Corporations Flashcards
What is required to for dissolution of a corporation?
To dissolve the corporation,
- The majority of the entire board must approve the resolution, not just the directors present.
- After the board adopts the resolution, the resolution is submitted to the shareholders.
- A majority of the shareholders entitled to vote must agree.
- Finally, a certificate of dissolution is filed with the Secretary of State.
What is a derivative action? When is one brought?
A derivative action is brought by a shareholder based on a primary right of the corporation, asserted by the shareholder because of the corporation’s failure to act.
A derivative action is brought by one or more shareholders to enforce a corporate right, or to prevent or remedy a wrong to the corporation where the corporation refuses to take the appropriate actions to protect itself.
It is the rights of the corporation that are sought to be vindicated, and recovery generally goes to the corporate treasury.
What is true regarding the owners of a corporation organized under the Professional Entity Act?
- All owners must be professional service providers licensed in Oklahoma.
- Each owner remains liable for any torts he commits while rendering professional services through the corporation.
No person may be an “owner” or “manager” of a professional entity who is not an individual duly licensed in OK to render the same specific professional service or related services as though for which the entity was formed to provide. The Act does not alter the professional relationship between a person rendering professional services and a person receiving such services. Under ordinary tort law the employee-professional remains liable for any torts he commits.
When is a promoter’s liability extinguished?
A promoter’s liability on a preincorporation contract continues after the corporation is formed,even if the corporation adopts the contract and benefits from it. The promoters’ liability can be extinguished only if there is an ovation—an agreement among the parties releasing the promoter and substituting the corporation.
What are the consequences of not paying the annual franchise tax of a corporation?
Corporations must pay an annual franchise tax to maintain the right to do business in OK.
Failure to do so can result in a suspension of the certificate of incorporation.
What are the effects of a suspension of the corporate certificate for failure to pay franchise tax?
- The corporation is barred from suing or defending any action in OK courts;
- All contracts made by the corporation during the period of its suspension are voidable at the election of the other party;
- The officers and directors are personally liable for all debts incurred by the corporations during the period of suspension,if the debts are incurred with their knowledge.
- ’Tis questionable whether the shareholders are protected from personal liability during the period of suspension.
- A corporation can be reinstated by the payment of the back franchise taxes due plus a small penalty fee.
When is a corporation liable for a preincorporation contract that a promoter signed on behalf of the corporation?
When the corporation expressly or impliedly adopts the contract as its own.
What is the relationship between a promoter and a preincorporation contract?
Since the corporate entity does not exist prior to incorporation, it is not bound on contracts entered into by the promoter in the corporate name. A promoter cannot act as an agent of the corporation prior to incorporation, since an agent cannot bind a nonexistent principal. The corporation may become bound on promoter contracts by adopting them. Adoption may be express or implied. The effect of an adoption is to make the corporation a party to the contract at the time it adopts, although adoption of the contract by the corporation does not of itself relieve the promoter of his liability. An ovation is required to release the promoter from liability.
Explain preemptive rights in Oklahoma corporations.
Shareholders do not have preemptive rights unless there is a special provision inserted in the certificate of incorporation.
When a corporation proposes to issue additional shares of stock, the current shareholders often want to purchase some of the new shares to maintain their proportional voting strength. The common law granted shareholders such rights, known as “preemptive right.”
**Under OK law, a shareholder DOES NOT HAVE ANY PREEMPTIVE RIGHTS UNLESS THERE IS A SPECIAL PROVISION INSERTED IN THE CERTIFICATE OF INCORPORATION.
A preincorporation subscription is irrevocable by the subscriber for ___ from the date of the subscription unless otherwise provided in the terms of the subscription, or unless the corporation or all other subscribers consent to revocation.
Six months.
Subscriptions are agreements to purchase stock. Subscriptions can be made to existing corporations or to corporations to be formed.
Preincorporation subscription agreements are irrevocable for six months from their date unless:
(1) the agreement itself provides the subscription is revocable or irrevocable under specific stated conditions; or
(2) consent to revocation is granted by either the corporation or all other subscribers.
Can duly elected directors be removed by shareholders?
Yes, with or without cause.
When is notice required for shareholder meetings?
Generally, notice of the shareholders’ meetings—special or annual—must be sent to shareholders. Notice must be given not less than 10 or more than 60 days before the meeting date. The notice must state the date, time, and place of meeting.
For special meetings, the purpose(s) for which the meeting is called must also be stated in the notice.
A shareholder may waive notice of a meeting:
(1) in a signed writing executed before or after the meeting; or
(2) by her attendance at the meeting unless she attends for the express purpose of objecting, and does object, at the beginning of the meeting, to the transaction of any business.
