Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

Business Entities , agencies and Corps > Corporations > Flashcards

Corporations Flashcards

1
Q

Corps - Gral - Rules / Entity/Authority

A
  • Most jdx under RMBCA (2003)
  • Corp as entity that is distinct and separate from shareholders (for liability)
  • Under auhtority of elected Board of directors (BOD)
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

Corps - Formation Process (4 steps)

A

1) Incorporator actions
2) Draft and filing of Articles of Incorporation
3) Held Organization Meeting
4) Draft and file by-laws and initial/annual reports

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

Corps - Incorporator’s liability - Gral Rule

A
  • Jointly and several liability with corp
  • WHEN acting as corp or on its behalf when still not in existence
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

Corps - Incorporator’s liability - Personal Liability Exception

A
  • Personally liable when UNDISCLOSED ppal (corp)
  • UNLESS Corp :
    1) accepts benefit,
    2) implied/express adoption (take and receive as own contract to which there is no previous relation) ,
    3) ratification (confirm/approve/ sanction of previous act done in name of or in behalf of one).
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

Corps - Incorporator - Reimbursement Rules

A
  • No absolute right of reimbursement for time and costs of incorporation
  • HOWEVER BOD can approve payment of prior compensation
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

Corps - Articles of incorporation - Effect

A
  • When filed with secretary of state it BEGINS corporate legal existence
  • Filing as E of compliace with legal conditions of incorporation
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

Corps - Articles of incorporation mandatory content (RINS)

A
  • Registered office + agent (Address for aservice of process)
  • Incorporator(s) name/address
  • Name (“corp”, “company”, “ltd”, “inc”, “co”)
  • Stock info: nr of shares / types of class (distinguish and describe) (relevant in regard with voting power)
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

Corps - Articles of incorporation optional content - Restrictions to director indemnification (FICE)

A

Restriction on provisions for director’s indemnification when:

  • Fiduciary duty breach
  • Intentional wrong doing
  • Criminal Act
  • Excess distribution to shareholders
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

Corp - Articles of incorporation - Ammendment

A

1) Minor matters - by BOD
2) “Significant changes” that affect rights of shareholders - by majority of shareholders

[Requires the filing of restates articles of incorporation]

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

Corps - De iure/De facto Corps /laibility effect

A
  • De Jure: Substantially complies with reqs of incorporation / shareholders usually insulated from personal liability
  • De facto: Failed de Jure but acts in good faith as corp / court might shield shareholders for personal (joint several) liability
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

Corps - Corp by Estoppel Doctrine / Liability effect

A
  • Protects purpotted shareholders when entity fails to meet incorporation reqs
  • 3rd part creditor is estopped from making claims against shareholders, claiming it is not a corp
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

Corp- Organization Meeting required mattters (post filing) (3)

A

1) Stock subscription
2) Distribution of shares
3) Initial board election - must adopt by-laws + ratify/adopt pre-formation contracts

[not necessarily presential]

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

Corp - By-laws content (define/specify) (2)

A

1) Corporate governance rules
2) Number of directors

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

Corp - Report + payment obligations (3)

A

1) Initial report filed with secretary of state with info on officers, directors, registered agent+address, description of nature of business
2) Annual report - with info above + total of authorized/issued/outstanding shares
3) License fee payment

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

Corps - Hierarchy of applicable authorities (4)

A

1st: State corporate law
2nd: Articles of incorporation
3rd: By-laws
4th: corporate resolutions and minutes of meetings

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

Corps - Special rules for closed corps owned by 10-50 in some jdx

A
  • Legal filing reqs (less strict that for open corps)
  • Ownership interest not in shares but in % of total ownership
  • Each member entitled to mgmt
  • Shareholder agreements usually allowed to have first refusal rights
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

Corps - Domestic/Foreign classification (on state of incorporation)

A
  • Domestic: “in-state” incoporation / local law controls corporate governance
  • Foreign: out of state incorporation / requires certificate of authority from secretary of state to “transact business” in state
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

Corp - Factors to determine if company “transacting business” in the state (foreign/domestic)

A

NEXUS TO STATE - activities must be permanent/substantial/continuous (expansive trend for online activities:

  • Enough: fixed permanent facility, active website taking orders
  • Not enough: one time sales by mail , passive website, own property, appear as D in court, borrow money
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

Corp- Effects of being foreign corp (4)

