Barbri Review
Quiz yourself by thinking what should be in
each of the black spaces below before clicking
on it to display the answer.
Help!
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| Organization Of A Corporation- What does it take to form a corporation?; People: Incorporators | Must have one or more;
Executes articles and deliver them to secretary of state;
Can be person or entity
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| Organization Of A Corporation- What does it take to form a corporation?; Paper: Articles of incorporation | Articles are a K b/w corporation and shareholders;
And, K b/w corporation and state
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| Organization Of A Corporation- What does it take to form a corporation?; Paper: Articles of incorporation, Information in articles- Names and address | Corporate name: Corp, co, incor, limited,
Each incorporator,
Initial director,
Name registered agent (legal representative to be served)/address registered office
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| Organization Of A Corporation- What does it take to form a corporation?; Paper: Articles of incorporation, Information in articles- Duration | Presume perpetual existence if nothing is said about duration;
It can last forever
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| Organization Of A Corporation- What does it take to form a corporation?; Paper: Articles of incorporation, Information in articles- Purpose | Generally, must have statement of purpose;
Some states presumed and articles need not say anything
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| Organization Of A Corporation- What does it take to form a corporation?; Paper: Articles of incorporation, Information in articles- Capital structure (stock), definitions | Authorized stock: Maximum number of shares corporation can sell;
Issue stock: Number of shares the corporation actually sells;
Oustanding stock: Shares that have been issued and not reacquired
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| Organization Of A Corporation- What does it take to form a corporation?; Paper: Articles of incorporation, Information in articles- Purpose, Ultra vires K | Common law: ultra vires K (beyond scope of articles) voided beyond company's capacity
Today: ultra vires K are valid, shareholders can seek injunction, responsible managers are liable to corporation for ultra vires loss
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| Organization Of A Corporation- What does it take to form a corporation?; Paper: Articles of incorporation, Information in articles- Capital structure (stock), Articles must include | 1. Authorized stock,
2. Number of shares per class, and
3. Information on voting rights and preference of each class
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| Organization Of A Corporation- What does it take to form a corporation?; Act | Incorporators have notarized articles delivered to Secretary of State and pay required fees;
Once accepted then conclusive proof of valid formation
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| Organization Of A Corporation- What does it take to form a corporation?; Act: De jure corporation | Legal corporation after AoC filed by Secretary of State
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| Organization Of A Corporation- What does it take to form a corporation?; Act: Organizational meeting | After legal corporation created, Board of directors holds organizational meeting, where it selects officers and adopts any bylaws and conduct other appropriate business
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| Organization Of A Corporation- Legal significance of formation of corporation; Internal affairs of a corporation | Roles/duties of directors, officers, shareholders;
Governed by law of state in which corporation is formed
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| Organization Of A Corporation- Legal significance of formation of corporation; Corporation is separate legal person | It can sue, be sued, hold property, be partner in partnership, make charitable contributions, etc.
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| Organization Of A Corporation- Legal significance of formation of corporation; Corporation is separate legal person: Double taxation | Taxed on its profits, taxpayers are taxed on distributions
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| Organization Of A Corporation- Legal significance of formation of corporation; Corporation is separate legal person: S corporation | Form corporation and avoid paying income tax at corporate level;
No more than 100 shareholders, all of whom are human and U.S. citizens/residents;
One class of stock and not publicly traded
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| Organization Of A Corporation- Legal significance of formation of corporation; Liability: Directors or officers | NOT liable for what entity does
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| Organization Of A Corporation- Legal significance of formation of corporation; Liability: Shareholders (owners) | NOT liable for what entity does
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| Organization Of A Corporation- Legal significance of formation of corporation; Limited liability | Shareholders generally are liable only for price of their stock
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| Organization Of A Corporation- Legal significance of formation of corporation; Liability: Who is liable? | The corporation itself
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| Organization Of A Corporation- De facto corporation and corporation by estoppel | Proprietors failed to form de jure corporation, so will be personally liable for what business does;
Business treated as corporation, so shareholders not liable for what business didi;
Anyone asserting either doctrine must be unaware of failure to form
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| Organization Of A Corporation- De facto corporation and corporation by estoppel; De facto corporation: Requirements | 1. There is relevant incorporation statute,
2. Parites made a goof faith, colorable attempt to comply with it, and
3. Some exercise corporate privileges (acting like have corporation)
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| Organization Of A Corporation- De facto corporation and corporation by estoppel; De facto corporation: Doctrine applies | Business treated as corporation for all purposes, except in an action by state (quo warranto)
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| Organization Of A Corporation- De facto corporation and corporation by estoppel; Corporation by estoppel | One who treats business as a corporation may be estopped from denying that it is a corporation
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| Organization Of A Corporation- De facto corporation and corporation by estoppel; Corporation by estoppel: Individual thinks corporation | If think corporation and treat as corporation, they think its corporation, so if not corporation you will lose if you sue b/c estopped to deny business was corporation
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| Organization Of A Corporation- De facto corporation and corporation by estoppel; Corporation by estoppel: Improperly formed corporation | Prevent improperly formed corporation from avoiding liability by saying it was not properly formed
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| Organization Of A Corporation- De facto corporation and corporation by estoppel; Corporation by estoppel: Cases | Applies only is K not tort cases
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| Organization Of A Corporation- De facto corporation and corporation by estoppel; Status | Abolished in many states
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| Organization Of A Corporation- Bylaws | Corporations are not required to have bylaws, but usually do for internal governance;
NOT filed with state
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| Organization Of A Corporation- Bylaws; Adopting | Board at organizational meeting
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| Organization Of A Corporation- Bylaws; Amending or repealing | Shareholders;
In some states, Board also can
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| Organization Of A Corporation- Bylaws; Conflicting with articles | Bylaws internal so articles since it are K with state
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| Organization Of A Corporation- Pre-incoproation Ks; Promoter | Person acting on behalf of corporation not yet formed;
Might enter K on behalf of corporation-not-yet-formed
