Business Associations Flashcards Preview

Cali Bar > Business Associations > Flashcards

Flashcards in Business Associations Deck (79):
1

What are the requirements of an irrevocable proxy?

1. Must be labeled as such and coupled with an interest

2

How long does a proxy agreement last?

11 months unless otherwise agreed

3

When may a self-dealing transaction be permitted?

Where there is full disclosure and independent ratification

4

What must a corporation do before making a fundamental change?

1. Hold a special meeting
2. Notice shareholders with time date place and reason for meeting

No other business discussed at special meeting

Meeting gives rise to appraisal and dissenters rights

5

What are the requirements for the establishment of a valid proxy agreement?

1. Writing
2. Signed
3. Delivered to corp’s secretary
4. State they are delegating authority to vote

6

What constitutes a fundamental corporate change?

1. Merger
2. Consolidation
3. Amendments to AOI
4. Sale of all or substantially all business assets

7

How much a decision by a board of directors be approved?

1. At a board meeting, with quorum met and a majority vote
2. Unanimous written agreement of the board

8

What happens if a director enters into a transaction where there is a conflict or no approval?

The transaction can be rescinded and the director be liable for losses to the shareholders.

9

What is a de jure corporation?

One that meets requirements, articles of incorporation include

# of shares
Propose of Corp
Register agents name and address
Incorporators name and address
Name of Corp

A pain

10

When is there a de facto corporation?

Corporation could have legally been formed
Attempt at incorporation
Use of corporate power

11

What is a corporation by estoppel?

A person who deals with a business believing it to be a corporation may be estopped from denying corporation status

12

What kind of case does corporation by estoppel apply in?

Contracts
Not torts

13

When can the corporate veil be pierced?

Alter ego
Undercapitalization
Fraud
Estoppel

14

When may the corporate veil be pierced under the fraud theory?

Corp exists for shareholders to avoid existing obligations

15

When may the corporate veil be pierced pursuant to estoppel?

Shareholder represents he will be personally liable for corporate debts

16

What is the deep rock doctrine?

When corporation is insolvent, shareholder claims subordinate to creditors claims

17

What is an ultra vires act?

Corporation acting outside it’s stated propose.

Uv acts generally enforceable.

18

Modernly, when is an ultra vires act at issue?

State moves for dissolution
Corporation sues officer
Shareholder sues to enjoin an act

19

What is a stock subscription agreement?

Subscriber agrees in writing to buy a specified number of stock

20

What is the effect of a post incorporation subscription?

Immediately binds both parties

21

What is the effect of a pre-incorporation subscription?

Irrevocable for six months
Must be accepted by Corp to be valid

22

What must a Corp do before issuing different classes of stock?

Identify limitations of various classes of stock before issuance

23

What type of consideration is not permitted for the exchange of stock?

1. Future services
2. Pre-incorporation services
3. Unsecured debt

24

What is par value?

Minimum issuance price of a stock

25

What are preemptive rights?

Shareholder can maintain percentage ownership when new stock are issued.

Modernly shareholders do not have preemptive rights.

26

What do promoters do?

Before incorporation, they raise capital, contract for a location, materials, equipment

27

Are promoters liable for pre incorporation contracts?

Yes unless parties didn’t intend for it, or there has been a novation

28

Under what theories do promoters have the right to reimbursement?

implied adoption
quasi contract

29

When is a corporation liable for preincorporation contracts?

It adopts the contract
Accepts benefits of the contract

30

What are promoter duties?

Fiduciary
Good faith
No secret profits

31

Must corporations have a director?

At least one, may have more

32

How are board of directors elected?

Initially stated in aoi
Vacancy filled by shareholder vote

33

How are officers chosen?

Appointed by board

34

What is officer authority?

Act on behalf of corporation pursuant to agency law

35

How may a director be removed?

Majority shareholder vote, with or without cause

36

How may an officer be removed?

By the board with or without cause

37

When may a bod take action?

Majority directors present
Properly noticed meeting

38

How must quorum be achieved?

Majority of disinterested directors present

39

How may a director break quorum?

Withdrawing from a meeting

40

May bod vote by proxy?

