Management and Control

Question 1

What are the two types of shareholder meetings?

Answer 1

(1) Annual meetings
(2) Special meetings

Question 2

What are the requirements for a shareholder meeting?

Answer 2

(1) Call
(2) Notice
(3) Quorum
(4) Voting eligibility

Question 3

How much notice is required for a shareholder meeting?

Answer 3

At least 10, no more than 60 days

Question 4

What is the general rule for what constitutes a quorum?

Answer 4

When shares representing a majority of the votes entitled to be cast are present

Question 5

What are the types of shareholder voting methods?

Answer 5

(1) Regular voting
(2) Straight voting for electing directors
(3) Cumulative voting for electing directors
(4) Proxy voting
(5) Class voting
(6) Voting trusts
(7) Shareholder voting agreements

Question 6

How is voting eligibility determined?

Answer 6

Set by the record date, which is a cutoff date set by the corporation

Question 7

What is regular voting?

Answer 7

Number of votes in favor exceeds number of votes opposing

Question 8

What is straight voting for electing directors?

Answer 8

Each board seat is treated as a separate election, requiring only 51% of all votes cast

Question 9

What is cumulative voting for electing directors?

Answer 9

Multiply a shareholder’s number of shares by the number of seats up for election. Each shareholder may cast that number of votes in total amongst all the seats. It allows minority shareholders to obtain representation

Question 10

What is proxy voting?

Answer 10

When shareholders appoint someone to vote their shares for them

Question 11

When is a proxy irrevocable?

Answer 11

(1) Appointment for states that the proxy is irrevocable
(2) Appointment must be coupled with an interest

Question 12

What is class voting?

Answer 12

Shares are divided into classes and each class of shares votes as a separate voting group

Question 13

What is a voting trust?

Answer 13

An arrangement by which one or more shareholders agree to transfer their shares to a trustee. Trustee only has the right to vote, nothing else

Question 14

What is a shareholder voting agreement?

Answer 14

Basically a contract between shareholders to vote in a certain way

Question 15

What are the requirements for a board meeting/action?

Answer 15

(1) Call
(2) Notice (only for special meetings)
(3) Quorum
(4) Sufficient vote

Question 16

What powers may board committees generally exercise?

Answer 16

The powers of the board of directors

Question 17

What may a committee not do?

Answer 17

(1) Authorize or approve distributions to the shareholders, except according to a formula or method prescribed by the board of directors
(2) Approve or propose to shareholders action that must be approved by shareholders
(3) fill vacancies on the board
(4) Adopt, amend, or repeal bylaws

Question 18

What type of relationship do an officer and corporation have?

Answer 18

An agency relationship

Question 19

Who may bind a member-managed LLC?

Answer 19

The LLC’s members

Question 20

What grants members actual authority in a member-managed LLC?

Answer 20

The LLC’s operating agreement

Question 21

Do members have the authority to bind a manager-managed LLC?

Answer 21

Generally not

Question 22

What area of law governs a member’s (member-managed) or manager’s (manager-managed) ability to bind the LLC?

Answer 22

Agency

Question 23

Who do an LLC’s debts, obligations, and liabilities belong to?

Answer 23

The LLC itself

Question 24

What is a shareholder agreement?

Answer 24

An agreement that alters the usual rules relating to corporate governance

Question 25

What is required for a shareholder agreement to be valid?

Answer 25

(1) Unanimous
(2) Must be conspicuously noted on the front or back of each outstanding stock certificate

Question 26

What is oppression?

Answer 26

A cause of action allowing minority shareholders to sue majority shareholders for oppressive conduct

Question 27

What are the remedies for an oppression claim?

Answer 27

(1) Dissolution
(2) Buyout of the minority shareholders

Question 28

What are the two tests to determine whether conduct is oppressive?

Answer 28

(1) Reasonable Expectations test
(2) Burdensome, harsh, or wrongful conduct test

Question 29

Who may breach a board deadlock?

Answer 29

Shareholders or the court

Question 30

How may a court break a director deadlock?

Answer 30

Dissolution

Question 31

When may a court dissolve a corporation for director deadlock?

Answer 31

(1) The corporation is suffering or threatened with suffering irreparable injury because of the deadlock; or
(2) The corp’s business can no longer be conducted to that advantage of the shareholders