A

1) Must incorporate / registrate as foreign corp by obtaining local license/ certificate of authority
2) Pay tax
3) Appoint in-state agent
4) Subject to application of long-arm statutes for jdx
- Failure to: Corp cant suit in state court (contracts unenforceable)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q

Corp Liability - gral /established by, purpose

A
  • To make effective service to registered agent OR secretary of state if registered agent cannot reasonably located
  • Based on “l_awful corporate purpose_” : Gral rule: corp can engage in ANY lawful purpose UNLESS otherwise specified limited purpose in articles
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
21
Q

Corp Liability - Specific application (contractual/torts)

A

1) Contractual: contracts by officer/agent w/authority or later ratified
2) Vicarious tort liability - respondeat superior

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
22
Q

Corp - Ultra Vires Doctrine

A
  • Argument that contracts beyond scope of corporate power are illegal (breach of by-laws or articles)
  • Defense available for shareholders, corps director/office/agent AND attorney gral
  • Cannot be argued against 3rd party w/out knowledge of “illegality”
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
23
Q

Corps - BOD - Gral /fx, nr, etc

A
  • Fx include: 1) exercise of corporate powers, 2) make strategical decisions, 3) manage officers to secure long term success and profitability TO SHAREHOLDERS
  • At least 1 director
  • State residency is not required
  • Required independency of members of audit, compensation and nomination committees
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
24
Q

Corp - BOD - Agency rule

A

Member of BOD (and officer): Agents of corp only if expressly established in corp articles

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
25
Q

Corps -BOD Election

A
  • Gral rule: by shareholders with 1 share/1 vote
  • Exceptionally:
    1) appointment of director under special circumstances AND/OR
    2) use of “Cumulative Voting Rule”
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
26
Q

Corps - BOD election - “Cumulative Voting Rule”

A
  • Exception to 1share/1vote
  • Applies when there is more than 1 vacancy in BOD
  • Formula: Multiply number of shares owned times the number of vacancies and allocate those votes as pleased in single or mx vacancies) (100 shares and 3 vacancies = 300 votes)
  • Is default system in WA / other states require express option
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
27
Q

Corp- BOD -Methods of removal of directors (2)

A

1) By shareholders: w/ or w/o cause in special meeting + prior notice
2) By court: when finding (4):
a) fraudulent conduct
b) gross abuse of position
c) intentional inflection of harm
d) OR for the best interest of corp

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
28
Q

Corp - Rule on dividends + BOD liability

A

Sole discretional power of BOD

  • potential personal liability of approving director if it causes insolvency of corp
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
29
Q

Corps - BOD Meetings - Gral voting rules

A
  • Approval by simple majority of present directors
  • Ok by phone
  • Directors cannot give voting proxy to another director
  • Directors present deemed to assent with BOD’s decided action (relevant regarding breach of fiduciary duty)
  • Allowed BOD actions w/out meeting when directors sign written consent previously
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
30
Q

Corp - Exceptions to director’s deemed assent when present in BOD meeting (3)

A

1) Dissent/object at beggining of meeting (pre)
2) Dissent/object into minutes (during)
3) Deliver written dissent within reasonable time (post)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
31
Q

Corps - Types of BOD Meetings (2) (+notice reqs)

A

1) Regular: doesnt need notice (unless required by articles) or it can be waived if attendance and dont raise any objection
2) Special: Written special notice of at least 2 days - oral notice ok if allowed by articles/by-laws

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
32
Q

Corp- Notice for special BOD meeting

A

Gral rule: 2 days in written. (oral ok if allowed in by-laws)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
33
Q

Corps - Fiduciary Duties - Gral

A
  • For BOD members, officials, senior execs
  • Duties of care, loyalty, good faith and fair dealing, act on manner reasonably believed to be in the best interest of corp
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
34
Q

Corps - Fiduciary Duties - Standard of care

A

Prudent director would exercise under similar circumstances in carrying its own affairs

  • act in the best interest of corp
  • treat assets as if their own
  • keep private affairs confidential
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
35
Q

Corps - Fiduciary Duties - Specific duties for BOD members

A
  • Stay informed of corp financial status
  • Direct officers
  • Pay attention to corp affairs + due diligence for decision making
  • Obey articles, by-laws, resolutions of the board and policies
36
Q

Corp- Fiduciary duty of directors/officers - Conflicts of interest (CUT) + Fed - to be avoid

