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Flashcards in Corporations Deck (36)
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1

Promoter liablity exceptions

1. 3rd party knows the C doesn't exist but promises to look to C only for liability

2. Novation w/ 3rd party

2

Corporate liability for pre-incorporation agmts

Not liable, unless: 

- Express adoption

- Implied adoption 

  • w/ full K of K, accepts bennies

3

Lack of good faith effort to incorporate

You are a promoter and personalyl liable 

4

De Facto Corp.

  1. Good faith effort
  2. Operate as if it were a corp
  3. Not know that incorp reqs failed

5

Piercing the corporate veil

"Necessary to prevent fraud, illegality, or acheive equity"

  • Excessive domination
  • Personal vs corporate gain
  • illegal biz or fraud
  • No corporate formalities 
  • Inadequate capitalization

6

Amending the certificate of incorp

Majority of SHs

7

Amending by-laws

  • SHs via majority vote
  • BOD if in articles of incorp

8

SHs entitled to vote on . . . 

  • directors
  • Amendments to articles of incorp
  • sale of all or substantially all of assets
  • Mergers and consolidations
  • Dissolution

9

Adversely affect a class?

They get to vote as a class

10

Revoking a proxy vote

  • request in writing
  • turning in another proxy
  • attending mtg in person
  • Death/Incompetence only if written notice received before proxy vote

11

Irrevocable proxy

1. State so

2. Given to someone w/ a coupled interest

12

Inspection of records

  • During normal biz hours
  • 5 days written notice
  • proper purpose 

NY limits records to:

  • MInutes of SH mtgs
  • List of SHs of record

13

Demand upon bd 

Not required if:

  • Futile
  • self interest or otherwise harming the corp

14

Removing a director

  • For cause by SH

- self- dealing

- waste

- usurping corp opps

  • W/o cause by SH

- if allowed in articles or SH approved by-law

  • Directors for cause 

- if allowed in SH by laws

15

Fidiciary Duties

  1. DUty of care
  2. Duty of loyalty 

- self-dealing

- usurpation

- entrenchment 

16

NY Interested director cleansing statute

  1. Conflict disclosed and approved (via normal process) by bd w/o counting interested Ds
  2. Conflict disclosed and disinterested Ds approved unanimously 
  3. Conflict disclosed to SHs, and they approve by majority 

17

Saving an interested Director deal

1. NY saving statute

2. Otherwise fair and reasonable 

- look to see if corp received something of comparable value

18

Usupration of corp opp

1. Tangible expectancy test

- existing interest

-expectancy 

- actively seeking

2. Line of business test

- broader

- w/n current/expected line of business

19

Director indemnification

1. Mandatory

-successful defense 

- ct ordered

2. Permissive -

 - good faith

- no reasonable belief that conduct was unlawful

3. Probited -

 SH derivative suit

20

Procedure for merger

  1. Boards of each corp must approve
  2. SHs of each corp must approve
  3. certificate of merger delivered to NY Dept of State

21

SH approval for merger/asset sale

  • Before 2/22/1998 --> 2/3 of shares
  • After 2/22/98 --> majority

22

Short form merger

If parent owns 90% or more --> merger w/o approval of subsidiary

23

When a buyer becomes liable for seller corp's liabilities

Four situations:
  • Expressly assumes 
  • when asset sale = de facto merger
  • mere continuation
  • designed to defraud seller's creditors

24

Dissenting SH right of appraisal

Three situations:

  • Dissent in merger/consolidation
  • Sale of all or sub all of assets
  • Amendment to article where such amend materially and adversely affects SH

25

Voluntary Corporate Termination

  • SH authorization

- Corp formed B4 2/22/98 --> 2/3 SJ vote

- formed after 2/22/98 --> majority of SH

  • Occurence of event w/n articles

26

Involuntary Corporate Dissolution

  • State 
  • SHs
  • Directors 

27

Involuntary corp termination by state

  • formation was based on fraud
  • engages in illegal or fraudulent business
  • abuse of corp power
  • fails to pay fees/taxes

28

SH involuntary termination of corporation

  • Insufficient assets
  • Beneficial action
  • Deadlock
    • Requires at least 50%
  • Oppressive conduct
    • closely-held corp
    • minority SH owns at least 20%
    • "substantially defeats the reasonable expectations of the minority SH
    • Controlling SHs may "buy out" minority at reasonable price

29

Director involuntary termination of corp

  • Insufficient assets
  • Beneficial action

30

Types of stock

1. Common

2. Preferred (only if articles authorize)