Virginia Corporations Flashcards
Enforcement of a restriction on the transfer of stock occurs when:
A transferee who takes the stock with knowledge of a restriction may be subject to this:
When shareholders are granted cumulative voting rights, this is how they vote:
For this voting rights scheme, each shareholder can 1) multiply the number of votes entitled to; 2) by the number of directors to be voted on; and either 3) cast all votes for one director or 4) allocate those votes amongst candidates
Allocation of profits and losses of an LLC are either:
Profits and losses for this are either 1) distributed according to the allocation in the operating agreement or 2) according to each member’s contribution if absent from the agreement
Once a board has authorized a distribution and set sufficient parameters, it may do what with respect to a committee?
A committee may receive authority from this to fix the amount and terms of a distribution
Normally election of a director by the shareholders requires:
Plurality of the votes by a quorum
A committee cannot do these whereas a board of directors can:
A committee cannot adopt/amend/repeal bylaws, or recommend actions requiring shareholder approval, unlike this group:
To form a corporation:
To form this, it must 1) file articles of incorporation with the SCC and pay registration fee, include name of corp, designation that it is a corp, # of authorized shares, and registered agent and office
To form a LLC:
To form this, it must file articles of organization with the SCC and pay registration fee, include name of LLC, designation that it is an LLC, registered agent and office, and principal office.
A court can pierce the corporate veil against shareholders if:
This can occur if the shareholders fail to observe the separateness of the entity and use it to perpetuate fraud or injustice
Corporation makes distributions based on this:
Shareholders make these in the form of dividends per share, by the percentage of ownership interest in the corporation
LLC allocations are based on what?
These are based on the members’ contribution to the entity
An LLC’s manager has more what regarding liability than its members?
This person has more fiduciary duties than the members
A manager of an LLC typically does what as opposed to members?
This person typically has more management rights and decision-making authority over day-to-day operations than members
Promoter is personally liable for:
This person is personally liable for pre-incorporation transactions, even after Corp comes into existence unless subsequent novation, and for fiduciary duties; may be indemnified if no novation, right to reimbursement if Corp receives benefits
Promoter will not be liable if (exception to general rule):
This person will not be liable if 3rd party w/ whom this person makes contact on behalf of Corp knew that incorporation had not occurred
Corporation is not liable for pre-incorporation:
Corporation is not liable for these transactions (even if made for Corp’s benefit), but IS liable if expressly/impliedly adopts contract by accepting benefits of transaction/gives express acceptance of liability of debt
An incorporator is not liable for this:
This person is not liable for contract entered into by promoter
Articles of Incorporation requires:
This must be signed by one incorporator and filed w/SCC & filing fee, must include name/location/shares authorizes/identity of registered agent in VA, may include statement of purpose, may enumerate powers; legal existence begins upon filing & issuance of certificate; failure to attempt to comply may result in class 1 misd
When a corp with narrow stated business purposes engages in activity outside stated purpose, this is considered a:
An ultra vires act is this, and a third party generally cannot escape liability for a transaction of C that is an ultra vires act
Challenges to ultra vires acts:
These are only done by the shareholder, the corporation, or SCC; here, the court may enjoin/set aside Corp’s action and award damages
Amendment of the articles of incorporation may be done:
This may be done by BoD if Corp has no stock; if stock, BoD must adopt and then submit to ShareHs w/ adequate notice and obtain their approval
Personal liability for defective incorporation may be found for a corporation by estoppel in Virginia (NOT de facto Corp): Requires
If there is a good faith effort to incorporate but is defective, a person dealing with an entity as if it were a corporation is estopped from denying its existence & seeking personal liability
Authorization of issuing shares is granted by this party:
The BoD can do this unless otherwise specified in the articles; they remain outstanding until reclaimed/canceled by C.
Form of shares require:
The certificate of this must state name of Corp, that it is incorporated in VA, name of the shareholder, and the number and class of shares
Consideration for shares issued are:
This is value determined by BoD (include cash, promissory note, property etc to pay for); articles may specify minimum par stock to issue, corp may issue but not required
Pre-incorporation stock subscription is irrevocable for:
This is irrevocable for six months from the date of subscription
The articles may grant these to shareholders, but they are not automatic:
A shareholder’s preemptive rights may be what but are not?