A

1) Compete w/corp during their term (“self dealing”)
2) Usurp corp opportunity UNLESS corp rejected it first + after full disclosure of opp + intent
3) Trade secret appropriation (court might consider it as part of “inevitable disclosure doctrine” required for execs who moves to direct competitor)

+

“inside trading” federal restrictions

37
Q

Corps - Fiduciary duties - Conflict of Interests - Legal Remedies (3)

A

1) Transaction “set aside” by court
2) Profit disgorged (forced giving up)
3) Recover of dx by corp from breaching director/exec/officer

38
Q

Corp- Fiduciary duty of directors/officers - Conditions for Interested Transactions (i.e. self dealing, loans from corp) (4)

A

1) Disclosed + recorded in minutes
2) At Market price
3) In fair reasonable terms
4) Approved by majority of non-interested directors/shareholders

39
Q

Corps - Officers - Gral / auhtority, standard of care

A
  • Authorities for day to day business operations
  • Authority as detailed in by-laws
  • Same fiducairy duties as directors, execs AND liable for N performance
40
Q

Corp - Officer appointment/removal

A

By BOD for all positions (President, vice president, secretary, treasurer, etc)

  • removal also at-will at any point w/ or w/out cause
41
Q

Corps - Business Judgment Rule - gral / effect/standard/error

A
  • Presumption that directors/officers have acted with due care and good faith under “prudent business person”.
  • Limits personal liability - rebutal of presumption can result in personal liability

- Usually court upholds business decision when there is no fraud, illegality or self dealing

  • Allows for honest/good faith error of judgment
42
Q

Corp - Business Judgment Rule Rebuttal

A
  • Show director/officer acted with Gross Negligence
43
Q

Corps - Business Judgment Rule - Prudent Business Person Standard - RIS

A

1) Reasonable at time - based on reliance on info by officers, employees, committees, expert opinions
2) In good faith
3) Supported by rational basis after appropriate investigation given the importance of the matter (Protects from honest mistake)

44
Q

Corp - Indemnization Agreement - gral

A
  • Corp to pay dx, legal fees, attorney fees of officer/director/employees personally named as party in suits.
  • WHEN Judgment on the merits and no personal benefit was received by named officer/director/exec
  • Can be subject to vote by shareholders according to by-laws
45
Q

Corp - Exceptions to Indemnization Agreement (FICE)

A
  • Fiduciary duty breach
  • Intentional wrong doing
  • Criminal act
  • Excess distribution to shareholder
46
Q

Stock Shares - Stock Certificate

A
  • Representation of owner’s interest in the corporation
  • Notice to issuing entity when destroyed, lost or wrongfully taken
47
Q

Corps -Stock Shares - Suscription - gral

A
  • Future shareholder’s promise to purchase stock (purchase not required, unlie option, warrant or other type of rights)
  • Gral rule: Irrevocable for 6 months
  • Uniform for each class/series
  • Default treated as any other debt due to corp
48
Q

Corps - Stock Shares - Payment of shares

A
  • Can be in any form allowed by articles of incorporation
  • i.e. $, promissory note, beneftis, past/future services
49
Q

Corp - Stock shares Price

A
  • Decided by board
  • Good faith determination (no fraud)
  • When directors sell, it has to be in prudent manner
50
Q

Corp - Stock shares transfer (Negotiability)

A
  • Completed with presentation of endorsed stock certificate to corp
  • Any restriction must be noted on certificate
51
Q

Corp - Stock Shares - Preemptive Rights

A
  • To maintain proportional ownership interest / can be waived by shareholder
  • On issuance of new shares, shareholder entitled to purchase pro-rata shares
  • Under RMCBA: not unless specified in articles / Other jdx is OK unless provide contrary
52
Q

Corp - Types of shares (4)

A

1) Preferred: w/superior rights
2) Authorized for issuance by nr or class according to articles (any different issuance requires amendment)
3) Outstanding: issued but unredeemed
4) Redeemed: re-purcahsed by own corp for cancellation or potential reissue (held in treasury) - No voting or distribution rights - If cancelled cant be reissued

53
Q

Corps - Type of Shares - Preferred

A
  • With superior rights for dividends and/or liquidation priority
  • Usually w/out voting rights
54
Q

Corps- Shareholder Rights (6)

A

1) Meetings and voting rights
2) Access to records and financial statements
3) Legal Remedies
4) Decision making control/allocation
5) Dissenter and appraisal rights
6) Dividends

55
Q

Corps - Shareholder rights - Meetings Types (2)

A

1) Regular - Once a year w/2 day notice
2) Special

56
Q

Corp- Shareholders Special Meetings - Who call for it?