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| Organization Of A Corporation- Pre-incoproation Ks; Liability of corporation | Corporation is not liable on pre-incorporaiton Ks until it adopts K
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| Organization Of A Corporation- Pre-incoproation Ks; Liability of corporation: Express | Board takes an action adopting K
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| Organization Of A Corporation- Pre-incoproation Ks; Liability of corporation: Implied | If corporation accepts benefit of K
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| Organization Of A Corporation- Pre-incoproation Ks; Liability of promoter | Unless K clearly provides otherwise, the promoter is liable on pre-incorporation Ks until there is novation
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| Organization Of A Corporation- Pre-incoproation Ks; Liability of promoter: Novation | Agreement of promoter, the corporation, and other contracting party that corporation replaces promoter under K
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| Organization Of A Corporation- Pre-incoproation Ks; Liability of promoter: Adoption | Makes corporation liable too, but does not relieve promoter, so both liable
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| Organization Of A Corporation- Foreign corporations | Foreign corporations transacting business in this state must qualify and pay prescribed fees
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| Organization Of A Corporation- Foreign corporations; Incorporated outside state | = Foreign
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| Organization Of A Corporation- Foreign corporations; Transacting business | Regular course of intrastate (not interstate) business activity;
So, doesn't include occasional or sporadic activity in this state, and not simply owning property here
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| Organization Of A Corporation- Foreign corporations; Qualifies | By getting certificate of authority from the Secretary of State;
Gives info from its articles and proves good standing in home state;
Must have registered agent in state and pay fees too
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| Organization Of A Corporation- Foreign corporations; Without qualifying | 1. Civil fine, and
2. Cannot sue in this state (but can be sued and defend)
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| Organization Of A Corporation- Foreign corporations; Qualifies + pays back fees and fines | Then can assert a claim
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| Issuance of Stock- What is an issuance? | Corporation sells its own stock
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| Issuance of Stock- What is an issuance?; Raise capital | Way for corporation to raise capital
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| Issuance of Stock- What is an issuance?; Apply | Only when there is an issuance;
So apply only when corporation is selling its own stock
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| Issuance of Stock- Subscriptions; | Written offers to buy stock from corporation
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| Issuance of Stock- Subscriptions; Revocation of pre-incorporated | Irrevocable for six months, unless it says otherwise or all subscribers agree to let you revoke
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| Issuance of Stock- Subscriptions; Post-incorporation subscriptions | Revocable until acceptance
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| Issuance of Stock- Subscriptions; Corporation and subscriber obligated under subscription agreement | When Board accepts the offer
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| Issuance of Stock- Consideration | What must the corporation receive when it issues stock
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| Issuance of Stock- Consideration; Form of consideration: Permitted | Every state agrees these are permitted-
1. Money (cash/check),
2. Tangible or intangible property,
3. Services already performed for corporation;
Always good
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| Issuance of Stock- Consideration; Form of consideration: Split authority | Some states okay, and others prohibited so using results in unpaid stock-
1. Promissory notes,
2. Future services
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| Issuance of Stock- Consideration; Amount of consideration: Par | "Minimum issuance price"
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| Issuance of Stock- Consideration; Amount of consideration: No par | "No minimum issuance price";
Board of directors set price
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| Issuance of Stock- Consideration; Amount of consideration: Treasury stock | Stock company issues and then reacquired;
Authority but unissued, and corporation then can resell,
If does, board sets an issuance price it wants
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| Issuance of Stock- Consideration; Amount of consideration: Conclusive valuation | Value decided by board;
If made in good faith then conclusive
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| Issuance of Stock- Consideration; Amount of consideration: On bar- Par stock | Watch for watered stock
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| Issuance of Stock- Pre-emptive rights | Right of an existing shareholder to maintain her percentage of ownership by buying stock whenever there is new issuance of stock FOR MONEY (cash or equivalent)
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| Issuance of Stock- Pre-emptive rights; New issuance | Include treasure stock-
Split authority: Some states yes, others no
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| Issuance of Stock- Pre-emptive rights; Articles are silent | No pre-emptive rights in most states
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| Directors and officers- Statutory requirements; Directors | Adult natural person
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| Directors and officers- Statutory requirements; Directors: Number | One or more
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| Directors and officers- Statutory requirements; Directors: Election | Initial directors usually named in articles;
Elected by shareholders at annual meeting;
Entire board elected each year unless "staggered" board (usu set in boards)
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| Directors and officers- Statutory requirements; Directors: Shareholders | Can removed directors before their terms expire;
Vote majority of shares entitled to vote;
Basis: With or without cause
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| Directors and officers- Statutory requirements; Directors: Board vacancy | Director resigns before term is up;
Shareholders elects director for rest of term;
If remove director, must select replacement
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| Directors and officers- Statutory requirements; Directors: Board can act | 1. Unanimous agreement in writing, or
2. At meeting (which has satisfy quorum and voting requirements)-
a. Individual conversation- void unless ratified by valid act,
b. Conference all- valid
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| Directors and officers- Statutory requirements; Directors: Board can act, Notice | Method of giving notice usually set in bylaws-
1. Regular meeting- no notice,
2. Special meeting- yes notice (time/place)
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| Directors and officers- Statutory requirements; Directors: Board can act, Failure to give notice | Voids whatever happened at meeting, unless directors not notified waive notice defect;
Do in writing anytime, or by attending meeting without objecting
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| Directors and officers- Statutory requirements; Directors: Board can act, Proxies | Proxies or enter voting agreements NOT allowed- void
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| Directors and officers- Statutory requirements; Directors: Board can act, Quorum for meetings of board | Must have majority of all directors to do business (unless different percentage is set in bylaws);
If quorum present at meeting, passing resolution requires majority vote of those present;
If people leave quorum can be lost, then Board cannot take act
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| Directors and officers- Role of directors | Generally, board of directors manages business of corporation;
Set policy, supervises officers, declares distributions, determines when stock will be issued, recommends fundamental corporate changes in shareholders, etc.