No, some states allow teleconferencing

41

May bod have voting agreements?

No

42

When may a bod action be valid without a meeting?

Unanimous written consent

43

What duties to directors and officers owe a corporation?

Loyalty
Care
Disclosure

44

What is the bjr?

Directors and officers operate in good faith and best interests of the corporation

45

When may a director or officer act personally on a business opportunity?

First offering it to corp
Full disclosure
Good faith rejection

46

What is the remedy for usurping a corporate opportunity?

Disgorgement of profits

47

What are the rights of directors and officers?

Compensation
Indemnification
Inspection

48

What are general meetings?

Occur 1x year
Most shareholder voting occurs then

49

What are special meetings?

Called upon reasonable notice of

Time
Place
Business tone discussed

50

What are the two types of stock a shareholder can have?

Common
Preferred

51

If articles do not specify, which class of stock has voting rights?

Both common and preferred

52

What is a revocable proxy?

An agency relationship between shareholder and proxy

53

How is shareholder quorum established?

Majority of outstanding shares represented, in person or by proxy

54

How may a shareholder action pass?

Quorum
Majority of votes cast

55

How may a shareholder vote pass for a fundamental corporate change?

Majority vote of all outstanding shares

56

What is straight voting?

Each shareholder casts one vote per share held.

Shareholder with more than 50% vote controls

57

What is cumulative voting?

Shareholder multiplies # of shares by number of directors to be elected, may cast all votes for one or more directors

58

When may a shareholder inspect corporate books?

Upon showing of proper cause

59

What are dividends?

Distribution of cash, property or stock from the corp to the shareholder

60

What are discretionary dividends?

Given at board’s discretion
Can’t be given if leads to insolvency or if not allowed by aoi

61

What is a voting trust?

When a shareholder agrees in writing to transfer shares to a trustee who votes and distributes dividends in accordance with trust

62

When are restrictions on stock transfers upheld?

Where they are reasonable, like right of first refusal

Absolute restrictions not reasonable

Third party bound if had knowledge or restriction conspicuously noted

63

What kind of lawsuits can shareholders bring?

Direct suit
Derivative suit

64

What is a direct suit?

Shareholder brings suit for breach of fiduciary duty to shareholder

65

What is a derivative suit?

Shareholder brings action on behalf of Corp for harm done to Corp

Corp gets recovery, shareholder gets expenses of litigation

66

What qualifies a shareholder to bring a derivative suit?

Own stock at time claim arose and throughout litigation

Make a demand on directors to bring suit or redress injury and demand is rejected or would be futile

67

What duty do shareholders owe to corporations?

Generally, none.

Modernly, controlling shareholders owe a fiduciary duty and minority shareholders owe duty of care and loyalty.

68

What restrictions on a controlling shareholder selling shares to a looter?

Controlling shareholders can’t sell shares to looters if they know buyer intends to harm company

69

May a controlling shareholder sell shares at a premium?

Yes so long as good faith and fair.

Controlling shareholder may not sell controlling shares and receive a personal benefit for the sale of a corporate asset or office

70

Are shareholders liable for the actions of corporations?

No

71

What is a short swing profit?

An insider receives a profit from trading within a six month period.

Applies where corp
1. Listed on national exchange
2. Has $10 mil in assets and 500 shareholders

72

What happens to short swing profits?

Disgorged to the corporation

73

Who is a corporate insider?

Officers
Directors
Shareholders who hold 10% stock

74

What does 10b5 prohibit?

Trading based on non public, corporate information

75

What are the elements of securities fraud?

Intent to defraud
Material misrepresentation or omission
Reliance
Purchase or sale of securities
Interstate commerce

76

How may 10b5 be violated?

Direct trading by insider
Tippers sharing info for personal gain
Tippees
Misappropriators

77

How may an insider avoid a 10b5 violation?

Disclose material, non public information

Or refrain from trading

78

How may a tipper violate 10b5?

Share inside info for personal gain
Need not do the trading himself

79

When is a tippee liable for a 10b5 violation?

Tipper breached fiduciary duty
Tippee knee of breach (scienter)