Quiz for Corporations

act with the care that a prudent person would use with regard to her own business, unless the Articles have limited director liability for a breach of the duty of care.

Corporation is a separate legal person; shareholders are not personally liable for the debts of the corporations (principle of limited liability)

business judgment rule… presumption that directors manage the corporation in good faith and in the best interests of the corporation and their shareholders.

A shareholder of record - based on record date, the voter eligibility cut-off date set by board - any day w/I 70 day period leading up to the meeting.

Shareholder who does not vote in favor of a fundamental change has right to force the corporation to buy her shares at fair value (dissenter may abstain…) - before vote, file written notice of objection/intent to demand payment; do not vote in favor of the proposed change; make prompt written demand to be bought out

State can enjoin ultra vires activities; corporation can sue its own directors and officers personally for losses caused by the ultra vires activities (they've exceeded the scope of their authority as agents of the corporation)

Preferred shares - first (amount of preference); common shares - last and equally; preferred that are participating shares are paid twice; preferred that are cumulative have right to receive unpaid and current years dividends

Shareholders must vote - board alone cannot approve… except no shareholder approval required for "short-form" merger, where parent corp. that owns 90% or more of the stock in its subsidiary merges with the subsidiary

Corporation has power to appoint an expert appraiser to value the shares and the appraisal will be binding on the parties

annual meeting… at least one director slot is open for election; … time and place for the meeting

licensed professionals (i.e., lawyers, accountants, medical professions) may incorporate as a Professional Corporation

liable personally… a defense of good faith reliance on financial officer's representations regarding solvency.

Reliance (investors actually relied on fraud or invested at a market price infected by fraud (= fraud of the market); loss causation (fraud not only induced investors to buy or sell but caused their economic losses)

Contemporaneous stock ownership; must generally make demand on directors that they cause their own corporation to bring suit (before suit can be filed, demand must be made and rejected, or at least 90 days must have passed since demand was made)

Preferred shares - first (amount of preference); common shares - last and equally; preferred that are participating shares are paid twice; preferred that are cumulative have right to receive unpaid and current years dividends

None, except for piercing corporate veil and that controlling shareholders owe fiduciary duty to minority shareholders and are liable for selling corporation to party who LOOTS corporation, unless reasonable measures taken to investigate buyer's reputation/plans for the corporation

reporting corporations

the forum state.

with or without cause.

agents … authorized activities

virtually unlimited power… at any time… breach of contract damages.

They need not exist; they need not be in articles of incorporation

certificate of authority… all information that is required in the articles.

any valid consideration deemed adequate by the board … no par stock.

It must contain some indicia of corporate status

any profit is recoverable by the corporation

does not exist unless expressly granted in articles.

promoter alone is liable on the contract

wins a lawsuit against any party (against the corporation or another party)

manage… delegate management functions… recommends action to the board

certificate of authority… all information that is required in the articles.

virtually unlimited power… at any time… breach of contract damages.

Yes. Proxies are revocable unless labeled irrevocable AND coupled with an interest (e.g., in the shares themselves) (e.g., S gives B the proxy at the same time S sells share to B)

No piercing even if failed to observe formalities, and possible subchapter S Corp. status, meaning deemed partnership for tax purposes, if < 100 shareholders and only one class of stock

Merger (a becomes B); Consolidation (A & B becomes C); Dissolution (A dissolves); Fundamental (not ministerial) Amendment of Articles; Sale (not purchase) of substantially all of corporation's access

a majority vote of independent directors, a majority vote of a committee of at least 2 independent directors, or a majority vote of shares held by independent shareholders.

De jure; de facto - organizers made a good faith, colorable attempt to comply with corporation formalities and have no knowledge of the lack of corporate status

business judgment rule… presumption that directors manage the corporation in good faith and in the best interests of the corporation and their shareholders.

board, president, or holders of at least 10 of voting shares. … special proposals or fundamental corporation changes … describe the special purpose for the meeting

may not receive an unfair benefit to the detriment of the corporation or its shareholders unless there has been material disclosure and independent ratification.