Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

Z - Others > MD Corporations > Flashcards

MD Corporations Flashcards

1
Q

Key characteristics

A
  1. freely transferable shares
  2. continuous existence
  3. limited liability of SHs (only to your investment EXCEPT piercing)
  4. central professional management
  5. entity for tax purposes - double taxation
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

Articles of Incorp must have:

A
  1. name/addy of incorporators
  2. name of corp, indicating it’s a corp
  3. purpose (can be broad)
  4. address of corp
  5. registered agent name/addy
  6. stock info: number, classes, par value
    - > exists when accepted by state
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

Bylaws

A

Created by board for internal governance, usually have annual meeting and restrictions on transfering shares, can’t conflict iwth Articles

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

De facto corporation

A

If the promoters made good faith attempts to incorporate right, will get limited liability

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

Corporation by estoppel

A

If creditor always dealt with as if was a corp, can’t pierce LL

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

Ultra Vires acts by the board

A

an action beyond the authority given the Board by the Articles. OJO! an act or transfer of property by corp NOT invalid solely because ultra vires -> Bd can be sued for breach of fiduciary duty. DIFFERENT from partnership(?)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

Piercing Corp Veil

A

IF 1. necessary to prevent fraud/iniquity and 2. failure to comply with formalities (meetings, records, commingle funds) OR 3. inadequate capitalization -> liability for SHs

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

Promotor Liability

A 
IF they know corp not formed yet -> jointly liable for Ks (they're a partnership) OJO unless K specially disclaims personal liability
IF corp adopts (express or implied by accepting the benefits) -> both liable
IF novation (creditor agrees to release promotor) -> only corp liable
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

Debt securities

A

DEFINE: $ investor loans to corp.
RIGHTS: priority over equity (SH) holders to repayment but not part owners so no dividends
TYPES:
- notes: IOUs
- bonds: when sells IOUs to a lot of people at once
- debentures: unsecured obligations so they’re general creditors

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

Equity securities (shares): Rights in general

A
  1. no right to repayment 2. dividend rights 3. liquidation rights 4. voting rights
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

Preferred stock

A

get: 1. fixed dividend b4 common stock 2. preference in liquidation 3. do not vote
Noncumulative dividend right: get stated amount only in years where dividends paid to common stock
Cumulative: Get credit for years where nothing paid
Participating: Get both the preference AND what’s paid to common stock

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

Stockholders’ preemptive rights

A

Right to buy additional shares at the same price when there is a new stock issuance. Default is NO preemptive rights, can be in Articles

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

Stockholders’ right to dividends

A

Generally no inherent right. Corp MAY NOT make dividend if: 1. makes unable to pay debts 2. total assets outweighed by liability. BUT if directors’ refusal to pay dividends due to bad fait, fraud, abuse of discretion (e.g. pay selves high salary) then can get $

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

SH Management Rights Generally

A
  1. Elect directors
  2. Approve extraordinary actions that are fundamental to the corporation: defensive mergers, amending Articles, selling all assets, dissolving
  3. Annual and special meetings (called by prez, Bd, or 25% of SHs, notice 10-90 days)
  4. Voting
  5. Right to information
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

Shareholder Voting: Quorum

A

Default is quorum = majority of the votes. Once quorum is present, majority of votes cast wins.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

Shareholder Voting: Proxies

A

Can either give and specify how you want to vote or let your proxy decide. REVOCABLE regardless of language of proxy UNLESS coupled with interest for benefit of proxy-holder (e.g. gave to secure a debt).

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

Shareholder Voting: Agreements and Trusts

A

In order to gain control/strength.
Agreements = K to vote a certain way together BUT costly to enforce after breach.
Trust = sign shares to trustee who votes in accordance w. agreement

18
Q

Shareholder Right to Info

A

May inspect/copy 1. bylaws 2. minutes of SH meetings 3. annual statements of affairs 4. any voting agreements. IF you own more than 25%, can get accounting books and lists of shareholders.

19
Q

Board reqs and rights

A

Must have at least one. Can hire officers, set major direction of corp, acquire another corp. Quorum = majority

20
Q

Board elections

A

Straight voting = vote your shares. Bad for minority. Cumulative voting where multiply number of shares times number of directors so minorities can get some elected.

21
Q

Officers powers

A

Must have prez, treas, secy. Have actual express/implied authority from Board, Apparent authority when normal, bind the corp if w/in scope of authority.

