Corporations Flashcards

Question

Directors and Officers

Answer 1

Natural person at least 18 Board of directors may fix the compensation of the directors unless the articles of incorporation or the bylaws state otherwise *Sale or transfer of assets in the ordinary course of business does not require BOD or SH approval*

Answer 2

Each director has term that expires at the next annual meeting unless staggered Default: Directors can be removed without cause --- AOI may require cause A director may be removed at a meeting of the shareholders, provided that the notice of the meeting states that removal of the director is the purpose, or one of the purposes, of the meeting. a director elected by a voting class of stock can only be removed by that same class _A DIRECTOR CANNOT REMOVE A DIRECTOR_ – only by Shareholders or judicial proceedings

Answer 3

Quorum: majority of directors authorized in AOI/bylaws (i.e., AOI provides for 10 directors --- 4 have died and 6 remain --- still need 6 for quorum) May increase but cannot reduce to less than 1/3 directors required in AOI (i.e., 10 directors cannot require less than 3 directors) Votes required to pass: MAJORITY PRESENT (i.e., 20 total members on Board: Need 11 for quorum and if 11 constitutes quorum need 6 yes votes to pass) Director must be present during a vote in order to be counted for quorum purposes President of Corp. has the power to call a special meeting of BOD

Answer 4

**Board of directors must hold** a meeting in order to authorize a corporate action. The BOD may act without a meeting through the written consent of the directors, this option is only available *_if all directors consent to the action._*

Answer 5

A director is entitled to inspect and copy corporate books, records, and other documents for ***_any proper purpose related to the performance of her duty as a director_*** When the corporation refuses to grant the director access to these items, the director can seek a court order to enforce this right.

Answer 6

Regular meeting: no notice Special meeting: 2 days with date, time, and place No purpose for special meeting

Answer 7

Director may be liable for action taken at a board meeting even without voting.

Answer 8

Duty of Care/Business Judgement Rule: Director is only liable for breach of duty of care for abuse of discretion, bad faith, fraud, illegality. Self-Dealing 1. May be allowed if the terms are fair to the corp. 2. Burden is on Directors to show the conflict is fair Unless: 1. Majority of disinterested directors approve; OR 2. Majority of disinterested SH’s approve Committee The BOD may authorize a committee of one to perform a management function. 1 person committee = ok (unless derivative investigation)

Answer 9

No indemnification of a director if he is found guilty of a crime, unless director has reasonable cause to believe the conduct was lawful or had no reasonable cause to believe the conduct was unlawful. Indemnification is required if a director is successful in defending against the suit. Indemnification is permitted if the actions are in good faith and the director acted in a manner he or she reasonably believed to be in, or not opposed to, the best interests of the corporation

Answer 10

Two or more corps merging together Directors of both companies must approve SH’s of both companies must approve Default: simple majority of all outstanding shares entitled to vote _SH approval of merger not required if_ 1. Corp. survives merger 2. AOI will remain the same 1. SH’s will hold the same number of shares and have the same rights after the merger Merger docs must be filed with the State

Answer 11

Merger between parent and subsidiary When Parent company owns at least **_80%_** of the voting power of each class of outstanding stock = SH approval is NOT required.

Answer 12

**Directors must propose the sale and SH must approve the sale** A corporation that acquires the assets of another corporation is not liable for torts of the predecessor corporation – unless specifically assumed

Answer 13

SH entitled to vote on merger may seek appraisal rights (being bought out) Not entitled to “independent evaluation” corp. will offer “fair/full value” if SH does not agree they can counter or court can determine value Must vote no or abstain to trigger appraisal rights NO appraisal rights when SH’s can sell shares in a public market NOTICE: shareholder must notify the corporation in writing of his intent to exercise appraisal rights and deliver the notice before the shareholder vote on the merger is taken Notice to the shareholder to accept appraisal rights is at least 40 days but no more than 60 days

Answer 14

Voluntary – Directors propose and SH’s approve Involuntary 1. Florida Department of Legal Affairs: fraud or abuse of authority 2. By creditor if they have an unsatisfied judgment and the corp. is insolvent – **CREDITOR + INSOLVENCY** 3. SH: directors are deadlocked or SH’s deadlocked 4. Assets being wasted or directors in control acting illegally 5. Directors are acting illegally, oppressively, or fraudulently 6. *_Can sue or defend suits during wind up_*

Answer 15

Articles of Organization – same rules except name must contain LLC Members – LLC must have at least 1 member Adding members requires UNANIMOUS consent

Answer 16

If operating agreement does not allocate how profits and losses will be distributed, they will be distributed according to each member contribution.

Answer 17

Majority-in-interest Member Managed: voting is proportionate to each member percentage of ownership (i.e., if one person owns 60%, they can approve anything) Manager Managed: majority of managers

Answer 18

Member Managed = Default Each member is an agent Fiduciary duties of loyalty and care

Answer 19

The manager is an agent of the LLC for the purposes of its activities and affairs An act of the manager binds the LLC Articles of Org. may provide for manager managed LLC Managers are agents The transfer of a membership interest to another person does not automatically give that person the right to participate in the management of the LLC.

Answer 20

_Duty of Care_ – ordinary negligence = ok Must Refrain from: gross negligence, recklessness, willful or intentional conduct, knowing violation of law **_Fiduciary duties of loyalty and care_** **_DUTY OF LOYALTY CAN BE WAIVED IN OPERATING AGREEMENT_** Duty of Loyalty Hold LLC property in trust No dealing as adverse party No compete with LLC General duty of good faith and fair dealing Operating agreement can alter most duties as long as it is not Manifestly Unreasonable

Answer 21

A judgment creditor of a member of a multi-member LLC has as his only remedy a charging order to receive distributions of the member’s interest Cannot force a sale of an interest in an LLC When the distributions are insufficient the person can force a foreclosure sale of the interest, if single-member LLC. → § Single-member – creditor can foreclose

Answer 22

Disassociation May disassociate at any time (but likely will be sued for damages) Does not automatically trigger buy out right

Answer 23

Name: “Chartered” “Professional Association” “P.A.” “PA” or if limited liability “PLLC” “P.L.L.C” ALL SH’s or members must be a member of the same profession Protects from malpractice by another member by not own malpractice

Answer 24

Cannot have "Company" in name but may have corporation, incorporated, cooperative, or co-op. Consists of **members** instead of SH’s Right to inspect and copy records Right to elect directors A not-for-profit corporation may pay its members, directors, or officers’ reasonable compensation for services rendered No voting rights by members unless provided for in AOI or bylaws _No financial distributions to members_ A charitable trust cannot be converted to a corporation

Answer 25

Pass through taxation if: Less than 100 SH’s Individuals, estates, and certain trusts (no corps or partnerships) Can only have 1 class of stock Requires unanimous SH consent to convert to S-Corporation

Corporations Flashcards

(49 cards)