Shareholders & Board of Directors Flashcards
Annual Meeting Requirement
hold once a year, primary purpose is to elect D
Special Meeting Requirement
may be called any shareholder or D that own 10% of voting shares
Will a failure to hold a meeting put the company at stake?
no
What is notice requirement for a meeting?
voting SH must be notified of time, date, place, in a timely manner no less than 10 days and no more than 60 before meeting
What occurs with unanimous written consent?
SH can take any action that would have occurred at a meeting with unanimous written consent
What is eligibility to vote
only record owners of voting stock permitted to vote must be owner of record stock at the close of the business on the record date
C generally cant vote on its own stock
Quorum requirements
majority of the Votes entitled to be cast on a matter
What is cumulative voting
SH can cumulate votes to allow minority SH to elect representatives t D
proxy voting
someone votes on behalf of SH, permitted if notice given and delivered to C or agent
Voting Pool
when SH cote with other SH, a binding agreement SH retain ownership
doesnt need to be filled with C and there is no time limit
Voting Trust
trust where legal ownership of SH stock, trustee votes the shares and distributes in accord with the trust
must be in writing , limited to ten years, filled with C
Management agreement
allows SH to alter the way the C is managed even if the agreement is inconsistent with statutory provisions
Right to inspect records
SH have the right, need to show proper purpose (goes to their interest), inspect and copy corporate records upon 5 days written notice
Direct Suit
action to enforce SH rights because Director breached a duty
or an action based on grounds unrelated to SH status
Derivative actions
SH sues on behalf of C for harm suffered by C
Standing for derivative actions
P must be a SH at the time of the wrong, and the time the action was filled, must continue to be SH during litigation, and fairly and adq. represents C interrest
What are requirements for derivative actions
written demand on board of directors unless it would be futile (futile exception does not apply to RMBCA)
What is standard if demand is rejected?
BJR
can the plaintiff seek reimbursement from the C for reasonable litigation expenses
yes
Can board missed derivative action?
qualified directors decide in good faith after reasonable inquiry that action is not in corporations best interest
Piercing Corporate Viel
a avenue to hold sH liable
use TOC: whether C is being used as facade for dominant SH personal dealing andd whether there is unity of interest and ownership between the C and its members
What factors to consider for piercing veil
undercapitalization, disregard of corporate formalities, using C’s assests as SH owns assests, self- dealing, siphoning funds, using corporate form to avoid statutory requirements
What is controlling SH
someone who holds high enough % of ownership in company to enact changes at the highest level: 50
When will controlling SH have fud. duty
if controlling SH is selling interest to an outsider seeking to eliminate another SH from C or receiving distribution that is denied to other SH
What is duty to disclose
information that RP would consider important in deciding how to vote on transactiion and a duty of fair dealing when purchasing minoirty SH intestest
Requirements
D must be a natural person, can have one or ore, selected at annual SH meeting
term
typically one year but may serve longer
can be removed by SH with or without cause, D may also resign at any time with written ntoice to DB, chair, or C
Meeting requirements
two days notice: date, time, place, purpose for special meetings
regular meetings can be held without notice
they may also act by unanimous written consent
Voting Requirements
asset of a majority of D present is necessary for board approval
- to be valid act, a quorum must have been present
- majority of all D’s in office constitutes quorum
Are pooling agreements permitted
no niether is proxy
Scope of Duty Care
D duty to act with care that a person in like position would reasonably believe appropriate under similar circumstances (objective Standard)
What is reliance protection?
D can rely on information and opinions of others D, experts, attorney, or committee if D reasonably believes them to be reliable
BJR
rebuttable presumption that D reasonably belived his action were in the best interest of C
When does BJR not apply?
when D engages in conflict of interest transaction with C
how to overcome BJR?
must be shown that D did not act in good faith; D was not informed to the extent he reasonably believed was necessary, D had material interest in challenged conduct, D failed to deovte attention to C affairs, D failed to timely investigate
Duty of loayty
breach if D self deals, ursurp oportunity
Indemnity
C is required to indemnify D for any reasonable expenses incurred in successful defense of proceeding against D
C cant indemnify D against liability due to reciept of improper personal benefit
C may do it is unsuccesful defense if D acted in good faith with a reasonable belief that the conduct was C best interest
Does D have right to inspect records?
Yes
Safe Harbor Requirements
majority directors informed about material facts, majority of directors are disinterested shareholder and fairness of transaction