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| Directors and officers- Role of directors; Delegation | Board can delegate to committee of one or more directors, but committee cannot-
1. Set director compensation, or
2. Declare dividends;
But, can recommend to full board for action
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| Directors and officers- Duty of care | Burden on P
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| Directors and officers- Duty of care; Standard | Director owes corporation of duty of care;
Must act in good faith and do what prudent person would do with regard to own business
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| Directors and officers- Duty of care; Standard: Nonfeasance | Director does nothing;
A prudent person would attend some meetings and do some work, so if not then held liable for breach only if breach caused a loss to the corporation
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| Directors and officers- Duty of care; Standard: Misfeasance | Board does something that hurts corporation, so in these cases causation clear;
Actions caused loss to corporation, but not liable if meets business judgment rule
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| Directors and officers- Duty of care; Standard: Misfeasance, Business judgment rule | Ct will not second-guess business decision if it was made in good faith, was informed, and rational basis;
Director is not guarantor of success
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| Directors and officers- Duty of loyalty | Burden on D
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| Directors and officers- Duty of loyalty; Standard | Director owed corporation duty of loyalty;
Must act in good faith and with reasonable belief that what she does is in the corporation's best interest
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| Directors and officers- Duty of loyalty; Standard: No business judgment rule | Never applies when there is a conflict of interest
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| Directors and officers- Duty of loyalty; Standard: Interested director transaction | Any deal b/w corporation and one of its directors (close relative of director) or another business of director's
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| Directors and officers- Duty of loyalty; Standard: Interested director transaction, Liability | Interested director transaction set aside (or director liable in damages) unless directors shows-
1. Deal fair to corporation when entered, or
2. Interest/relevant fact disclosed/known & deal approved by majority of-
a. Directors,
b. Disinterested sha
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| Directors and officers- Duty of loyalty; Standard: Interested director transaction, Special quorum rule | In many states, interested directors count toward quorum
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| Directors and officers- Duty of loyalty; Standard: Interested director transaction, Approved by appropriate group | Some cts also require a showing of fairness
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| Directors and officers- Duty of loyalty; Standard: Interested director transaction, Compensation | Directors can set their own compensation ad directors/officers, but it must be reasonable and in good faith;
If excessive, its waste of corporate assets, and breach of duty of loyalty
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| Directors and officers- Duty of loyalty; Standard: Competing ventures | Director cannot compete with their corporation
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| Directors and officers- Duty of loyalty; Standard: Competing ventures, Remedy | Constructive trust on profits of new corporation
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| Directors and officers- Duty of loyalty; Standard: Corporate opportunity (expectancy) | Director cannot USURP a corporate opportunity;
Director cannot take it until-
1. Tells board about it, and
2. Waits for board to reject opportunity
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| Directors and officers- Duty of loyalty; Standard: Corporate opportunity (expectancy), Test | 1. Something in corporations business line, or
2. Something company has interest or expectancy in, or
2. What director found on company time on time or with company resources
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| Directors and officers- Duty of loyalty; Standard: Corporate opportunity (expectancy), Defenses | Financial inability to pay for opportunity is probably NOT a defense
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| Directors and officers- Duty of loyalty; Standard: Corporate opportunity (expectancy), Remedy | Must sell it to have corporation at cost;
If sold at profit, corporation gets it
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| Directors and officers- Other state law bases of director liability; Ultra vires act | Responsible officers and directors liable for ultra vires losses
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| Directors and officers- Other state law bases of director liability; Improper distributions | ...
