Basics Flashcards
(51 cards)
Secret Profit Rule
Promoter can’t make secret profits on dealings with corporation. If she does, she’s liable and must account for profit. If profit is disclosed to corporation it’s allowed.
Promoter’s compensation
A promoter can seek compensation/reimbursement for related expenses, but can’t compel corp to pay bc acts weren’t undertaken at corporation’s direction
Ultra vires action
If corporation acts beyond scope of articles, SH can
(1) seek injunction, or
(2) Corp can sue responsible officers/directors and are liable for losses, or
(3) state can dissolve.
Articles of Incorporation
Needs
1) corp name and
2) to be filed with the state.
De jure corporation
If all statutory requirements for incorporation are satisfied, corp is liable for corporate activities
De facto corporation
Corp makes good-faith effort to comply with the incorporation requirements and operates corp without knowing the requirements were not met
Common stock
Basic ownership interest that lets owner vote on corporate governance matters
preferred stock
has preference over other stock with regards to distributions
stock authorization
must be by BOD and/or SH
stock consideration
if adequate, the stock is deemed fully paid and non-assessable
SH preemptive rights
Right of a SH to buy newly issued shares to maintain their proportional ownership share under articles.
Waiver of preemptive rights in writing is irrevocable
securities registration
Required for public offerings of stocks; corp must file a registration with SEC and give buyer with a prospectus
SH suit to compel distribution
SH can sue to enforce his right by proving the existence of funds legally available to pay a distribution and D’s bad faith for refusing to pay distribution
Bylaws
Lawful provisions to manage and regulate a corporations business affairs, not inconsistent with the articles
SH Meeting Notice Requirement
Voting SHs must get notice of time/date/place in a timely manner (no less than 10 days and no more than 60 days) before the meeting; SH may waive notice in writing or by attending the meeting
SH Resolutions
submitted for SH action at SH meeting; cannot bind corp or BOD
unless amending bylaws; can regulate political expenditures
Voting eligibility
generally, only record owners of voting stock can vote; an owner
of voting stock by the end of day on the record date has the right to vote; corp cannot vote its own stock
Quorum requirements
a majority of the votes entitled to be cast on a matter
Cumulative voting for Directors
SHs can cumulate votes to allow minority SHs to elect representatives to BOD
Proxy voting
must be in writing and delivered to corp or its agent
Record inspection
a SH with a proper purpose (relates to SH’s interest) has the right
to inspect and copy corporate records upon five days’ written notice
Direct action
an action to enforce SH rights for breach of fiduciary duty by Director or Officer, based on grounds unrelated to SH’s status
Derivative Action
SH sues on behalf of corp for harm suffered by corp. Requirements:
1. P needs standing at time of wrong, when action is filed, and during litigation.
2, Written demand on BOD unless futile.
3. Can be dismissed if a quorum decide in good faith after reasonable inquiry action isn’t in corp’s best interest
Piercing the corporate veil
SH isn’t personally liable for corporate debts and obligations, but court can “pierce the corporate veil” to hold SH liable
Courts will pierce the corp veil if:
i. SH is acting as the alter ego of corp & injustice results;
ii. Inadequate capitalization at formation, OR
iii. Fraud, avoidance of existing obligations or evasion of statutory provisions.
Liability will be Joint and several.
