Shareholders

Question 1

The power to manage the corporation is generally vested in whom?

Answer 1

the directors

Question 2

Do shareholders have any direct control in management of the corporation’s business?

Answer 2

generally, no

Question 3

In what way to shareholders exercise control over the corporation?

Answer 3

through their voting power

Question 4

Can shareholders dispense with the board of directors and assume control of the corporation?

Answer 4

yes, if they decide to do so.

Question 5

Corporations must hold ___________ shareholders’ meetings.

Answer 5

annual

Question 6

When must an annual meeting be held?

Answer 6

within 6 months of the end of the corporation’s fiscal year or 15 months of the last shareholder meeting.

Question 7

Can a court force a corporation to hold a shareholder meeting?

Answer 7

yes

Question 8

Can specialized meetings be called?

Answer 8

yes

Question 9

Where can shareholder meetings be held?

Answer 9

anywhere

Question 10

When must shareholders be notified of a shareholder meeting?

Answer 10

not less than 10 days before the meeting and not more than 60 days before the meeting.

Question 11

Who may vote at a shareholder meeting?

Answer 11

shareholders of record on the record date

Question 12

What is the record date?

Answer 12

the date by which shareholders should be recorded as voting shareholders of the corporation in order to be eligible to vote.

Question 13

Can a shareholder vote by proxy?

Answer 13

yes

Question 14

Proxies last for how long?

Answer 14

11 months unless otherwise stated.

Question 15

How is a proxy made irrevocable?

Answer 15

by stating that it is irrevocable and is coupled with an interest.

Question 16

Quorum

Answer 16

a majority of outstanding shares entitled to vote, unless the bylaws require some greater number.

Question 17

Absent a contrary provision in the articles, each share is entitled to ________ vote.

Answer 17

one

Question 18

Unless the articles provide otherwise, directors are elected by _____________ of the votes cast.

Answer 18

plurality

Question 19

Whenever a class of stock has no voting rights, but an amendment to the articles would affect only that class of stock, may that class of stock vote to defend itself?

Answer 19

yes

Question 20

When can shareholders take action without a meeting?

Answer 20

with the unanimous consent of all shareholders entitled to vote on the action.

Question 21

Voting Trust

Answer 21

a written agreement of shareholders under which all the shares owned by the parties to the agreement are transferred to a trustee, who votes the shares and distributes the dividends in accordance with the provisions of the voting trust agreement.

Question 22

How long is a voting trust valid?

Answer 22

10 years unless extended by agreement of the parties

Question 23

Voting Agreement

Answer 23

a written and signed agreement providing for the manner in which they will vote their shares. It is specifically enforceable.

Question 24

Shareholder Management Agreements

Answer 24

agreements amongst the shareholders regarding almost any aspect of the exercise of corporate power.

Question 25

For a shareholder management agreement to be valid, what must be present?

Answer 25

the agreement must be included in the articles, bylaws, or a written agreement approved by all persons who are shareholders at the time of its adoption.

Question 26

How long are shareholder management agreements valid?

Answer 26

10 years unless otherwise provided.

Question 27

What will terminate a shareholder management agreement?

Answer 27

the listing of the corporation on a national securities exchange.

Question 28

Stock transfer restrictions must be _____________.

Answer 28

reasonable

Question 29

Under RMBCA, shareholders may inspect the corporation’s books, papers, accounting records, shareholder records, etc. when?

Answer 29

upon five days written notice stating a proper purpose.

Question 30

Under RMBCA, what records may a shareholder inspect at any time without prior notice?

Answer 30

the corporation’s articles and bylaws, board resolutions regarding classification of shares, minutes of shareholders’ meetings from the past three years, communications of the corporation, all contact info for directors and officers, and copies of the corporation’s most recent annual report.

Question 31

Under RMBCA, do shareholders have a right to purchase additional stock to maintain their proportional share of the company before the stock is open to the public?

Answer 31

no, unless the articles or bylaws state differently.

Question 32

When can a shareholder bring a direct action against the corporation?

Answer 32

for a breach of a fiduciary duty by the officers or directors.

Question 33

Derivative Action

Answer 33

a suit where a shareholder is asserting the rights of the corporation, not of the shareholder.

Question 34

Recovery in a derivative suit goes to whom?

Answer 34

the corporation

Question 35

In a derivative suit, who is named as the defendant?

Answer 35

the corporation.

Question 36

When does a shareholder have standing to bring a derivative suit?

Answer 36

if the shareholder was a shareholder at the time of the wrongdoing or who became a shareholder through transfer by operation of law.

Question 37

Before filing a derivative action, a shareholder must do what?

Answer 37

make a written demand on the corporation to take suitable action.

Question 38

When will a derivative suit be dismissed on the corporation’s motion?

Answer 38

when a majority of the directors who have no personal interest in the controversy find in good faith after reasonable inquiry that the suit is not in the best interests of the corporation.

Question 39

What form can distributions take?

Answer 39

dividends, redemptions of shares, repurchases of shares, distribution of assets upon liquidation.

Question 40

The decision of whether or not to issue distributions is controlled by whom?

Answer 40

it is at the discretion of the directors.

Question 41

Can shareholders compel a distribution?

Answer 41

no

Question 42

A distribution is not permitted if, after giving it effect, either:

Answer 42

1) the corporation would not be able to pay its debts as they become due in the usual course of business; or 2) the corporation’s total assets would be less than the sum of its total liabilities plus the amount that would be needed, if the corporation were to be dissolved at the time of the distribution.

Question 43

What controls the directors’ abilities to make distributions?

Answer 43

the articles of incorporation.

Question 44

Are distributions of a corporation’s own shares included in the definition of “distribution?”

Answer 44

no

Question 45

Preferred Shares

Answer 45

shares that have a right to be distributed before common shares.

Question 46

Do shareholders have a fiduciary duty to the corporation in which they hold shares?

Answer 46

no

Question 47

Where the corporation has a structure such that shareholders rather than directors manage the operations of the corporation, who is liable?

Answer 47

the managing shareholders

Question 48

Close Corporation

Answer 48

a corporation with few shareholders.

Question 49

What duties do shareholders in a close corporation owe to one another?

Answer 49

the same duties of loyalty and good faith that partners in a a partnership do.

Question 50

Can a controlling shareholder use his control to disadvantage minority shareholders?

Answer 50

no