Kaplan Corps Pgs 282-298 Flashcards
What is the law that applies to corporations?
Corporations are strictly creatures of statute, as found in the California corporations code, and there is no common law right to organize a corporation
What are the major characteristics of a corporation?
Dash freely transferable
– perpetual existence
– limited liability of shareholders
– centralized management of directors and officers
What does it mean that a corporation is a person?
Dash enjoy sports amendment protections against unreasonable searches and seizures and 14th amendment equal protection
Where is the corporation considered to be a citizen?
– The principal place of business in the state of incorporation
What are the areas that a corporation is not considered to be a person?
Dash for the fifth amendment self incrimination
– under the privileges and immunities clause
I want toforeign corporation thing to do before they can do business in California?
Get certificates of qualification to transact business
Because S corporations can avoid double taxation, who actually pays the taxes?
The corporation doesn’t have to pay any Federal income taxes, only the shareholders pay taxes on their dividends. Although the corporation does have to file the required forms with the IRS
What is the major difference between a C Corp and an S Corp.?
Taxation. Escorts only have to pay taxes once and see corporations have double taxation
What is a publicly traded corporation question
One who shares our trade it over and exchange. These have a minimum of $5 million in assets and have to register with the SEC and make red regular filings
What is the difference between a closely held corporation and a statutory close corporation?
– Closely held: there is no ready secondary market for the stock because it is just a small number of shareholders to participate in the management of the firm
– statutory: has fewer than 35 shareholders, the articles say that the corporation is a closed corporation, and the name includes the words corporation, Inc., Limited, or some abbreviation.
What does it mean for a benefit corporation to have a “general public benefit“?
A material positive impact on society and the environment, taken as a whole
Does California require that a corporation’s name include words such as “corporation, Inc., limited, or an abbreviation of these”
No
What are the mandatory provisions of the articles of incorporation?
– name
– statement of purpose
– name and address of the initial agent for SOP
– the total number of shares the corporation is authorized to issue
What are some provisions that are optional to put in the articles of incorporation?
Dash restrictions on the transfer of shares
– preemptive rights for stockholders
Dash provisions at limit liability for directors
– provisions at limit the period of duration [in California corporation is deemed to exist perpetually unless the articles of incorporation provide otherwise]
– the names and addresses of the initial Board of Directors
What is the benefit of a de facto corporation?
Insulates directors and shareholders from liability except in direct actions by the State
What does it mean that shareholders have limited liability?
They are not personally liable for the debt and obligations of the corporation. The creditors of the corporation are limited in their recovery to the assets of the corporation
Is it possible to contract around limited liability question
Yes, the parties can contract that the shareholders will personally guarantee corporate debts
What is the situation when you use piercing of the corporate veil Krista
Only when it is necessary to avoid a grave injustice
What is required to apply the alter ego test?
A corporate entity will be disregarded when there has been such unity of interest and ownership that the separate personalities of the corporation and individuals don’t exist. The plaintiff must prove that the shareholder controlled the corporation so that it was not treated as a separate entity and the shareholder was actually the alter ego of the corporation. Bad faith in one form or another must be shown, but actual fraud is not necessary
When does the altar ego test fit in?
Under piercing the corporate veil
Is it possible for a shareholder to lend money to the corporation?
Yes, and then the shareholder is treated as a creditor. But if the corporation becomes insolvent shareholder dead maybe subordinated to other unsecured debt of outside creditors
Who is liable for pre-incorporation contracts?
Generally the promoter is personally liable in any contract enters on behalf of the nonexistent corporation, whether the contract was made in his name or the corporations name, unless the other party agreed that the promoter would not be liable or they looked to the corporation for performance
What is the consideration for a novation?
The assumption of liability by the corporation
If a promoter signs a contract as an agent, who is liable for that contract?
The promoter is because the corporation doesn’t exist yet so he cannot be an agent for the corporation
What is the difference between an expressed adoption by a corporation and an implied adoption?
Dash express: the contract is explicitly approved by the Board of Directors
– implied: the corporation excepts or acknowledges the benefits of the contract in someway
If a promoter entered a contract with a company on behalf of the corporation to supply office furniture, and then the corporation was subsequently validly formed, and the furniture company delivered the furniture to the employees of the corporation who began using it, who would be liable on that contract?
The corporation, because the furniture contract wasn’t technically formally adopted by the corporation, but it was an implied adoption since they excepted the benefits of it
What is a subscription for shares?
Essentially a contract to buy shares that will be issued by a corporation that will be formed in the future
If you agree to sign a contract to purchase 20 shares of a corporation at $10 per share when it is formed in three months, what have you agreed to question
A subscription contract
How does the revocability of a subscription contract work with regard to pre-incorporation?
Pre-incorporation subscriptions for shares are irrevocable for six months unless the agreement says otherwise
If a share subscriber defaults in his payment under a pre-incorporation subscription agreement, what can the corporation do it?
Dash treat a subscriber as a debtor and collect from him
– resend the agreement and sell the shares if the debt is not paid within 20 days of a written demand for payment
What are the two different types of securities?
Debt debt securities
– equity securities
What is a debt security?
Money that was loaned to the corporation so that the holder becomes a creditor of the corporation. He is entitled to repayment of a specified time with a return of interest
If a bond has a conversion ratio of 30 to 1, what does that mean?
One bond can be exchanged for 30 shares of stock
What do holders of debt securities have that equity securities do not question
Priority upon liquidation of the corporation
What are the three major kinds of debt securities?
Dash debentures
– bonds
Death notes
What is a debenture question
Unsecured obligations of the corporation. If you hold this, you are a general creditor
What is a bond?
Secured by a mortgage or a security interest in specific asset to the corporation, so that holders are secured creditors
What is a note?
A short form debt security that can be either secured or unsecured and is not traded or transferred