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| Directors and officers- Other state law bases of director liability; Improper loans | Loan that is not reasonably expected to benefit the corporation
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| Directors and officers- Other state law bases of director liability; Which directors are liable for all things directors be liable for?: Presumption | Director presumed to concur with board action unless dissent or abstention is noted in writing in corporate records
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| Directors and officers- Other state law bases of director liability; Which directors are liable for all things directors be liable for?: Presumption, In writing | 1. In minutes,
2. Delivered in writing to presiding officer at meetings, or
3. Written dissent to corporation immediately after meeting;
Oral consent alone NOT effective
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| Directors and officers- Other state law bases of director liability; Which directors are liable for all things directors be liable for?: Presumption, Exceptions | 1. Absent director not liable for stuff done at missed meeting, or
2. Good faith reliance on info (including financial) presented by officer/employee/committee (of which director relying not a member), or professional reasonably believed competent
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| Directors and officers- Other state law bases of director liability; Improper loans: Sarbanes-Oxley Act (federal law, never seen on bar) | Forbids loans to executive in large, publicly-traded corporation;
Require board to establish audit committee/oversee work of registered public accounting firm;
Chief executive/financial officer certify accuracy/completeness of financial reports
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| Directors and officers- Officers | Owe same duties of care and loyalty as directors
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| Directors and officers- Officers; Status | Office are agents of corporation so bind corporation by acts for which they have authority to bind it;
President inherent authority to bind corporation to Ks in ordinary course of business
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| Directors and officers- Officers; Traditionally | President, secretary, treasurer but can have others;
One person can hold all offices at once
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| Directors and officers- Officers; Selection and removal | Officers are selected by and removed by board, which also sets officer compensation;
Shareholders hire/fire directors, but board hires/fires officers
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| Directors and officers- Indemnification of directors and officers | Someone has been sued by (or on behalf) corporation in capacity as officer or director;
Incurred costs, attorney's fees, maybe even fines, judgment or settlement in litigation;
Now seek indemnification (reimbursement) from corporation
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| Directors and officers- Indemnification of directors and officers; No indemnification allowed | Corporation barred form indemnifying if held liable to corporation or received an improper personal benefit
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| Directors and officers- Indemnification of directors and officers; Mandatory | Corporation must indemnify person if successful in defending, on merits or otherwise (win's a judgment)
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| Directors and officers- Indemnification of directors and officers; Permissive | Corporation may indemnify
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| Directors and officers- Indemnification of directors and officers; Permissive: Eligibility standards | Must show acted in good faith and with reasonable belief that actions were in company's best interest;
Eligibility: Disinterested directors or disinterested shares or independent legal counsel
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| Directors and officers- Indemnification of directors and officers; Order reimbursement | Ct where director/officer was sued can order reimbursement if it justified in view of all circumstances;
If she held liable to corporation, this is limited to costs and attorney's fees (cannot include judgment)
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| Directors and officers- Indemnification of directors and officers; Eliminate director liability | Articles can eliminated director liability to corporation for damages, but not for intentional misconduct, usurping corporation opportunities, unlawful distributions, or improper personal benefit
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| Directors and officers- Indemnification of directors and officers; Eliminate officer liability | Exculpatory provisions in articles apply to officers-
Some states yes, some states no
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| Shareholders- Do shareholders get to manage the corporation? | Generally NO, since Board manages
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| Shareholders- Do shareholders get to manage the corporation?; Run directly | Shareholders can run corporation directly in close corporation;
Characteristics-
1. Few shareholders,
2. Stock not publicly traded
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| Shareholders- Do shareholders get to manage the corporation?; Eliminate board | If corporation's stock is not traded on national exchange, shareholder can eliminate board and run corporation directly
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| Shareholders- Do shareholders get to manage the corporation?; Eliminate board: How? | 1. In articles and approved by all shareholders, or
2. By unanimous written shareholder agreement;
Either way, agreement should be conspicuously noted on front and back of stock certificates
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| Shareholders- Do shareholders get to manage the corporation?; Eliminate board: Duties of care/loyalty | If eliminated, duties of care and loyalties to corporation owed by managing shareholders
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| Shareholders- Do shareholders get to manage the corporation?; Eliminate board: Fiduciary duties | Shareholders might owe- not to oppress each other;
Especially, controlling shareholders should not oppress minority shareholders (selling control) w/o reasonable investigation of buyer;
If oppression, harmed minority shareholder then sue b/c no way out
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| Shareholders- Do shareholders get to manage the corporation?; Licensing professionals | Lawyers, doctors, CPAs;
May incorporate as "professional corporation" or "professional association";
Name must have one of phrases- PC or PA;
Articles must state that presuppose is to practice in particular profession
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| Shareholders- Do shareholders get to manage the corporation?; Licensing professionals: Directors/officers/shareholders | Usually must be licensed professionals
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| Shareholders- Do shareholders get to manage the corporation?; Licensing professionals: Malpractice | Personally liable for malpractice
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| Shareholders- Do shareholders get to manage the corporation?; Licensing professionals: Shareholders | Not liable for corporate obligations or for other professional's malpractice
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| Shareholders- Do shareholders get to manage the corporation?; Licensing professionals: PC | Generally, governing regular corporations apply to PC
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| Shareholders- Can shareholders be held liable for acts or debts of corporation? | NO b/c corporation is liable for what it does
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| Shareholders- Can shareholders be held liable for acts or debts of corporation?; Personal liability | Might be personally liable for what corporation did if court "pierces the corporate veil" (PCV)
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| Shareholders- Can shareholders be held liable for acts or debts of corporation?; Personal liability: What kind of corporation- | Close corporations ONLY
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| Shareholders- Can shareholders be held liable for acts or debts of corporation?; Personal liability: PCV & hold shareholders personally liable | 1. They must have abused privilege of incorporating, and
2. Fairness must require holding them liable
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| Shareholders- Can shareholders be held liable for acts or debts of corporation?; Personal liability: PCV standard | Cts may PCV to avoid fraud or unfairness;
Sloppy administration generally not enough
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| Shareholders- Can shareholders be held liable for acts or debts of corporation?; Personal liability: Classic fact pattern, Alter ego (identity of interests) | Close corporation. X commingles funds. Using corporate credit card for personal purchases. C corp fails to pay bills.
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| Shareholders- Can shareholders be held liable for acts or debts of corporation?; Personal liability: Classic fact pattern, Under-capitalization | No insurance, but carries and disposes nuclear waste. If truck melts down, can sue corporation?
