UBE Corporations

Question 1

Req. for incorporation

Answer 1

articles of inc must be filed with the state and if in conflict with the bylaws, the articles control

Question 2

liability prior to incorporation

Answer 2

generally, corp not liable unless it expressly or impliedly adopts/ratifies the k

the promoter (person entering k on behalf of corp) is liable

Question 3

Shareholder definition

Answer 3

only owners, do not manage corp

Question 4

how often to SH meet

Answer 4

generally annually

Question 5

notice req for SH meetings

Answer 5

10-60 days prior

must state time, place, and purpose of meeting

Question 6

SH voting

Answer 6

can vote by proxy or by voting agreement

quorum must be present to vote (majority of all outstanding shares)

Question 7

Directors definition

Answer 7

manage corp and act as a body when voting

Question 8

SH power w/ regard to directors

Answer 8

SH can hire and fire directors

Question 9

flexibility of directors voting?

Answer 9

no can’t vote by proxy or by voting agreement

Question 10

director voting

Answer 10

must have quorum present and can break quorum by leaving (unlike SH)

Question 11

notice req. for director meetings

Answer 11

no notice requirement except for special meetings

Question 12

duties of directors of corps (or members of LLC)

Answer 12

duty of care (BJR) and duty of loyalty

Question 13

duty of care - business judgment rule (BJR)

Answer 13

presumption that in making business decisions, directors act on (1) an informed basis, (2) in good faith, and (3) in honest belief that action was in the best interest of the company

entitled to rely upon info, opinions, reports, etc

party claiming breach of duty of care has burden of proof

Question 14

duty of loyalty

Answer 14

BJR doesn’t apply

director must act in good faith and with reasonable belief that what he does is in the corporation’s best interest

Question 15

3 scenarios where duty of loyalty issues arise

Answer 15

BCC:

1. director on BOTH sides of the transaction (has material financial interest, knowledge of interest, still votes to approve)
2. COMPETES with corp
3. CORPORATE opportunity

Question 16

defenses to liability for breach of duty of loyalty

Answer 16

1. approval by disinterested SH
2. approval by disinterested directors
3. transaction judged to be fair at the time it was entered into

Question 17

duty of loyalty w/ LLCs

Answer 17

LLC operating agreement may waive the duty of loyalty so long as not manifestly unreasonable

Question 18

what vote is needed for resolution to pass at SH meeting

Answer 18

more for than against

Question 19

who can vote at SH meeting

Answer 19

record owner on the record date unless:

SH died (executor can vote)
valid proxy (proxy may vote)

Question 20

how to vote by proxy

Answer 20

SH appoints proxy by signing an appointment form OR making electronically verifiable transmission

cannot orally ask someone to be proxy

Question 21

are proxys revocable

Answer 21

generally yes by any action inconsistent with the grant of proxy is sufficient revocation

EXCEPTION: if explicitly states its irrevocable + interest (ex: sale of shares); usually valid for 11 months

Question 22

what happens when 2 or more proxys granted

Answer 22

the last proxy revokes previous ones

Question 23

when can SH file suit against the corporation

Answer 23

when directors actions are illegal, fraudulent, or willfully unfair or oppressive to EITHER corporation OR SH

Question 24

Types of SH suits against corporation

Answer 24

direct suits and derivative suits

Question 25

direct suits by SH against corp

Answer 25

appropriate when the wrong amounts to a breach of duty owed to the SH personally

Question 26

derivative suits by SH against corp

Answer 26

appropriate when the injury is cause to the CORP and SH is trying to enforce corp’s rights

Question 27

requirements for derivative suits

Answer 27

SAD:

1. must have STANDING
2. ADEQUACY (SH reps interests of corp)
3. DEMAND (SH must filed written demand and wait 90 days before filing suit unless irreparable injury would result

Question 28

awards in derivative suits

Answer 28

goes to the corporation

Question 29

lawsuits against the SH

Answer 29

piercing the corporate veil
generally, law treats corp as entity separate from SH even if 1 SH owns all corp stock
only allowed in close corporations and LLCs

Question 30

what Ps must prove in lawsuit against SH

Answer 30

1. SH of corp (or members of LLC) abused the privilege of incorporating and
2. fairness requires holding them liable

ex: undercapitalization of business, failing to follow formalities, commingling assets, confusion of business affairs, deception of creditors

only those who participated are liable

Question 31

SH rights to inspect corp books and records

Answer 31

right as long as demand is made in (1) good faith and (2) for a proper purpose (reasonably related to address the economic risks to the corp)

Question 32

what SH must state in demand to inspect corporate books and records

Answer 32

1. purpose
2. records desired to inspect
3. how records are directly connected to his purpose

Question 33

LLC formation

Answer 33

articles of organization must be filed

Question 34

Types of LLC management

Answer 34

Member-managed LLC

Manager-managed LLC

Question 35

Member-managed LLC

Answer 35

direct management of LLC by members
members act as agents of corp with actual and apparent authority to bind LLC in ordinary course of business (not extraordinary)

Question 36

Manager-managed LLC

Answer 36

centralized management of LLC by 1 or more managers who need not be members

Question 37

Dissociation in LLC

Answer 37

if member leaves, then leads to dissaciation of that member but does not lead to winding up or dissolution unless other members unanimously agree to dissolve the LLC

Question 38

LLC member liability

Answer 38

generally not liable for losses
liable if court decides to pierce the corp veil or if proper procedures for dissolutiona dnw inding up have not been followed