For public offerings of stock (securities registration):
For this to occur, must file a registration statement with SEC and provide buyer w/ prospectus
Distribution authorization comes from and may be these:
Power to issue shares to shareholders pro rata and without consideration rests with BoD, unless restricted by articles
Limitations on distributions include:
Corp cannot do this if insolvent or it would make Corp insolvent (insolvency = if payment would prohibit C from paying debts or L>A)
Defendant’s liability for unlawful distributions in violation of duty to care/loyalty:
This holds D personally liables to Corp for amount in excess of lawful amount
Restriction on stock transfers (typically small corps) must:
To do this, must have valid lawful purpose (no undue restraint on alienation), be reasonable (question of fact, but absolute is unreasonable), and enforceable (restriction must be noted on certificate).
Shareholder meeting requirements:
Annual time/place specified in bylaws (primary purp to elect Directors) OR Special - called by any specified in articles or by private corp w/ >35 Shareholders who own 20% of voting shares; written notice no less than 10 no more than 60 days to Shareholders unless waived in writing/by attending meeting
Eligibility to vote:
The owner of voting stock at COB on record date has right to do this; record date is fixed by BoD, cannot be more than 70 days before meeting; co-owner may vote shares, but Corp cannot
Shareholders typically vote for:
These vote for selecting BoD or approving fundamental corporate changes
For shareholders to cast a vote, the number required to be present:
This must be a majority of votes entitled to be cast; articles may set out something different, but cannot be less than 1/3rd
Plurality voting for Directors:
In this voting scheme for Directors, this nominee that receives the most votes wins
Cumulative voting for Directors must be provided in the articles and if permitted:
In this voting scheme for Directors (if permitted), each shareholder can multiply votes cast by number of directors to be elected and may distribute/put all votes on one candidate; must provide notice to Corp of intent to use this scheme/proxy statement conspicuously authorizing the same
For proxy voting to occur for a shareholder:
For this, it must be in writing and delivered to the Corporation or its agent; valid for 11 months
Voting trusts are this: (After Jul 2015, time limit must be):
These are shareholders’ shares transferred to trustee who votes the shares and distributes dividends according to trust terms; must specify duration in agreement after 2015
A pooling agreement requires:
This requires a signed agreement between 2 or more shareholders to vote in a particular manner; no separation of legal/equitable title, and may be specifically enforced
Without restriction, Shareholder of record can inspect/copy:
Shareholder of record can inspect/record articles & bylaws, annual report, conact details of directors/officers, minutes of meetings, and certain BoD resolutions when/how?
With PROPER PURPOSE, Shareholder can inspect/copy:
Shareholder can inspect/copy corporate records directly related to this if Shareholder for 6 months or record/beneficial owner owner of at least 5% outstanding shares
Corporation must deliver financial statements for most recent year when?
