corporations rule statements

Question 1

ways to recognize a corporation

Answer 1

1. de jure (meets all formalities)
2. de facto- in tort AND contract lawsuits
3. estoppel- CONTRACT lawsuits only

Question 2

forming a valid corporation

Answer 2

Incorporator must file articles of incorp. With sos- must contain:

1. name of the corporation (co., inc., corp., ltd.)
2. number of shares corporation authorized to issue- if classes, number in each class
3. name and address of incorporators
4. name and address of registered agent
5. statement of purpose (not required)- if silent assumed any lawful purpose

if purpose is SPECIFIC, exceeding the purpose is an ultra vires act. co bound against 3rd parties BUT -shareholders can enjoin it -co can sue responsible managers for damages -state can dissolve corp

Question 3

when is the co liable for a contract made before it incorporated? Is the promoter liable?

Answer 3

Happens when a promoter of a corporation not yet formed enters into a k with third party

corporation liable ONLY once adoption of K

Promoter is liable unless:
the contract with the third party says otherwise or
there is a novation where the corporation replaced the corporation as a contract party, even if the corporation has adopted the k

Question 4

distinguishing features of a corporation

Answer 4

*separate legal person- legal entity distinct from owners.
*LIMITED LIABILITY - shareholders, directors, officers not liable for obligations of the corp.; only lose investment. exception- PCV; (only pierce-able in close corp if fraud/abuse and fairness requires) *generally taxed separately from shareholders and shareholders are also taxed- double tax (C corp)
NOTE: S corp is taxed once but must have <100 SH

Question 5

what law governs a corporation?

Answer 5

the law of the state where it is incorporated

Question 6

bylaws v. articles

Answer 6

bylaws are not required and are the operating manual. Adopted by incorporators. They are not filed w/ SOS. Can be amended by shareholders or board.

Articles are required and must be filed.

if bylaws and articles conflict, articles control

Question 7

foreign corporations doing business elsewhere

Answer 7

Foreign means incorporation in another country or state
Doing business is more than owning property in the other state or occasional transactions
must qualify and pay prescribed fees; obtain certificate of authority from SOS

If it does not qualify it cannot sue in the state, but can defend itself

Question 8

consideration for stock

Answer 8

some tangible or intangible property or benefit to co.

common law: could not be less than par and value received had to be held in a specific account

now: board’s good faith valuation is conclusive BUT likely if co sets par price, can’t sell for less

Question 9

subscription

Answer 9

Offer to purchase stock from the corporation
Irrevocable for 6 months if made pre incorporation unless otherwise stated
Revocable until corporation accepts if made post incorporation

Question 10

pre-emptive right

Answer 10

right of a stockholder to maintain existing percentage by buying that percent of any new issuance *majority- articles must state; some states imply one if articles don’t say

Question 11

piercing corporate veil exception to lim liab

Answer 11

Gen rule: SH not liable for co’s obligations BUT Courts may PCV and reach the BAD SH (in close corp) or Parent Company if:
a. abused privilege of incorporating AND
b. Fairness must require holding them liable **Court more milling to PCV for TORT victim (than K claimant who came willingly)

Question 12

DIRECTORS: qualifications, number, role, what they have to do to bind the business

Answer 12

responsible for management of the business and affairs of the corporation. Must be a natural person but bylaws can add more qualifications.

statute only requires one, but usu. more per bylaws

To properly ACT a) unanimous written consent OR b) quorum at meeting + majority of directors present approve
Individually are not agents

Meeting can be done by conference call or zoom- directors must be able to hear each other at same time

Question 13

quorum for board meeting

Answer 13

majority of the board of directors
Or whatever is specified in bylaws but no less than one third
can lose a quorum if people leave. has to be quorum at time of vote

Question 14

shareholders’ rights

Answer 14

1) elect
2) remove directors with or w/o cause
3) inspect articles, bylaws, board resolutions regarding shares, minutes of shareholder meetings, communications to shareholders, list of names and business addresses of corporation’s current directors and officers, copy of most recent annual corporation report
4) inspect board meeting minutes, corporation’s books and accounting records, shareholder records IF THEY STATE A PURPOSE reasonably related to their interest as a shareholder
5) bring suit on behalf of co- called derivative lawsuit

Question 15

shareholder meeting notice

Answer 15

must be NOTIFIED 10-60 days before ANY meeting of date, time & place;

SPECIAL meeting notice also must state purpose

Question 16

method of shareholder voting at mtg

Answer 16

• vote in person
• proxy
  normally: one share, one vote except in elections if the corporation allows cumulative voting

Question 17

proxy requirements and length of time valid for

Answer 17

writing
signed by SH
directed to secretary of corp
authorizing another person to vote his shares
Need not be given before record date as long as shareholder was a record owner on record date

valid for 11 mos UNLESS stated otherwise

Question 18

duties directors owe

Answer 18

-duty of care
BIG EXCEPTION to duty of care= BJR but only if directors ACT. BJR will protect the directors if they rely on other directors, officers, or advisors that the bd. reasonably believes to be reliable & competent

-duty of disclosure
-duty of loyalty
a) conflicting interest transaction
b) corporate opportunity

