Management (Directors & Officers)

Question 1

BoD

Answer 1

Manages + directs nosiness & affairs of corp

Question 2

BoD Election

Answer 2

Elected by SHs at annual meeting

Question 3

BoD Removal

Answer 3

Sh can remove director with/without cause unless articles provide

If elected by particular stock class, can only be removed by that class

Question 4

BoD Action

Answer 4

Takes action thru meeting/w/ unanimous written consent

Question 5

BoD Meetings

Answer 5

2 days’ notice needed for special meetings unless waived in writing/by director attending

No notice needed for reg meeting

Directors can’t vote by proxy

Question 6

BoD Quorum

Answer 6

Majority of all directors to be present unless articles/bylaws say otherwiseBo

Question 7

BoD Voting

Answer 7

Presence: can attend electronically if can hear/speak

Required #: If quorum present, majority vote of directors in attendance if they are present when vote taken

No voting agreements allowed

Question 8

Director Dissent

Answer 8

D may dissent to action to avoid liability:

D must object to meeting, ensure dissent is in minutes or file written dissent during or immediately after meeting

Question 9

BoD Committees

Answer 9

BoaD can act thru committee, Sarbanes Oxley requires publicly traded corp to have independent audit committee

Question 10

Board Compensation

Answer 10

BOD can set its own comp but excess may be waste of assets

Question 11

Officers

Answer 11

Run daily business, elected + removed by BoD

Owe fiduciary duties of loyalty & care to corp

Question 12

Actual Authority

Answer 12

Defined by corporate bylaws/BoD

Question 13

Implied Authority

Answer 13

Perform tasks necessary to carry out officer’s duties by virtue of status/position as long as matter is w/I scope of ordinary business

Question 14

Apparent Authority

Answer 14

If corporation holds officer out as having authority to bind corp to TPs

Question 15

Duty of Care

Answer 15

Must act as prudent person in like circumstances, must use any special skills

(can rely on info of experts, employees etc)

Question 16

Business Judgment Rule

Answer 16

Rebuttable presumption director/officer reasonably believed actions were in corp’s best interests

Good faith actions subject to BJR absent fraud/illegality/self-dealing

Question 17

Overcoming BJR

Answer 17

1. Fraud
2. Illegality
3. Self-Dealing
4. Acted in bad faith
5. Not informed enough
6. Didn’t devote enough attention
7. Any failure to act as reasonable director

Question 18

Duty of Loyalty

Answer 18

Director/Officer must act in good faith & in manner he reasonably believes is in corp’s best interest

Question 19

Conflict of Interest/Self-Dealing Rule

Answer 19

transaction b/w corp & director (or relatives) or business where director has an interest that would normally require board approval is a breach of duty of loyalty unless (1) ratified or (2) fair

Question 20

Ratification (self-dealing)

Answer 20

disclosure of material facts & approval by majority of disinterested directors or majority of all disinterested SHs

Question 21

Fair (self-dealing)

Answer 21

transaction fair to corp at time of transaction

Question 22

Self-Dealing Remedies

Answer 22

damages to corp, transaction my be subject to recession or injunction

Question 23

Corporate Opportunity: Rule

Answer 23

D/O can’t usurp corp opportunity unless she 1st notifies board & waits for board to accept/reject before seizing opportunity (interest or expectancy, line of business)

Question 24

Usurpation Remedies

Answer 24

Damages, constructive trust, corp gets opportunity at cost

Question 25

Competing Venture Rule

Answer 25

D/O that engages in business that competes w/ corp breaches duty of loyalty

Question 26

Competing Venture Remedies

Answer 26

constructive trust on profits

injunctive relief

Question 27

Right of Indemnification

Answer 27

Mandatory: D successfully defends action against him in for role as D

Prohibited: D liable for getting improper personal benefit

Permissive: D acted in good faith or had no cause to know acts unlawful