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| Shareholders- Can shareholders be held liable for acts or debts of corporation?; Personal liability: Classic fact pattern | Cts may be more willing to PCV for tort victim than for K claimant
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| Shareholders- Can shareholders be held liable for acts or debts of corporation?; Personal liability: PCV, Shareholders | PCV to impose liability on shareholders for what should be corporate debt;
Parent corporation forms subsidiary to avoid own obligations since another corporation can be shareholder
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| Shareholders- Shareholder derivative suits (shareholder as P); Derivative suit | Shareholder is suing to enforce corporation's claim, not own personal claim;
Case in which corporation is not pursuing its own claim, so shareholder steps in to prosecute it for corporation;
Ask: Could corporation have brought this suit?
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| Shareholders- Shareholder derivative suits (shareholder as P); Shareholder P wins derivative suit | Money from judgment goes to corporation;
Shareholder P receives costs and attorney fees, usually form judgement won for corporation
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| Shareholders- Shareholder derivative suits (shareholder as P); Shareholder P loses derivative suit | Cannot recover costs and atty fees;
S liable to D for D's costs and atty fees, if sued w/o reasonable cause;
Claim preclusion for other shareholder later suing same D on same transaction
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| Shareholders- Shareholder derivative suits (shareholder as P); Requirements for bringing a shareholder derivative suit: Stock ownership | When claim arose and throughout suit;
Person bringing suit must have owned stock at time claim arose, or got it by operation of law from someone who did have it then (inheritance/divorce decree)
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| Shareholders- Shareholder derivative suits (shareholder as P); Requirements for bringing a shareholder derivative suit: Adequate representation | Corporation's interest
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| Shareholders- Shareholder derivative suits (shareholder as P); Requirements for bringing a shareholder derivative suit: Written demand | Must make on corporation (usu board) that corporation bring suit;
In many state must always make demand, and cannot sue until 90 days after;
But others, no demand if futile (sitting directors D in suit)
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| Shareholders- Shareholder derivative suits (shareholder as P); Requirements for bringing a shareholder derivative suit: Corporation must be joined | As D;
Even though suit asserts corporation's claim, corporation did not do so, so it is joined initially as D
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| Shareholders- Shareholder derivative suits (shareholder as P); Requirements for bringing a shareholder derivative suit: Settle or dismiss | Parties can only with court approval;
Ct may give notice to shareholders and get their input on whether to dismiss or settle
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| Shareholders- Shareholder derivative suits (shareholder as P); Requirements for bringing a shareholder derivative suit: Corporation move to dismiss | Upon showing independent investigation showed suit was not in corporation's best interest;
Investigation must be made by independent director or ct-appointed panel
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| Shareholders- Shareholder derivative suits (shareholder as P); Requirements for bringing a shareholder derivative suit: Corporation move to dismiss- Ruling | In ruling on motion, ct will look to see if those recommending dismissal are independent, and if so dismiss (some states, ct will also make an independent assessment of whether dismissal is in co. best interest)
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| Shareholders- Shareholder voters; Who: G/R | The record shareholder as of the record date has right to vote
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| Shareholders- Shareholder voters; Who: Record shareholder | Person shown as owner in corporate records
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| Shareholders- Shareholder voters; Who: Record date | Voter eligibility cut-off
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| Shareholders- Shareholder voters; Exceptions: Corporation re-acquires stock | Before record date, so it is owner of treasury stock as record date;
Does not vote this stock
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| Shareholders- Shareholder voters; Exceptions: Death of shareholder | Dead people cannot vote
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| Shareholders- Shareholder voters; Exceptions: Proxies | 1. Writing (fax/email),
2. Signed by record shareholder (email identifying sender),
3. Directed to secretary of corporation,
4. Authorizing another to vote shares
🗑
|
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| Shareholders- Shareholder voters; Exceptions: Proxies, Revoking | Allowed
🗑
|
||||
| Shareholders- Shareholder voters; Exceptions: Proxies, Irrevocable proxy | Proxy coupled with an interest then can still revoke-
1. Proxy says its irrevocable, and
2. Proxy holder has some interest in shares other than voting (ownership)
🗑
|
||||
| Shareholders- Shareholder voters; Voting trusts and voting agreements: Requirements for voting trust (10 yr maximum) | 1. Written trust, controlling how shares will be voted,
2. Copy to corporation,
3. Transfer legal title to voting trustee,
4. Original shareholders receive trust certificates and retain all shareholder rights except for voting
🗑
|
||||
| Shareholders- Shareholder voters; Voting trusts and voting agreements: Requirements for voting (pooling) agreement | Shareholders can enter into;
Required-
1. In writing, and
2. Signed;
Split- specifically enforceable- some states yes, other no
🗑
|
||||