This record inspection must be done by corporation upon Shareholder’s written request
Direct action of Shareholder vs. Derivative
This for a shareholder is brought to enforce their rights for breach of fiduciary duty by director/officer of corporation vs. being brought on behalf of corporation for harm suffered by corporation (recovery to C)
For a shareholder to have standing in a derivative action:
For this to occur, must have been/became by operation of law a shareholder at time of act/omission, or became SH before pub disclosure w/out notice of act/ommission; must be SH when demand made and fairly/adequately represent C’s interests
A corporation can move to dismiss a derivative action if:
This may occur if disinterested directors submit short explanatory statement after adequately reviewing allegations & determining in good faith that suit was not in C’s best interest
When piercing the corporate veil, C’s existence is ignored and:
When this occurs for liability, SH’s are held personally liable; typically applied when SH’s control/use C to evade personal obligation/perpetuate crime/fraud/commit an injustice
An individual being the sole SH/Direct/Off in the Corp is not by itself:
This is not by itself grounds for veil piercing; failure to hold corporate meetings/records cannot justify piercing
If parent C owns all of sub C’s shares, the corporate veil:
If this scenario is present, the corporate veil cannot be pierced to reach parent except when it could be pierced to reach an individual SH
Inadequate capitalization is a factor to be considered, not:
This is not a a sufficient ground on its own for piercing
SH is not permitted to do this to corporate veil; the more likely piercer is:
This person cannot pierce the corporate veil for personal benefit; this person is tort claimant is one who has not willingly entered into a transaction with C
Management of C can be made inconsistent to statute by:
All SHs at time of agreement may agree to do this if noted conspicuously on certificate/in SH info; becomes ineffective upon C becoming public
Composition of BoD requires:
This can have as few as 1, w/ #/range set by articles or bylaws, must be natural person w/ quals set in articles or bylaws; need not be VA resident
Term of BoD members is:
This is typically 1 year, may be longer if terms staggered, no longer than 3; can be removed by SH’s w/ or w/out cause unless articles say otherwise; Direct may resign anytime w/ written notice to BoD, ,chair or secretary
A court may remove a Director if:
This may occur if in best interests of C and the Director committed fraud vs. C or its SHs/grossly abused position, or intentionally harmed C
SHs are only entitled to notice of these types of meetings:
These are only entitled to notice of special meetings
BoD can act w/out meeting by:
This may occur by signing consent describing action to be taken
Voting requires quorum rules of D to be present, and may:
This may be higher/lower depending on bylaws, but no less than 1/3rd
Assent of majority of directors present at time of vote is necessary for this:
This is required for board approval, with statute/articles/bylaws able to set higher
Director dissent to voting requires:
This person must 1) object to holding of the meeting, 2) vote against the action or abstain from voting or 3) properly deliver written notice of D’s dissent
Director voting agreements are unenforceable and:
These are unenforceable as each Director must exercise independent judgement; may not vote by proxy unless, for private Cs, otherwise provided for in SH’s agreement
BoD may generally exercise power through committee but cannot:
This is general for BoD unless articles or bylaws provide otherwise, cannot authorize distributions, propose action requiring SH approval, approve plan of merger not requiring SH approval, fill vacancies on BD or committee, amend articles, adopt/amend/appeak bylaws, authorize sale of shares
Director must discharge duties in accordance with (no liability if they satisfy):
This must occur with good faith business judgement of best interests of corporation; no liability if they satisfy
Business judgement rule is a rebuttable presumption that:
This is a rebuttable presumption that D acted properly & in good faith in exercise of business judgement; overcome by showing of self-dealing, fraud, bad faith
Director is not liable for breach of duty of care if:
Director is not this if undertaken in good faith (subjective standard)
For duty of care, director may rely on information of opinions of officers/employees/attorneys/accountants/other experts/committees if:
For this to be done, D must reasonably believe these people to be reliable or competent
A director’s absence from a meeting/dissent on record are:
These are defenses to alleged breach of duty of care to C
Duty of loyalty requires Director to:
This requires director to act in manner that Direct reasonably believes in best interest of C
Self-dealing is where a D who engages in this:
This is where D engages in a conflict-of-interest transaction w/ his own Corp violates duty of loyalty (CANNOT profit at C’s expense!)
A transaction is voidable unless:
This is voidable unless disclosure of all material facts & BoD/Committee approved transaction, SHs were aware of material facts & approved transaction OR transaction was fair to C (AKA either outcome the same despite dealing or ratified by information)
Whether or not a transaction is fair to a corporation: must determine:
To do this, must determine whether 1) transaction would have been approved by a disinterested BoD, or 2) same result would have been accomplished between 2 parties of same economic bargaining power not acting under duress
A disinterested director is one who:
This person is one who has no financial interest in matter or relationship that would reasonably impair objectivity of D’s judgement
Usurpation of corporate opportunity to be present unless:
For this to occur, D must fail to first offer opportunity to Corp; may be protected by safe harbor provisions if 1st approved by BoD or SHs
A D who engages in a business venture that competes with C does this:
This is a breach of duty of loyalty to C.
Director has this duty with regard to corporate assets
This person has duty not to wast corporate assets
