Corps

Question 1

Who’s is responsible for contract entered into pre corporation?

Answer 1

Promoters are personally liable

Question 2

What must be filed for a corp to exist?

Answer 2

Articles of incorporation

Question 3

What is a de jure corporation?

Answer 3

A corporation that attempted to incorporate and tan a business believing it was incorporated but wasn’t.

Can be treated as a corporation if the organizers:
1) made good faith effort to comply with the incorporation process and
2) have no actual knowledge of a defect on the corporate status

Question 4

What is a corporation by estoppel?

Answer 4

When a 3rd party enters into a contract with the corporation believing it was incorporated then a 3rd party is estoppel from asserting that the corporation was not formed appropriately and thus not held liable.

Question 5

Who determiens the valuation of stock and issues stock?

Answer 5

The board of directors

Question 6

What must shareholders hold an annual meeting primarily for?

Answer 6

Electing directors

Should receive notice no fewer than 10days but no more 60days

Question 7

What is the right to inspect records for shareholders?

Answer 7

May inspect records

1) during normal business hours
2) requires five days notice and
3) must state a proper purpose for inspection (purpose related to their financial interests in the corp)

Question 8

What do shareholders have the right to vote for?

Answer 8

Vote on directors and fundamental corporate changes such as mergers or sale.

Question 9

What is needed for a proxy?

Answer 9

1) be in writing
2) signed by shareholder
3) sent to secretary of the corp
4) authorized by SH to vote the shares and
5) valid for no more than 11 months

Question 10

What is a direct action brought by a shareholder?

Answer 10

Shareholder can sue the corporation for their own benefit (ex: personal wrong)

Damages go to the SH

Question 11

What is a derivative action brought by a SH?

Answer 11

Shareholder may sue on behalf of the corporation against a director or officer.

Must have been a SH at the time the bad acts or omissions occurred.

Claim is in the name or the corporation and recovery belongs to the corporation.

Question 12

What must you do before brining a derogate SH suit?

Answer 12

Send demand to the BOD to act unless FUTILE (ex: action against the board for wrongdoing)

Board has 90 days to act before the SH can file the derivative action
Board can dismiss if not in the corps best interests

Question 13

There is personal liability for shareholders under a corporation unless????

Answer 13

Finding of situation where the corporate veil should be pierced.

Question 14

What is corporate veil piercing based on?

Answer 14

A totality of the circumstances including:

1) under capitalization at formation
2) alter ego - failing to observe corporate formalities between himself and the corporation
3) use of corporate assets as shareholders own
4) self dealing with the corp

Analyze all facts!!!!!

Question 15

What does the BOD do?

Answer 15

Manage and direct the corporations business and affairs

Question 16

The BOD cannot vote by proxy!!!

Question 17

What is needed for a resolution to pass the BOD?

Answer 17

Quorum present and majority vote of those present

Question 18

What is the notice required for special meetings?

Answer 18

2 days notice
Include time, dated, place

A director who does not receive proper notice can object but if they attend the meeting their objection is waived.

Question 19

What do officers do?

Answer 19

Run the corporation on a daily basis

Question 20

What duties are owned my officers?

Answer 20

Duty of loyalty and Duty of care

Question 21

What is the business judgment rule under the duty of care?

Answer 21

Directors and officers are protected by the BJR if there is no fraud illegality or self dealing then courts do not disturb the good faith based business decisions

Question 22

What is the duty of care?

Answer 22

To act with the care that a person in a like position would reasonably believe appropriate under the circumstances

Special skill must be used

Question 23

What is the duty of loyalty?

Answer 23

Must not receive an unfair benefit to the detriment of the corporation without effective disclosure and ratification

Question 24

What do you look for, for violations of the duty of loyalty?

Answer 24

Self dealing
Usurping corporate opportunities

Question 25

What is the safe harbor rule under the Duty of Loyalty?

Answer 25

A self-interested transaction may be upheld if all material facts are disclosed and ratified by:
1) a majority of SH or
2) a majority of directors or
3) showing it was fair to the corp both substantially and procedurally

Question 26

Shareholder ate only owners and do not manage the corporation

Question 27

What does the BJR say?

Answer 27

Creates a presumption that in making business decisions, the directors acted on an informed basis, in good faith and in the honest belief that the action taken was in the best interests of the company

Question 28

LLC can waive the duty of loyalty as long as it’s not unreasonable

Question 29

LLC dissociation does NOT lead to winging up or dissolution unless the other members unanimously agree to dissolve the LLC

Answer 29

LLC tested sometimes in corps or partnership bc it’s new