| Shareholders- Shareholder voters; Where do shareholder vote? Meeting | Usu. action at meeting;
They can act by unanimous written consent signed by holder of all voting shares (email ok)
🗑
|
||||
| Shareholders- Shareholder voters; Where do shareholder vote? Meeting, Types | 1. Annual: Elect directors, if none held in 15 mos a shareholder can petition ct OT order one (required),
2. Special: Called by board or President or holders of at least 10% voting shares or anyone else authorized in bylaws
🗑
|
||||
| Shareholders- Shareholder voters; Where do shareholder vote? Notice requirement | Must be given notice (fax/email) to every shareholder entitled to vote;
Delivery b/w 10-60 days before meeting
🗑
|
||||
| Shareholders- Shareholder voters; Where do shareholder vote? Notice requirement, Content | Always must state time and place of meeting;
Special= must also state purpose b/c cannot do anything else
🗑
|
||||
| Shareholders- Shareholder voters; Where do shareholder vote? Notice requirement, Consequences for failure | Action taken at meeting is void unless those not sent notice waive notice defect
🗑
|
||||
| Shareholders- Shareholder voters; Where do shareholder vote? Notice requirement, Waiver of notice defect | 1. Express: in writing and signed anytime,
2. Implied: attending meeting w/o objection
🗑
|
||||
| Shareholders- Shareholder voters; How do shareholders vote? | Quorum represented at meeting;
Determination of quorum focuses on number of shares represented, not number of shareholders
🗑
|
||||
| Shareholders- Shareholder voters; How do shareholders vote?: G/R | A quorum requires a majority of outstanding shares
🗑
|
||||
| Shareholders- Shareholder voters; How do shareholders vote?: Shareholder quorum | Is NOT lost if people leave meeting
🗑
|
||||
| Shareholders- Shareholder voters; How do shareholders vote?: Binding corporation | Unless articles or bylaws requires higher vote;
Majority means majority of votes actually cast on proposal, not necessarily majority of all shares present
🗑
|
||||
| Shareholders- Shareholder voters; How and when do shareholders use cumulative voting?: When | Only available when shareholders elect directors, it is a device to give small shareholders a better chance of electing someone to Board;
Majority- Do not have this unless articles say so
🗑
|
||||
| Shareholders- Shareholder voters; How and when do shareholders use cumulative voting?: How | Multiple number of shares times number of directors to be elected
🗑
|
||||
| Shareholders- Stock transfer restrictions; Transferability of ownership interest | Shareholder can sell or give stock away;
Sometimes people want tot restrict, especially in close corporation to keep outsiders out
🗑
|
||||
| Shareholders- Stock transfer restrictions; Right of first refusal | Stock transfer restrictions will be upheld provided they are reasonable under circumstances;
Not an undue restraint on alienation
🗑
|
||||
| Shareholders- Stock transfer restrictions; Not invoked against | Even if restriction is reasonable and thus valid, it cannot be invoked against transferee unless-
1. Conspicuously noted in stock certificate,
2. The transferee had actual knowledge of restriction
🗑
|
||||
| Shareholders- Right of shareholders (personally or by agent) to inspect (and copy) books and records of corporation; Standing | Majority- Any shareholder
🗑
|
||||
| Shareholders- Right of shareholders (personally or by agent) to inspect (and copy) books and records of corporation; Procedure | Shareholder must make written demand stating docs desire and proper purpose for inspection;
Proper purpose: related to role as shareholder
🗑
|
||||
| Shareholders- Right of shareholders (personally or by agent) to inspect (and copy) books and records of corporation; Failure to allow proper inspection | Shareholder seeks ct order;
If wins, can recover costs and atty fees incurred
🗑
|
||||
| Shareholders- Right of shareholders (personally or by agent) to inspect (and copy) books and records of corporation; Directors | Directors do not have to go through procedure to get access;
Have access
🗑
|
||||
| Shareholders- Distributions | Payments by corporation to shareholders
🗑
|
||||
| Shareholders- Distributions; Types | 1. Dividends,
2. To repurchase shareholders stock,
3. Redemption (forced sale to corporation at price set in articles)
🗑
|
||||
| Shareholders- Distributions; Board discretion | No right to distribution until board declares it;
An action to compel declaration of distribution is direct;
To win, must make VERY strong showing of abuse of discretion
🗑
|
||||
| Shareholders- Distributions; Which shareholders get dividends? | Preferred, participating, cumulative, common
🗑
|
||||
| Shareholders- Distributions; Which shareholders get dividends?: Preferred | Pay first
🗑
|
||||
| Shareholders- Distributions; Which shareholders get dividends?: Common stock | Divided by cost
🗑
|
||||
| Shareholders- Distributions; Which shareholders get dividends?: Participating | Pay again;
So paid first b/c preferred, and then paid again because participating
🗑
|
||||
| Shareholders- Distributions; Which shareholders get dividends?: Cumulative | Add them up;
Accrues year-to-year
🗑
|
||||
| Shareholders- Distributions; For any distributions (dividend, repurchase, redemption) which funds can be used?: Traditional view, Earned surplus | Generated by business activity;
Consists of all earnings minus all losses minimum distributions previously paid
🗑
|
||||
| Shareholders- Distributions; For any distributions (dividend, repurchase, redemption) which funds can be used?: Traditional view, State capital | Generated by issuing stock (capital surplus);
When corporation issues stock, it has to allocate proceeds b/w state capital and capital surplus
🗑
|
||||
| Shareholders- Distributions; For any distributions (dividend, repurchase, redemption) which funds can be used?: Traditional view, State capital- On par issuance | Par value goes to state capital;
Excess of part goes to capital surplus
🗑
|
||||
| Shareholders- Distributions; For any distributions (dividend, repurchase, redemption) which funds can be used?: Traditional view, State capital- On no par issuance | Board allocates consideration b/w stated capital and capital surplus