Question 19

business judgment rule

Answer 19

presumption that directors when making decisions:
-are informed
-act in good faith
-have a rational basis for their decision

the challenger has the burden of proof

Question 20

duty of loyalty- rule and who holds burden of proof

Answer 20

• dir. owes a duty of loyalty to corp: good faith and reasonable belief that act is in co’s best interest

Burden is on defendant to show no breach

Question 21

conflicting interest transaction- definition and approval

Answer 21

definition: director or a related person
-is a party to the transaction
-has a beneficial financial interest in the transaction
-is a director general partner, agent, or employee upheld if
-all material facts disclosed, and approved by majority of disinterested directors or 2 directors, whichever is less
-all material facts disclosed, approved by majority of disinterested shares OR
-fair to the corporation.

Question 22

corporate opportunity

Answer 22

may not divert a business opportunity without giving co opportunity to act. 1. Corp has interest/expectancy in opp. 2. Opp is w/in corp’s line of business *Dir found on Co time w/ Co resources remedy: constructive trust

Question 23

if one director doesn’t explicitly take part in board action that is challenged are they liable?

Answer 23

They can be, presumed to concur unless noted in writing, either: -noted in the minutes -delivered to the presiding officer at the meeting or -delivered to the corp immediately after meeting

If totally absent from meeting will not be liable
Also an exception if employee or officer provided info the director reasonably relied on

Question 24

shareholder derivative suit- definition and requirements

Answer 24

derivative= shareholder asserts the corporation’s rights

1) P must have standing
a) ownership at time of act or omission or received ownership by operation of law (in a divorce or inheritance) from someone who was an owner at the time of act or omission
b) fairly, adequately represent co’s interests

2) P must make written demand to the corporation to take suitable action, and in some states may not bring suit until 90 days after demand filed. exception: if demand is futile (majority of directors are interested)

The corporation keeps the judgment and shareholder gets attorney fees and costs if shareholder wins, if shareholder loses they personally have to pay opponents attorney fees and costs

Op of law means divorce or inheritance

Question 25

how can a corporation get a derivative suit dismissed?

Answer 25

must get court approval by showing that the majority of the directors who have no personal interest in the controversy (or a court appointed panel of disinterested people) find in good faith after reasonable inquiry that the suit was not in the best interest of the co. like it would be too expensive in light of possible judgment or corp unlikely to win. BOP of good faith on co if majority of directors interested

Question 26

who can call a special shareholder meeting?

Answer 26

the board the president the holders of at least 10% of voting shares anyone else authorized by bylaws *note- if shareholders they must have authority to vote on the subj of the meeting

Question 27

quorum and votes needed for a regular shareholder action

Answer 27

Meeting: -need quorum- majority of outstanding shares quorum is not lost if people leave the meeting -approved IF: votes cast in favor exceed votes against (i.e. majority of votes cast approve) Norm: one share/one vote

Question 28

shareholder votes needed to elect a director

Answer 28

the candidate with the most votes for a director seat wins

Question 29

10b-5 direct liability

Answer 29

* tippee * misappropriation * insider trading

Question 30

tipper liability

Answer 30

If an insider gives a tip of inside information to someone else who trades on the basis of the inside information, the tipper can be liable under 10b-5 if the below elements are met: i. Tipper must be an insider ii. Tipper must have an improper purpose iii. Tipper must receive some personal gain (monetary or reputational)

Question 31

does a surviving corporation need to get approval of its shareholders to merge with another co?

Answer 31

generally yes. will need approval if: the new entity will have different AOI (any difference counts) original shareholders hold fewer shares after the merger shares of original shareholders are subject to new restrictions or don't have the same rights or preferences OR voting power of newly issued shares of surviving corporation > 20% obviously will also need board approval from both companies.

Question 32

10b-5 rule statement (state this first for ALL 10b-5 plaintiffs)

Answer 32

unlawful for any person, directly or indirectly, to use any means or instrumentality of interstate commerce, the mail, or the national exchange to: 1. employ any device, scheme, or artifice to defraud 2. make any untrue statement of material fact or omit to state a material fact necessary to make the statement not misleading, OR 3. to engage in any act, practice, or course of business that operates or would operate as a fraud on any person in connection with the purchase or sale of a security

Question 33

people who are treated as insiders

Answer 33

-employees, directors, officers of the issuer b/c they owe a duty not to use inside information for personal benefit -anyone else who owes a duty of trust and confidence to the issuer (constructive) -anyone who owes a duty of trust and confidence to the source of information\* (misappropriators) \*history of sharing confidences; family relationship (spouse, child, parent, sibling); OR agreed to keep confidential

Question 34

tippee liability

Answer 34

state 10b-5 rule first a tippee can be liable under 10b-5 if he trades on inside information, the tipper breached a duty, and the tippee knew

Question 35

officers- roles, who controls them

Answer 35

a) selected by directors, supervised by directors b) roles and titles of officer are the ones specified in bylaws - don’t have to have Pres, treas, sec in most states but some states require a minimum of pres and sec c) can have more than one role and title d) may be removed by board with or without cause

Question 36

officers' duties to the co

Answer 36

1. duty of care 2. duty of loyalty same rules as for director!!

