Texas Corporations

Question 1

Duty of Care Standard

Answer 1

A director owes a duty of care to the corporation. She must act in good faith and exercise ordinary care and prudence. She must do what a prudent person would do under the circumstances. This is a non-delegable fiduciary duty.

Question 2

BJR

Answer 2

BJR is a presumption that when the board took the act, it did appropriate homework. A director is not a guarantor of success.

Question 3

Duty of Loyalty Standard

Answer 3

A director owes the corporation a duty of loyalty. She must act in good faith and with a reasonable belief that her act is in the corporation’s best interest.

Question 4

Corporate Opportunity

Answer 4

Director cannot usurp a corporate opportunity

Question 5

Competing Ventures

Answer 5

You cannot compete without approval from a majority of disinterested directors.

Question 6

Director Defenses

Answer 6

Absent from the meeting; Dissented in writing in the corporate records; good faith reliance on information given to you

Question 7

2 Ways Board can take action

Answer 7

(1) Unanimous written consent (email-OK)

(2) Meeting that satisfies quorum and voting requirements

Question 8

Defective Incorporation

Answer 8

The proprietors failed to form a de jure corporation, so they will be personally liable for what they business does (because its just a partnership). Under these doctrines, the business is treated as a corporation, so shareholders are not liable for what the business did.

Question 9

Texas Corporations Introduction

Answer 9

All Texas Corporations are governed by the Texas Business Organizations Code (TBOC).

Question 10

Pre-Emptive Right

Answer 10

The right of an existing shareholder of common stock to maintain her percentage ownership by buying stock whenever there is a new issuance of stock FOR MONEY.

Question 11

Close Corporation

Answer 11

“FRIENDS WITH BENEFITS”

File a certificate that says “this is a close corporation”

Want a shareholders agreement then must public notice this fact by filing with the SOS

Benefits are increased flexibility and informality.

Question 12

When is recession available

Answer 12

For nondisclosure of a shareholders agreement. A purchase of shares who does not know at the time of purchase of the existence of a shareholders agreement is entitled to rescission. A purchaser is deemed to know if the agreement is noted on the share certificate.

Question 13

Inspect the Books and Records

Answer 13

5% or more of outstanding shares or 6 months more of ownership.