Management - Shareholdres

Question 1

Shareholder management generally

Answer 1

1. SHs do not manage a corporation
2. exception: SHs of a close corporation run it directly
   i. close corporation: small number of SHs and no public market for the stock

Question 2

SH management if stock is not traded on a national exchange

Answer 2

1. if stock is not traded on a national exchange, SHs can eliminate the board and run the corporation directly:
   i. in the articles or bylaws and approved by all shareholders, or
   ii. by unanimous written shareholder agreement
2. the agreement should be conspicuously noted on the front and back of stock certificates
3. if the board is eliminated, the SHs managing the corporation owe duties of loyalty and care
   i. i.e. cannot eliminate fiduciary duties in close corporations

Question 3

Oppression in close corporations

Answer 3

1. shareholders in close corporations owe fiduciary duties not to oppress each other
   i. oppression: majority SHs treating minority unfairly
2. if oppression, a harmed minority shareholder can sue the oppressing controlling SH
   i. minority SHs in close corporations have no way out bc there is no public market

Question 4

Licensed professionals

Answer 4

1. licensed professionals may incorporate as a PC or PA
   i. including lawyers, medical professionals, and CPAs
2. name must include professional corporation or PC or professional association or PA
3. articles must state that the purpose is to practice in a particular profession

Question 5

Licensed professionals- constituents

Answer 5

i. directors, officers, and SHs must be licensed professionals
ii. the P.C. employ non-professionals but not to practice the profession

Question 6

licensed professionals - liability

Answer 6

i. SHs are not liable for corporate obligations or for other professionals’ malpractice
ii. professionals are personally liable for their own torts (ex. malpractice)

6. generally, the rules governing regular corporations apply to the P.C.
7. summary: PCs are corporations in every way, except shareholders and managers have to be licensed professionals