• An owner of voting stock at the close of business on the record date has the right to vote

Question 7

Quorum Requirements

Answer 7

A majority of votes entitled to be cast on a matter

Question 8

Cumulative voting for Directors

Answer 8

SHs can cumulate votes to allow minority SHs to elect reps to the BoD.

Question 9

Proxy Voting

Answer 9

Must be in writing and delivered to the
C or its agent.

Question 10

Voting Pool

Answer 10

A binding voting agmt under which SHs agree on the manner in which they will vote their shares. SH retain legal ownership; does not need to be filed with the C; no time limit

Question 11

Voting Trust

Answer 11

• A trust to which legal ownership of SH’s stock is transferred;
• the trustee votes the shares and distributes the dividends in accord w/ trust;
• mut be in writing;
• limted to 10 years,
• filed with C

Question 12

Can a SH inspect records?

Answer 12

A SH with a proper purpose (relates to SH’s interest) has the right to inspect and copy corporate records with 5 days notice

Question 13

SH Suits: Direct Action

Answer 13

An action to enforce SH rights for breach of fiduciary duty by Directors or Officers, or an action based on grounds unrelated to SH’s status

Question 14

SH suits: Derivative Actions
1. What is it?
2. Who has standing?
3. Pre-reqs to filing?
4. Dismissal by BoD?

Answer 14

1. What is it? SH sues on behalf of C for harm suffered by C
2. Who has standing? PL must have been a SH at the time of the wrong AND at the time the action is filed; must continue to be a SH during the litigation, and must adequately represent C’s interests
3. Pre-reqs to filing? Written demand upon BoD unless it would be futile
4. Dismissal by BoD? only if a MAJ of qualified directors decided in good faith after reasonable inquiry that the action is not in the C’s best interest.

Question 15

Piercing the Corporate Veil

Answer 15

Totality of the circumstances
* Look to whether C is being used as a façade for a dominant SH’s personal dealings (ex: whether C is “alter ego” or “mere instrumentality” of SH)
* Whether there is a unity of interest and ownership b/t the C and its members.

Question 16

What is a controlling SH

Answer 16

a SH (or group of SHs acting in concert) who holds a high enough percentage of ownership in a company to enact changes at the highest level

SH owning 50% plus ONE of C’s shares is automatically controlling SH