🗑
|
||||
| Shareholders- Distributions; For any distributions (dividend, repurchase, redemption) which funds can be used?: Traditional view, Capital surplus | Generated by issuing stock;
Computed- payments in excess of par plus amounts allocated in no-par issuance
🗑
|
||||
| Shareholders- Distributions; For any distributions (dividend, repurchase, redemption) which funds can be used?: Modern view | Does not look at funds;
Corporation cannot make distribution if it is insolvent or if distribution would render it insolvent
🗑
|
||||
| Shareholders- Distributions; For any distributions (dividend, repurchase, redemption) which funds can be used?: Modern view, Insolvent | Insolvent-
1. Corporation unable to pay its debts as they come due, or
2. Total assets are less than total liabilities (and liabilities include preferential liquidation rights)
🗑
|
||||
| Shareholders- Distributions; Joint and several liability | Directors are jointly and severally liable for improper distributions;
Remember good faith reliance defense
🗑
|
||||
| Shareholders- Distributions; Joint and several liability: Shareholders | Personally liable only if they knew distribution was improper when they received it
🗑
|
||||
| Fundamental Corporate Changes- Characteristics of fundamental corporate exchange; Board cannot do alone, so need- | 1. Board action adopting resolution of fundamental change,
2. Board submits proposal to shareholders w/written notice,
3. Shareholder approval (majority of shares entitled to vote),
4. In most of these changes, we need to deliver doc to Secretary of St
🗑
|
||||
| Fundamental Corporate Changes- Characteristics of fundamental corporate exchange; Dissenting shareholder right of appraisal | Right to force corporation to buy your stock for fair value
🗑
|
||||
| Fundamental Corporate Changes- Characteristics of fundamental corporate exchange; Dissenting shareholder right of appraisal: When | Actions by corporation to trigger right-
1. Merger or consolidation,
2. Transfer of substantially all asset not in ordinary course of business, or
3. Transfer of shares in share exchange
🗑
|
||||
| Fundamental Corporate Changes- Characteristics of fundamental corporate exchange; Dissenting shareholder right of appraisal: Not available | If stock is listed on national exchange or 2,000 or more shareholders;
Makes sense b/c in such corporation there is public market for stock, so unhappy stockholder can sell on market;
Right exists in close corporation
🗑
|
||||
| Fundamental Corporate Changes- Characteristics of fundamental corporate exchange; Dissenting shareholder right of appraisal: What to do to perfect right | 1. Before shareholder vote, file w/corporation written notice of objection & intent to demand payment,
2. Abstain or vote against proposed change,
3. After vote, w/in time set by corporation, make written demand to be bought out & deposit stock w/corp
🗑
|
||||
| Fundamental Corporate Changes- Characteristics of fundamental corporate exchange; Dissenting shareholder right of appraisal: Fair value of shares | If shareholder and corporation cannot agree fair value of shares, ct may appoint appraiser;
Only remedy for fundamental change except for fraud
🗑
|
||||
| Fundamental Corporate Changes- Amendment of articles; Board of director action and notice to shareholder | Must have
🗑
|
||||
| Fundamental Corporate Changes- Amendment of articles; Shareholder approval | Must have
🗑
|
||||
| Fundamental Corporate Changes- Amendment of articles; If approved | Deliver amendment articles to Secretary of State
🗑
|
||||
| Fundamental Corporate Changes- Amendment of articles; Dissenting shareholder right of appraisal | NOT allowed
🗑
|
||||
| Fundamental Corporate Changes- Merger (B merges into A) or consolidation (A and B form C); Board and notice | Need board of director action (both corporations) and notice to shareholders
🗑
|
||||
| Fundamental Corporate Changes- Merger (B merges into A) or consolidation (A and B form C); Shareholders approval | Generally both corporations;
Majority of shares entitled to vote
🗑
|
||||
| Fundamental Corporate Changes- Merger (B merges into A) or consolidation (A and B form C); Short form merger | No shareholder approval required if 90% or more owned subsidiary is merged into parent corporation
🗑
|
||||
| Fundamental Corporate Changes- Merger (B merges into A) or consolidation (A and B form C); If approved | Surviving corporation delivers articles of merger or consolidation to Secretary of state
🗑
|
||||
| Fundamental Corporate Changes- Merger (B merges into A) or consolidation (A and B form C); Right of appraisal | Generally, for shareholder entitled to vote on merger or consolidation and also for shareholders of subsidiary in short former merger
🗑
|
||||
| Fundamental Corporate Changes- Merger (B merges into A) or consolidation (A and B form C); Effect of merger or consolidation: Successor liability | Surviving corporation succeeds to all rights and liabilities of constituents
🗑
|
||||
| Fundamental Corporate Changes- Transfer of all or substantially all of the assets not in the ordinary course of business or share exchange | One company acquires all stock of another
🗑
|
||||
| Fundamental Corporate Changes- Transfer of all or substantially all of the assets not in the ordinary course of business or share exchange; Substantially all of assets | Requires transfer of at least 75% of assets;
Varies state to state
🗑
|
||||
| Fundamental Corporate Changes- Transfer of all or substantially all of the assets not in the ordinary course of business or share exchange; Fundamental corporate change | For seller only corporation (not buyer)
🗑
|
||||
| Fundamental Corporate Changes- Transfer of all or substantially all of the assets not in the ordinary course of business or share exchange; Liability | So company that buys assets is not liable for debts of company that sold assets, unless deal says otherwise or unless company buying assets is merely continuation of selling corporation
🗑
|
||||
| Fundamental Corporate Changes- Dissolution; Voluntary | Board of directors action and approval by majority of shares entitled to vote;