A
  • Called by BOD OR by 10% of shareholders w/written demand w/specific purpose

OR

  • By Court bc of shareholder seeking remedy because disregard of request for meeting or not holding annual meeting
57
Q

Corp- Shareholders Meetings - Notices

A
  • No less than 10 days no more than 60 days
  • No less than 20 for significant changes affecting shareholder rights (merger, dissolution, susbtantial sale of assets, fundamental changes)
  • No more than 70 to define who gets notice

[ Notice waived if attends meeting and doesnt object to it at its begining)

58
Q

Corps - Shareholders Rights - Business Related Resolutions presented by shareholders

A
  • When they own 1% of outstanding shares OR shares are valued at least at $1K
  • Usually require prior notice
  • Corp make available list of shareholders at least 10 days prior to meeting
59
Q

Corps - Voting - Gral

A
  • In person or by proxy (signed appointment valid for 11 months)
  • Dodd Frank act: Shareholders also get to vote on executive compensation and “golden parachutes”
  • Can also be by electronic transmission
  • There can be action w/out meeting, if all voting shareholders consent by writing
60
Q

Corp- Voting - Shareholders Quorums

A
  • Gral Rule: Simple Majority UNLESS articles require higher (i..e for “significant changes”)
  • Once quorum is established - all actions are authorized, even if shareholder walks out of meeting
61
Q

Corp- Shareholders Voting trust reqs

A
  • written +max 10 years
  • Trustee w/rights to vote on behalf of interest of stock-block group
62
Q

Corps - Records and Financial Records Statements (3)

A

1) Corporate records maintained at ppal office (accounting, list of shareholders, articles, by-laws, minutes)
2) Financial Statements - at least annually within 120 days of closing of fiscal year (balance shhet, income statement)
3) Inspection rights (inspect/copy) relevant records for proper purpose - request with 5 days o court can compel if refusal by corp

63
Q

Corp- Legal Remedies (2)

A

1) Direct Action: when corp has direct negative effect in personal finances of shareholder (i.e. pay certain classes and other not)
2) Derivative Action: by corp bc BOD fails to enforce corporate right - dx for corp

64
Q

Corps - Legal Remedies - Derivative Action / Grounds + Procedure

A
  • Corp as P against BOD for failure to enforce corporate right resulting in dx
  • Shareholder must first submitt writen demand to directors/officers to pursue claim
  • If refusal/undue delay - ater 90 days shareholder can directly initiate action
  • If result of derivative action is substantial benefit of corp - then corp must pay legal expenses
65
Q

Corps - Shareholder Rights - Decision Allocation - Gral

A
  • Ordinary decision: Simple Majority
  • Fundamental Changes: Requires majority of shareholders greater than simple (i.e. 75%) (i.e. dissolution, merger, share exchange, substantial sale of assets, ammend of articles that can impai shareholder’s rights)
66
Q

Corps - Shareholder Rights - Dissent / Appraisal

A
  • To protect minorities dissenting from fundamental changes
  • Right to receive fair value
  • Once paid dissenter loses most of his rights
67
Q

Corps - Shareholder rigths - Dissenter/Appraisal rights - Procedure

A
  • Present written notice of objection + intent to demand appraisal prior to vote
  • Corp has 30 days to pay fair value + accrued interests/dividends ALONG with explanation of price and financial statements
  • Dissenter has 30 days to contest proposed price
  • After 60 days w/out agreement - corp can ask court to determine value
  • If no court involvement, Corp must pay amount required by dissenter
68
Q

Corps - Shareholder Rights - Right to dividends

A
  • Not absolute right
  • Discretional of BOD (even if profitable)
  • Once dividen is declared, corp is obliged to pay them and shareholders are treated unsecured creditor
  • Unless otherwise agreed in articles, all shareholders in same class must receive similar dividend per share
69
Q

Corp- Shareholder Liability - Gral Rule

A

Not liable beyond investment in shares

  • UNLESS:
    1) “pierce of corporate veil” (equitable for fairness and to avoid unjust enrichment, ordered by court) - allow for creditor to sue shareholder directly.
    2) Statutory liability (very narrow exceptions)

[Exception allow to

70
Q

Corp- Shareholder Statutory Liability (3) (very narrow exceptions to gral rule)

A

1) Subscription agreement set amount for liability for shareolders
2) Equitable Insolvency of corp can expose directors/shareholders to creditors
3) Balance Sheet Test: When post-distribution liabilities exceed assets (‘illegal distribution”).

