Shareholders

Question 1

SH Duties

Answer 1

SHs elect BoD & vote on fundamental changes

Question 2

Meetings

Answer 2

Annual: mandatory to elect BoD

Special: to approve fundamental change

Question 3

SH Meeting Notice

Answer 3

Required ≤ 10 and ≥ 60 days before meeting

1. Content (where/when held)
2. Special meeting notice needs purpose
3. Failure to provide notice allows SH to challenge actions
4. Waiver: SH held to waive defends in notice by signed writing/meeting attendance

Question 4

SH Voting

Answer 4

Only SH who owns shares on record date entitled to vote

Question 5

Record Date

Answer 5

Fixed by BoD
Can’t be more than 70 days before meeting
SH after record date can’t vote w/o proxy from record owner

Question 6

Proxy (SH Voting)

Answer 6

3P can be appointed to vote if signed writing sent to corp

signed for 11 months unless otherwise stated

Revocable unless otherwise specified & coupled w/ interest

Question 7

Quorum (SH Voting)

Answer 7

Majority of votes representing eligible outstanding shares

Quorum must be present at meeting

Question 8

Number Required (SH Voting)

Answer 8

If quorum exists cote approved if votes in favor > votes against (unless Articles say otherwise)

Question 9

Cumulative Voting (SH Voting)

Answer 9

Articles can give SH number of votes equal to number of shares multiplied by number of directors

Votes = (Share #) x (Director #)

Question 10

Class Voting

Answer 10

Articles can create classes of stock w/ greater or no voting power

Question 11

Voting Agreements (SH)

Answer 11

SH can enter contractual agreement to vote shares in specific way

SoF applies, enforceable thru specific performance

Question 12

3 Types of SH Voting Agreements

Answer 12

1. Voting Pool
2. Voting Trust
3. Management Agreement

Question 13

Voting Pool

Answer 13

Binding voting agmt where SHs retain legal ownership

Doesn’t need to be filed w/ corp, no time limit

Question 14

Voting Trust

Answer 14

Trust to which legal ownership of SH’s stock transferred

Trustee votes shares & distributes dividends in accord w/ trust

Must be in writing

Limited to 10 years, Filed w/ Corp

Question 15

Management Agreement

Answer 15

Lets SHs alter way corp manages even if agate inconsistent w/ statutory provisions

Question 16

SH Right To Inspect Records

Answer 16

SH can inspect/copy records w/ 5 days’ notice stating proper purpose

Question 17

SH Right to Sue Corporation

Answer 17

SH can bring direct/derivative action against corp

Question 18

Direct Suit

Answer 18

recover damages for breach of duty to SH individually, causing direct harm

SH vindicating his own rights, not required to make demand on BoD before proceeding w/ litigation

Question 19

Derivative Suit

Answer 19

SH sues on behalf of corp to vindicate corp’s rights (SAD)

Standing, adequacy, demand

Question 20

Standing

Answer 20

Must be SH at time of harm & maintain ownership throughout litigation

Question 21

Adequacy

Answer 21

Must fairly adequately represent interests of the corporation

Question 22

Demand

Answer 22

Must make written demand to BoD & wait 90 days before commencing action unless BoD rejects it earlier/waiting would cause irreparable harm

Demand may be excused if futile

Question 23

Recovery

Answer 23

Any recovery goes to Corp, SH can demand reimbursement for atty’s fees if action benefitted corp

Question 24

SH Liability Generally

Answer 24

SHs don’t owe duty to each other/corp but can be liable to 3P or if controlling SH in close corp

Question 25

Controlling SH

Answer 25

1/group who holds high enough % ow ownership to enact changes at highest level

Question 26

Controlling SH Duty

Answer 26

Not abuse power to disadvantage minority SHs

Can’t use position of control to cause corp to take action prejudicing minority SHs

Duty breached if nondisclosure causes loss to minority SHs

Question 27

CSH Fiduciary Duty to MSH

Answer 27

May Arise if CSH is:

1. Selling interest to outsider
2. seeking to eliminate other SHs (duty of fair dealing when purchasing minority SH interest)
3. Receiving distribution denied to other SHs
4. Failing to disclose material info: CSH has duty to disclose info that reasonable person would consider important in deciding how to vote on transaction

Question 28

Tax

Answer 28

Separate taxable entity from SHs, causes corp to face double taxation: taxed when profits brought in, SHs taxed on distributions received