File notice of intent to dissolve with Secretary of state;
Corporation stays in existence to wind up;
Notify creditors so they can make claims
🗑
|
||||
| Fundamental Corporate Changes- Dissolution; Involuntary (by ct order): Shareholder petition if | 1. Director abuse, waste of assets, misconduct,
2. Director deadlock that harms corporations,
3. Shareholder failed at two consecutive annual meetings to fill vacant board position;
Ct could order buy out of objecting shareholder
🗑
|
||||
| Fundamental Corporate Changes- Dissolution; Involuntary (by ct order): Credit petition | Corporation is insolvent and-
1. Has an unsatisfied judgment, or
2. Corporation admits debt in writing
🗑
|
||||
| Fundamental Corporate Changes- Dissolution; Dissolution not end of corporation | Beginning of process that will end corporate existence
🗑
|
||||
| Fundamental Corporate Changes- Dissolution; Wind-up (liquidate) | 1. Gathering all assets,
2. Converting to cash,
3. Paying creditors, and
4. Distributing remainder to shareholder, pro-rata by share unless there is liquidation preference
🗑
|
||||
| Fundamental Corporate Changes- Dissolution; Liquidation preference | Pay first
🗑
|
||||
| Federal Securities Law- Security are investments; Debt securities | Investor lends capital to corporation, to be repaid (usu. interest), as specified in agreement
🗑
|
||||
| Federal Securities Law- Security are investments; Debt securities: Creditor (not owner) | Debt holder's relationship to corporation-
1. Secured by corporate assets ("bond"),
2. Unsecured ("Debenture")
🗑
|
||||
| Federal Securities Law- Security are investments; Equity securities | Investor buys stock from corporation, which generates capital for business
🗑
|
||||
| Federal Securities Law- Security are investments; Equity securities: Owner (not creditor) | Equity holder's relationship to corporation
🗑
|
||||
| Federal Securities Law- Rule 10b-5; Aimed at deceit | Federal law prohibits fraud or misrepresentation (or nondisclosure) in connection with purchase or sale of any security (debt or equity)
🗑
|
||||
| Federal Securities Law- Rule 10b-5; Aimed at deceit: Elements | 1. Instrumentality of interstate commerce,
2. Types-
a. Misrepresentation of material info,
b. Insider trading,
c. Tipping;
3. Materiality,
4. Possible Ps,
5. Possible Ds,
6. Scienter,
7. Reliance
🗑
|
||||
| Federal Securities Law- Rule 10b-5; Aimed at deceit: Elements, Instrumentality of interstate commerce | Mail/telephone/trade on national exchange
🗑
|
||||
| Federal Securities Law- Rule 10b-5; Aimed at deceit: Elements, Types- Misrepresentation | Of material information
🗑
|
||||
| Federal Securities Law- Rule 10b-5; Aimed at deceit: Elements, Types- Insider trading | Trading securities on basis of material inside information;
Someone with relationship of trust and confidence with shareholders;
Insiders cannot trade on secrets
🗑
|
||||
| Federal Securities Law- Rule 10b-5; Aimed at deceit: Elements, Types- Tipping | Insider passes along material inside information for a wrongful purpose
🗑
|
||||
| Federal Securities Law- Rule 10b-5; Aimed at deceit: Elements, Materiality | Misrepresentation or omission must concern a "material" fact-
One reasonable investor would consider important in making an investment decision
🗑
|
||||
| Federal Securities Law- Rule 10b-5; Aimed at deceit: Elements, Possible Ps | 1. Securities and exchange commission,
2. Private action for damages by buyer or seller of securities
🗑
|
||||
| Federal Securities Law- Rule 10b-5; Aimed at deceit: Elements, Possible Ds | Any person included entities;
1. Company issues misleading press release,
2. Buyer or seller of securities who misrepresent material info.,
3. Buyer or seller of securities who trades on material inside info.,
4. Tipper or tippee
🗑
|
||||
| Federal Securities Law- Rule 10b-5; Aimed at deceit: Elements, Scienter | D must have intent to deceive, manipulate or defraud;
Recklessness may suffice
🗑
|
||||
| Federal Securities Law- Rule 10b-5; Aimed at deceit: Elements, Reliance | Said to be separate element, as in fraud cases, but it presumed in public misrepresentation and nondisclosure cases
🗑
|
||||
| Federal Securities Law- Section 16B; Aimed at speculation by directors, officers, and 10% shareholders: Strict liability | Provides for recovery by corporation of profits gained by certain insiders from buyer and selling company's stock;
Bad for market confidence to have insider buyer and selling owner company's stock
🗑
|
||||
| Federal Securities Law- Section 16B; Aimed at speculation by directors, officers, and 10% shareholders: Strict liability, Claim | Derivative suit
🗑
|
||||
| Federal Securities Law- Section 16B; Aimed at speculation by directors, officers, and 10% shareholders: Strict liability, Apply | 1. Reporting corporation,
2. Types of Ds,
3. Types of transactions
🗑
|
||||
| Federal Securities Law- Section 16B; Aimed at speculation by directors, officers, and 10% shareholders: Strict liability, Apply- Reporting corporation | Listed on national exchange, or at least 500 shareholders and $10mill in assets
🗑
|
||||
| Federal Securities Law- Section 16B; Aimed at speculation by directors, officers, and 10% shareholders: Strict liability, Apply- Types of Ds | 1. Director (bought or sold), or
2. Officer (bought or sold), or
3. Shareholders who owns more than 10% (both when bought and sold)
🗑
|
||||
| Federal Securities Law- Section 16B; Aimed at speculation by directors, officers, and 10% shareholders: Strict liability, Apply- Types of transaction | Buyer and selling stock within a single 6 mos period (short-swing trading);
No fraud or inside info needed
🗑
|
||||
| Federal Securities Law- Section 16B; Aimed at speculation by directors, officers, and 10% shareholders: Strict liability, What happens | All profits from such short-swing trading are recoverable by corporation;
If within 6 mos before of after any sale, there was purchase at lower price there is profit
🗑
|
||||
| Federal Securities Law- Section 16B; Aimed at speculation by directors, officers, and 10% shareholders: Strict liability, Key to applying | Focus on sale
🗑
|
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