MO Corps: Directors and Officers Flashcards
Statutory Requirements - Directors
- must have a board with at least 1 member
- SHs elect directors
- Shs can remove a director for no cause at all
- Valid meeting
Valid Meeting
- Meeting is req’d unless all Ds consent
- Notice can be set in bylaws
- Proxies are NOT allowed- conference calls ok
- Quorum– majority of all Ds
- Vote – to pass resolution however, all that is required by majority vote of those present.
- Each D presumed to concurred in Board action unless her dissent or abstention is recorded in writing
Voting
so if there are 9 Ds– 5 must attend and out of the 5 – 3 must vote for a resolution in order for it to pass
Liability of Ds to their own corporation and SHs
- Duty to Manage
- BJR
- Fiduciaries
Duty to Manage
Ds have a duty to manage the corp. Directors may delegate management functions to a committee of one or more Ds that recommends action to Board
BJR
Protection from liability. The rule is a presumption that the Ds manage the corporation in good faith and in best interests of the corp and its SHs. As Such DIRECTORS WILL NOT BE LIABLE FOR INNOCENT MISTAKES of Biz judgment
Directors are fiduciaries who owe the corporation duties of care and loyalty
CARE: Prudent person unless articles limits liability
LOYALTY: NO UNFAIR benefit UNLESS disclosure and independent ratification
H, a director of Hedonist’s hot tub, after studying the issue thoroughly votes to hire a religious singing ensemble to promote the company’s line of hot tubs with built in wine coolers and video camera. Idea is a disaster–> has heftier breached his duty of care?
NO. D’s have a duty to manage. They are protected from liability by BJR but they are fiduciaries so they owe duties of care and loyalty. D must act with prudence unless limited by articles for lack of care. In this case, H after thoroughly studying matter carefully made n innocent misktae and therefore will not be liable for lack of care.
Self-dealing
D who receives an unfair benefit to herself in a transaction with her own corporation.
Usurping corporate opportunities
D receives an unfair benefit by usurping for herself an opportunities which the corporation would have pursued.
Ds may defend a claim by proving their conduct was
FAIR to the corporation
Ds may also defend a claim by obtaining independent ratification through:
- a majority vote of independent directors;
- majority vote of a committee of at least 2 independent Ds
- Majority vote of shares held by independent SHs
A one of ten Ds of Diamond Merchants Inc, spots choice diamonds and buys then for herself for 1mill. Alice then resells those diamonds to her corporation for $2mill. A however disclosed her conduct to the Board and at a board meeting attended by the other 9 board members, 5 of the members voted to ratify her transaction. What liabilities if any does A have
None. Ds have a duty to manage. Thehy are protected by BJR. They are fiduciaries with duty of care and loyalty. Ds may not receive an unfair benefit unless there has been disclosure plus independent ratification. in this case, Alice did receive a benefit by profiting from self-dealing and usurping choice diamonds. Nonetheless, Alice will not be liable because she disclosed her conduct and received independent ratification through majority vote of independent directors–she will not be liable
Officers
–sme duties as directors
- agents of corp and bind corp by authorized activities
Ds have unlimited power to select officers and remove then but corp will be liable for breach of K damages
Indemnification
- NEVER indemnify D who is held liable to own corp
- ALWAYS indemnify D who wins against any party
- May Indemnify if: Liability to third parties or settlement with corp; D shows action in good faith and that she believed conduct was in best interest of corp
