Business Association Flashcards
1
Q
Corporation formation
A
- Formation
- de jure corporation: file articles of incorporation: (A PAIN)
- - authorized shares
- - purpose
- - agent name/address
- - incorporator name/address
- - name of corporation
- de facto corporation: actual use, but good faith unsuccessful incorporation
- corporation by estoppel - Pierce corporate veil: active shareholders personally liable, usually tort
- alter ego
- undercapitalization at time of formation
- fraud
- estoppel - Ultra vires
- act outside business purpose - Shares of stock issued
- subscription agreement: subscriber agrees to buy specific number of shares
- par value: minimum issuance price per share
- no par: no minimum
- treasury stock: previously issued stock bought back, treated like no par stock
- no preemptive right for existing shareholder - Promoters: acting on behalf of corp. not yet formed
- liability for contracts
- - personally liable unless both parties intended otherwise
- - right of reimbursement based on quasi-contract or implied adoption of K
- - corporation not liable under K unless expressly adopts or accepts benefits
- duties
- - act in good faith with proposed corp.
- - no secret profit
2
Q
Corporate directors and officers
A
- DIrectors
- voted in by shareholders
- removed with or without cause by shareholder vote - Officers
- agents, need express, implied or apparent authority
- appointed by board of directors
- removed with or without cause by board - Board meetings
- directors operate as board to take action
- quorum required of disinterested directors
- no proxy voting
- no voting agreements
- action without meeting only if unanimous written consent of directors - Duty of care (officers and directors)
- reasonable prudent person
- business judgment rule (BJR) presumes:
- - good faith
- - corp’s best interests
- - violated if conduct is unreasonable - Duty of loyalty
- no self-dealing
- - presumed unfair, but
- - conflict can be cured if disclosure, authorized by disinterested board/shareholders and fair
- no usurp corp. opportunity
- - ok if good faith rejection and
- - full disclosure
- - remedy: disgorge profits
- no unfair competition - Duty to disclose material information
- Rights of directors and officers
- compensation
- indemnification
- inspection of corporate records and facilities - Liability of directors and officers
- no personal liability generally
3
Q
Corporate shareholders
A
- Rights of shareholders
- meetings
- voting
- - right to vote by stock type
- - voting by proxy allowed
- - quorum required (majority shares)
- inspection if proper purpose
- dividends - Shareholder agreements
- voting trusts
- voting agreement
- management agreement
- restrictions on stock transfer: ok if reasonable, must have notice of restriction - Shareholder suits
- direct suits
- derivative suit on corp behalf: must own stock at time of harm, make demand on directors if not futile - Shareholder duties
- general rule: no fiduciary duty
- modern trend: controlling shareholders owe a duty care and loyalty (no looting) - Shareholder liability
- general rule: no personal liability
- except: professional corps
4
Q
Federal securities law
A
- Section 16(b): no short-swing (6 mon) profits by insider
- corporation
- - on national exchange, OR
- - $10M assets and 500+ shareholders
- corporate insiders
- - officers and directors
- - 10% shareholders
- trading within 6 months
- remedy: disgorge profits - Section 10b-5: no misrepresentation when trading and no insider trading
- misrepresentation requires
- - intent to defraud, deceive or manipulate
- - material misrepresentations or omission
- - reliance
- - buy or sell securities
- - interstate commerce
- - remedy: disgorge profits
- 10b-5 insiders: 4 ways
- - insider direct trading
- - tipper: giving information w/ improper purpose
- - tippee: receiving information only if scienter
- - misappropriator of inside info w/ duty to corp
- remedy: disgorge profits to company - Sarbanes-Oxley
- enhanced corporate reporting requirements
- increased criminal penalties
5
Q
Corporate fundamental changes
A
- Types of changes
- merger
- stock sale
- asset sale
- conversion of corporate form
- amend bylaws or articles
- dissolution and winding up - Dissenter appraisal rights
6
Q
Agency
A
- Formation (ABC)
- agreement
- benefit of principal
- control of agent
- all contract formalities not required - Principal duties
- as required in contract - Agent duties
- duty of care: business judgment rule
- duty of loyalty: no conflicts
- - no self-dealing
- - no usurp principal opportunity
- - no secret profits
- - no commingling funds
- duty of obedience
- duty to communicate
- express contract duties - Agent is personally liable for 3P contracts only if:
- agent acts with no authority
- principal’s identity unrevealed
- principal’s existence unrevealed - Principal is liable for agent contracts if:
- actual express authority
- actual implied authority, can be terminated by (BLO-CHU):
- - breach of agent’s duty
- - lapse of stated, or reasonable time
- - operation law: death, incapacity, bankruptcy of P
- - changed circumstances
- - happening of specified event
- - unilateral termination by either party
- apparent authority (look at acts b/w P and 3P)
- - notice to 3P required if actual authority terminated
- - written “lingering authority”
- - agent exceeds authority
- ratification by P
- but, if no authority: agent is personally liable - Principal liable for agent torts
- normal tort: liable if tort is within scope of relationship
- - except frolic (sustantial deviation), not mere detour
- independent contractors: not liable (no control of methods), except:
- - ultrahazardous activities
- - nondelegable duties
- - estoppel (hold contractor out as agent)
- intentional torts: not liable, except:
- - specifically authorized (force is authorized)
- - natural result (bouncer)
- - motivated by desire to serve
7
Q
Partnership - general
A
- Formation
- no formalities required
- intent to be co-owners required (look for exchange of something for profit)
- agency-like relationship - Partnership assets
- titled property presumed partnership property if:
- - titled as partner, or
- - purchased with partnership funds
- untitled property
- - partnership funds
- - close relationship
- - listed as an asset in books - Partnership rights
- ownership of property
- equal control
- no right to salary (except for winding up)
- equal right to profit and losses (unless agreement otherwise)
- indemnification - Partner duties
- duty of care (business judgment rule)
- duty of loyalty: no conflicts (no self-dealing, usurping opportunity, secret profits, competition)
- duty to disclose material info re partnership business
- duty to account - Partner relations with 3P
- personal liability for debts
- contract authority
- - actual authority
- - apparent authority
- - estoppel
- torts: joint and severally liable - Partnership liability
- civil liability extends to:
- - contracts within the scope
- - tort within the scope
- - liability is joint and several
- incoming partners
- outgoing partners - Dissociation: partner leaves
- Dissolution: partnership ceases
- Winding up: liquidate and distribute partnership assets
- compensation allowed
- priority of distribution
- - creditors
- - partner loans
- - capital contributions
- - profits and surplus
8
Q
Partnership - limited
A
- Formation: file certificate
- Partner rights and duties
- general: same as general
- limited: no right to act on behalf and owe no duties - Partner liabilities
- general: same as general
- limited: not liable beyond capital contribution - Dissolution: can be prompted by:
- time specified in certificate
- written consent of all
- dissociation of general partner
- judicial decree - Winding up activities
- priority of distribution
- - creditors
- - partners and former partners distributions
- - capital contributions
- - partners under partnership agreement
9
Q
LLP
A
- Formed by filing statement
- LL partners have no personal liability
- Duty of care and loyalty owed
- Dissociation similar to regular partnership
10
Q
LLC
A
- Formed by filing articles of organization
- LLCs have no personal liability
- Management interest not freely transferable (limited liquidity)
- Duty of care and loyalty owed