71
Q

Corp- Equitable Veil Piercing reqs (2)

A

1) Corp used to avoid payment duty and intentionally grossly undercapitalized
2) Disregard of corp form to prevent aiding fraud/wrong suffered by innocent injured party

72
Q

Corp liability for debts of other corps (4) CSME

A

1) Concurrent affiliates (integration + cross finances) (i.e. parent and subsidiary with common operation, commingling or confusion of records, assets, personal, etc)
2) Successor Affiliates of bankrupt corp - when new corp benefited from old corp assets
3) “Mere sham”: alter ego: fraud/failure to separate and treat corp and separate entity or disregard of all formalities (i.e. use as piggy bank, commingle funds, bank accounts, etc)
4) Estoppel: intentional + fraudulent mislead of 3rd party to believe entity was the same

73
Q

Corps - Stock-for-stock Statutory Merger

A

Company absorbs all merging entities

74
Q

Corps - Merger - Procedure Reqs (5)

A

1) BOD of both corps agree on plan
2) Disclosure of terms and conditions notice to shareholders of both companies
3) Approval ONLY by target corp shareholders (many states require 2/3, RMCBA simple majority) UNLESS parent company owns 90% or more of subsidiary target corp
4) File Articles of Merger with Secretary of State
5) Since its fundamental change - appraisal right for dissenting shareholders

75
Q

Corp - Consolidation

A
  • New corp created, old corps cease to exist
  • Approval required by shareholder UNLESS parent company owns 90% or more of subsidiary target corp
76
Q

Corps - Holdings and Subsisdiaries - Concepts (3)

A
  • Holding: corp own stock of other companies
  • Subsidiary: majority of shares owned by parent company
  • Brother-sister: corps have common shareholders or corporate parents
77
Q

Corp - Takeover - Reqs for non-hostile (mostly focus on foreign corps) (3)

A

1) Equality: same price per share offered to all shareholders in tender
2) Procedure: bona fide written proposal - BOD responds within 30 days and recommends or not to shareholders
3) “Obtain highest Price” duty for BOD

78
Q

Corps - Dissolution - Gral

A
  • Legal termination
  • Required to terminate corp bc of potential perpetual duration
79
Q

Corp - Dissolution Causes (3)

A

1) Voluntary - surrender of corporate charter (submit articles of dissolution)
2) Administrative - by sec of state
3) Judicial: possible appointment of receiver, custodian

80
Q

Corp - Voluntary Dissolution - 2 situations + next steps

A

1) Shares not issued: By BOD discretionary w/o approval of shareholder
2) Shares issued: BOD passes resolution w/proposal to shareholders - majority vote
- submit Articles of Dissolution to Secretary of States
- then wind up

81
Q

Corp - Voluntary Dissolution - Deadline for creditors to present claim

A
  • 120 days since notice of dissolution (If claim is rejected: 90 days to file suit).
  • 3 years since publication notice for unknown claims.
82
Q

Corps - Voluntary Dissolution - 3rd party claims effects on former shareholders

A
  • Claim can be enforced agaisnt shareholders IF they received corp assets upon dissolution

UNLESS corp show during dissolution to have provided security for interests

83
Q

Corp - Administrative Dissolution by Sec of State - Reasons (3) /Cure/ Retroactive reinstatement

A

1) Non-filing of annual report
2) Non payment of license fees
3) Failure to maintain registered agent/office

[Notice and 60 days to cure deffect]

[If dissolved - 2 years to apply for retroactive reinstatement]

84
Q

Corp - Judicial Dissolution - Possible P’s (2)

A

1) Shareholder
2) Creditor unsatisfied after default judgment.

85
Q

Corp - Judicial Dissolution - Causes for shareholder’s action - FOWD

A
  • Fraud/ Illegal activities by officers/directors
  • Oppression of minority shareholders (i.e. withhold financial info, dilute interests, non-pro rata stock redemption)
  • Waste of assets (i.e. misaplication)
  • Deadlock on BOD/among shareholders creates risk of irreparable harm.

Business Entities , agencies and Corps (7 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions