Corporations Flashcards
Who is personally liable for pre-incorporation agreements?
Absent intent to the contrary, a promoter is personally liable for pre-incorporation transactions, even after the corporation comes into existence, unless a subsequent novation releases the promoter from liability.
What is the exception to the general rule that promoters are personally liable for pre-incorporation transactions?
If the third party with whom the promoter makes a contract on behalf of the corporation knew that the incorporation had not occurred, the promoter will not be liable.
How do you form a corporation in VA, and what information must be included?
To form a corporation, one must file the “articles of incorporation” with the state. The articles must include the name, location of principal office in VA, and the # of shares authorized.
What is an ultra vires action, and who has standing to challenge ultra vires acts?
An ultra vires act is an act taken by a corporation that exceeds the scope of its narrow business purpose (if it so choose state one in the AofI). Third parties and creditors generally cannot assert UV acts, but a Shh, the corporation, and the State Corp Commission of Va can.
Who can amend the articles in a corporation that has and has not issued stock, and what notice is required
No stock issued: BoD or incorporators (if no BoD exists)
Stock was issued:
BoD gives notice btwn 25-60 days.
BoD adopts amendment, submits amendment to Shh, Shh’s approve by 2/3 votes entitled to cast.
Do shh’s have a right to dividends?
No. Shh’s do not have an inherent right to dividends. The Board has the power to authorize a distribution of dividends, unless the articles provide otherwise.
What is a 10b-5 action?
A federal cause of action for the fraudulent purchase or sale of any stock or other security (BIDBIRD)
What are the two types of shareholder meetings, and when must notice be given?
Special meetings & Annual meetings.
If fundamental corporate change: 25-60 day notice.
If not, 10-60 day notice.
How can a Shh’s take action, outside of a meeting?
Unanimous written consent
What must you have for a decision made at a shareholder’s meeting to be valid?
A quorum of shares eligible to vote.
Does a shh have a right to inspect and copy corporate books and records?
Yes, generally, for any reason, but a proper purpose is needed for (1) excerpts of meetings, (2) accounting materials in preparation of the corp’s most recent annual financial statements, and (3) the record of the corp’s current shh’s.