22
Q

Duty of Care (Corp)

A

for directors, owe reasonably prudent person BUT business judgment rule: only bad faith or grossly negligent conduct creates liability. ALSO entitled to rely on reports given to them

23
Q

Duty of Loyalty

A

Fiduciary duty.
Business dealings: if Dir has personal financial interest in a deal THEN must disclose to Board and have approved by a majority AND K must be fair and reasonable to the corp.
Usurp corp opp: IF 1. corp financially able to undertake opp, 2. in corp’s line of business 3. practical advantage to corp 4. by taking, D/O will come into conflict w. corp THEN must offer to corp
Compete: can’t compete directly
REMEDY: disgorge profits

24
Q

10-b5 False/Misleading Statemetns

A
  1. in connection with purchase/sale of security
  2. use any artifice to defraud
  3. omission AND misstatement of material fact
  4. any practice that operates as a fraud or deceit
    Private OR gov’t action
25
Q

10-b5 Insider trading

A

DEF: trading based on confid info
INSIDER: director/officer/employee OR constructive - s/o who knows info because of representation (lawyer, accountant)
TIPPER liable if gets personal advantage from tip (gets paid, reputational advantage, gives gift) and tippee trades on info
TIPPEE liable if 1. tipper has breached fiduciary duty 2. knows of breach 3. traded on info
MISAPPROPRIATION: if you steal info from your company even though not trading on your own company’s stock

26
Q

16b Short Swing Profits

A

If insider (D/O or SH with more than 10% both before first and second transaction) buys and sells stock w/in 6 months -> disgorge profits

27
Q

Duties of Controlling Stockholders

A

Fiduciary duty so can’t:
1. make Bd give you a loan or guarantee a loan
2. make Bd issue stock at too low a price
3. make Bd enter into unfair K with you
SALE OF CONTROL: can’t sell to a known looter
SQUEEZE OUT MINORITY: can do a freeze out merger (create new corp wholly owned by you, merge old corp into it by paying out minority SHs) because they get fair value. Squeeze outs evaluated for fairness -> both price and process must be fair.

28
Q

Closely Held Corp: Define

A
  1. small number of SHs
  2. no ready market for stock
  3. substantial participation by owners in mgmt
    often small business, often have restrictions on transfer of stock
29
Q

Closely Held Corp: Statutory features

A
  1. Must specify in Arts and Bylaws
  2. w. Unanimous agreement can regulate all affairs of corp - restrictions on transfers, who officers can be
  3. can have no Bd - SHs run corp
30
Q

Closely Held Corp: Duties

A

All owe fiduciary duties to others, no sale unless unanimous

31
Q

Limited Liability Company

A
  • gets both limited liability and pass through taxation
  • must file Articles of Organization and indicate form, may write Operating Agreement but not necessary
  • owners called “members”
  • default profits shared in proportion to contribution
  • management default is members (like Pship) but can have managers
  • authority to bind by Operating Agreement or agency principles
  • liability: no liability for personal torts of other members (NOT like Pship)
  • can transfer rights to profits but not to control (like Pship)
  • disolution: 1. unanimous vote 2. in Op Agree 3. court order because not reasonably practicable to carry on in conformity w. Articles 4. no members for 90 days
32
Q

Foreign corp requirements

A

before doing business must register by:

  1. having addy in MD
  2. registered agent in MD
  3. demonstrate good standing at home
33
Q

Types of ‘mergers’

A
  1. merge: one disappears, survivor gets all liabilities
  2. consolidate: two corps make a third one
  3. transfer of assets: survivor does not get the liabilities
34
Q

Shareholder Rights: Approving fundamental change

A
  1. Bd approves resolution recommending

2. SH vote 2/3 majority

35
Q

Shareholder appraisal rights

A

Right to demand payment for fair value of the stock as valued by a court. Process: Must submit written objection before meeting and must NOT vote for the merger

36
Q

Involuntary Dissolution

A

Bloc of SH at least 25% of those entitled to vote in Bd election petition court to dissolve because 1. Dirs deadlocked 2. SHs deadlocked and can’t elect Dirs.
Any SH entitled to vote petition court to dissolve because 1. SHs haven’t been able to elect Dirs for 2+ yrs 2. Dirs acting in an illegal, oppressive, or fraudulent manner
Any SH OR creditor petition court to dissolve because unable to pay its debts

37
Q

Forfeiture of charter

A

State can revoke if 1. fails to pay taxes 2. misuses corp power -> becomes partnership, no LL. Can revive at any time if you pay taxes, reimbursements, unemployment contributions, file reports

38
Q

Tender offer

A

Buyer goes around Dirs to SHs, offers above market price to get a controlling share
REGULATION: 1. No secret purchase - if you get 5+% must disclose ID 2. Offer disclosure 3. no false or misleading statements in connection with offer
DEFENSIVE MEASURES: 1. white knight 2. poison pill: if anyone gets above e.g. 15% of stock, automatic issue more stock to dilute

39
Q

Direct SH suit

A

SH seeks to recover injury imposed directly on him, e.g. didn’t get dividend

40
Q

Derivative Suit

A
  • Need ‘contemporaneous ownership”: P was SH at time of misdeeds
  • make demand on Dirs to get corp to sue
  • demand excused if it would be futile b/c Dirs conflicted w. self-interest
  • Dirs can appoint special litigation committee of disinterested Dirs, including getting new ones, MD courts will respect
41
Q

Subscription Agreement

A

Contract to buy shares that will be issued, says what consideration will be paid. Subscriber owes corp for any unpaid subscription.

Z - Others (14 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions