IL Corporations Flashcards

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1
Q

Promoter’s liability

A

Liable until novation.

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2
Q

Requirements on Articles of Incorporation

APAIN

A

APAIN

  1. Authorized shares, max number
  2. Purpose
  3. Agent (address of registered office)
  4. Incorporators
  5. Name of Corp.
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3
Q

Shareholder liability

A

Not liable unless the corporate veil is pierced

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4
Q

Par value

A

Minimum issue price

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5
Q

Preemptive rights

A

Right to maintain ownership percentage.

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6
Q

Business judgment rule

A

Presumption that directors manage the corp. in good faith and in the best interest of its SHs.

Directors are not liable for innocent mistakes of business judgment - no matter how bad.

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7
Q

Director duties:

A
  1. Of care - prudence, unless limited by Articles.

2. Of loyalty - no unfair benefits unless disclosed and ratified by independent board members.

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8
Q

Derivative Suits need:

A
  1. Contemporaneous ownership (standing)
  2. Adequacy
  3. Demand
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9
Q

Quorum

A

Majority of all SHARES.

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10
Q

Vote

A

Votes CAST in favor exceed votes CAST against.

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11
Q

Cumulative voting

A

shares x slots (for directors)

PRESUMED in Illinois.

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12
Q

Common stock

A

Pay last

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13
Q

Preferred stock

A

Pay first

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14
Q

Participating stock

A

Pay twice

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15
Q

Cumulative stock

A

Add up

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16
Q

Eliminating formalities in closely held corps.

2 requirements = 2 upsides

A
  1. Unanimous election AND
  2. Share transfer restrictions
    YIELD
  3. No piercing AND
  4. Possible SCORP status.
17
Q

Professional Corporation (PC)

A

Just one profession.

Limited liability.

18
Q

LLC

A
  1. Limited liability
  2. Limited liquidity
  3. Limited life
  4. Limited tax
19
Q

Making fundamental changes

A
  1. Board resolves
  2. Special notice for special meeting
  3. Majority of all shares (2/3 in IL)
  4. Dissenter’s have rights
  5. File notice with state.
20
Q

Federal Securities Law Sec. 10(b)

A

Needs:

  1. Scienter
  2. Deception
  3. Actual purchase/sale (reliance)
21
Q

Federal Securities Law Sec. 16(b)

A

No trading profits w/i 6 months.

22
Q

Sarbanes-Oxley Act (2002)

A
  1. No knowingly false filings

2. No benefits during falsehoods or blackout periods.

23
Q

3 Director Owes Corporation Duty:

A
  1. To act in good faith
  2. To act as a reasonably prudent person would in that situation.
  3. In a manner the director believes is in the best interest of the corporation.
24
Q

Controlling shareholders must refrain from:

A
  1. using his control to obtain special advantage or,

2. to cause the corporation to take action that unfairly prejudices the minority shareholders.

25
Q

Corporation not liable on promoter’s contract unless:

A

it adopts the contract.

26
Q

Adopting promoter’s contract:

A
  1. Express act of corp.

2. Implied by corp. accepting K’s benefit

27
Q

Piercing the Corp. Veil

A
  1. Corporate formalities have been ignored, and
  2. A basic injustice will result b/c of lack of formality.
  3. Corp was undercapitalized at the outset.
  4. Corp was formed to perpetrate fraud.
28
Q

Derivative Suit

A

a suit brought by a shareholder to enforce a right belonging to the corporation.