BA - Final Study Condensed

Question 1

Duty of loyalty

Answer 1

DOFLI-CUBAS

1. Directors and Officers owe a Fiduciary duty of Loyalty
2. to promote the Interests of the Corporation without regard to personal gain
3. bars Usurping any legitimate Opportunities of the corporation.
4. not Competing
5. not Both sides
6. Approval by disinterested directors or shareholders = safe harbor.

Question 2

Approving conflict of interest transactions (Ratification for breach of duty of loyalty)

Answer 2

1. common law - only majority vote of shareholders could ratify, otherwise voidable by corporation, liable for profits.
2. modernly - ratified by board if fair and honest by disinterested majority;
3. interested can satisfy quorum, but not majority vote.

Question 3

Fairness factors for conflicts of interest

Answer 3

1. adequacy of proposed Consideration;
2. availability of Alternatives
3. Financial position of corporation;
4. Need to enter transaction

CAF-N

Question 4

Duty of disclosure

Answer 4

DOMReL

1. Director or Officer with Material facts;
2. RElevant to proposed transaction before the board;
3. Breach of duty of Loyalty if fails to disclose.

Question 5

Duty of care

Answer 5

DOD-SCOP-AIR

1. presumption that Directors and Officers owe a fiduciary duty to the corporation;
2. must exercise duties with same degree of Diligence, Care, and Skill which
3. an Ordinary Prudent erson would manage their own affairs.
4. Areas include: Attentive to corporate business,
5. Informed on voting matters, and
6. Rational basis for decisions.

Question 6

Business Judgement Rule

Answer 6

DOLLERS-FaDD

1. Directors or Officers
2. Are not Liable for Losses to corporation where
3. they Exercised good faith and
4. Reasonable judgement.
5. safe harbor when Fair; or approved by
6. Disinterested directors; or
7. Disinterested shareholders.

Question 7

Piercing corporate veil (factors)

Answer 7

2 for contract, 1 for tort:
1. Basic formalities not followed;
2. Undercapitalized at formation;
3. Commingling assets;
4. Domination or control by one individual or corporation;
5. Alter ego theory;
6. Formed to commit fraud.
7. Injustice would result.

FUCCAFI

Question 8

Key factors to consider for entity selection

Answer 8

MCLiTT
1. Management;
2. Costs of formation, compliance, and formalities;
3. Liability;
4. Transferability;
5. Taxation.

Question 9

Fundamental change requiring shareholder majority

Answer 9

MADAB

1. Merger & consolidations;
2. Amending articles;
3. Dissolution;
4. Sale of substantially all assets;
5. Bankruptcy.

Question 10

Deadlocks

Answer 10

1. Russian - A submits bid to B who can buy or sell;
2. Texas - A and B submit bids to C, if A is highest, A buys at A’s price;
3. Dutch - A and B submit bids to C, if A is highest, A buys at B’s price.

Question 11

General partnership

Answer 11

2-CoPEJ-WoC-RAD

1. 2+ persons, Co-owners, for Profit
2. Evidenced by Joint liability, profit sharing;
3. Writing Or Capital contributions not required;
4. not Rent, Annuity to Widow, Debt payment.

Question 12

Derivative suit

Answer 12

SAD

1. Standing - owned shares at injury and throughout litigation;
2. Adequacy - represent similarly situated shareholders;
3. Demand - make on board.

Question 13

Agency authority

Answer 13

1. Actual - express or implied, P led A to believe, custom, course of conduct, necessity;
2. Implied - 3P reasonable belief in A’s authority, P’s act or omission.
3. Ratify if A does not have authority, express or implied acceptance of benefits, P has material facts.