Question 37

removing a director & cumulative voting

Answer 37

Shareholders have right to remove if firm uses cumulative voting: -director may not be removed if the number of votes opposing his removal would have been enough to elect him

Question 38

permissible ways for shareholders to seek to exercise control

Answer 38

1. voting agreement 2. voting trust 3. SH management agmts 4. Stock Transfer Restriction- must be for a reasonable purpose 5. Variation of shareholder voting - cumulative

Question 39

voting trust

Answer 39

written agmt transferring legal ownership of shares to trustee, who votes shares. 10 yr validity. SH have ben. ownership

Question 40

shareholder management agreement

Answer 40

must be: 1. close corp: can't have if shares on natl exchange 2. formalities- need either 1. unanimous election in articles, by laws approved by all shareholders 2. written agmt signed by all shareholders and filed with the co 3. things can agree on 1. eliminate board -no piercing even if fail to observe and may elect S corps status 2. establish who will be directors or officers or how to select them 3. give shareholders authority to exercise corp powers and they will then owe the duty of care and loyalty to the corporation and often to other shareholders 4. valid for 10 years Should note on the back of the share certificates

Question 41

voting agreement

Answer 41

agmt that is written, signed, provides for manner in which shares voted. specifically enforceable in most states but some states don't grant specific performance of a voting agreement

Question 42

do shareholders have any right to a distribution?

Answer 42

No, the distributions are in the board's discretion and the board won't be able to declare one if corporation is insolvent even if they want to

Question 43

short swing trading

Answer 43

people liable: directors, officers, 10% or more SH rule: any profit realized from the purchase and sale of securities within a 6 month period must be returned to the co strict liability- use of inside info irrelevant profit = purchase at lower price 6 mo before or after sale \*\*look at highest and lowest price w/in 6 mo, and number of shares both purchased and sold

Question 44

dissolution- definition and types

Answer 44

def: termination of corporate existence voluntary: board action + approved by majority of shares entitled to vote or involuntary by court order if -board deadlocked and threat of irreparable injury -shareholders fail at 2 meetings to fill a vacancy -director abuse, waste, misconduct -corporation abandoned its business and did not dissolve within a reasonable time -a creditor makes a claim because they have a judgment that is unsatisfied and the corporation is insolvent, or corporation admitted the claim is due and owing and it's insolvent

Question 45

fundamental corporate actions

Answer 45

* sale of all/substantially all assets * merger or consolidation * dissolution * share exchange * amendment to articles *conversion to another type of entity

Question 46

if a fundamental change is voted on by shareholders and not all agree, what are the dissenting shareholders rights?

Answer 46

they will have a right of appraisal (ability to be bought out for FMV) if the stock is not listed on a national exchange or has 2,000 shareholders or more and the change was: * merger * shareholders of selling co in transfer of all/ substantially all assets * NOT for amendment to AOI * shareholders in share exchange whose shares are being acquired the only other option is to sue if there is fraud.

Question 47

controlling shareholders

Answer 47

shareholders in close corporations owe each other the same duty of loyalty as partners controlling shareholders must refrain from using control to obtain a special advantage controlling shareholders must not sell their interest to people who subsequently loot the company. liable for damages unless they took reasonable measures to investigate the character and reputation of the buyer and did not discover anything

Question 48

Shareholder

Answer 48

Owner of corporation

Question 49

Board of directors

Answer 49

Group of people in charge of managing corporation

Question 50

Benefit corporation

Answer 50

For profit but also to achieve a broader social purpose Shareholders consider benefit of acts to themselves as well as the broader community or environment

Question 51

Are directors and officers liable for corporate debts?

Answer 51

No the entity is liable unless veil is pierced

Question 52

If shareholders or directors mistakenly thought they formed valid corporation are they still personally liable?

Answer 52

In most states yes. Some states have two exceptions. De facto corporation- there is an incorporation statute, parties are unaware they didn’t properly form, tried in good faith to comply, and exercised some corporate privileges Quo warranto- in a lawsuit against the state they are not a corporation even if de facto applied Estoppel- someone who treated a corporation like a corporation cannot later argue it is not. Only applies in contract lawsuits

Question 53

Ways to raise money for a corporation

Answer 53

Issue a bond to someone for consideration - corporation is just a debtor to holder and bond is promise to repay Issue stock certificate to someone for consideration - stock holder is an owner

Question 54

Issuance of stock

Answer 54

Corporation selling its own shares for consideration

Question 55

Par value

Answer 55

Minimum price for issuance of stock. Stocks can be sold for more than par but not less. The buyer is charged with notice of the par value and liable for difference between par and sale price, but a bfp is not charged with notice

Question 56

Preemptive right

Answer 56

Shareholders right to maintain his existing percentage of stock by buying new shares whenever they are issued in exchange for money

Question 57

Director meeting notice

Answer 57

Notice not required for regular meeting Is required for special meeting - at least two days beforehand in writing notify of time date and place Director can waive lack of notice in writing or attending meeting without objecting to lack of notice

Question 58

Can directors vote by proxy?

Answer 58

No

Question 59

Things a committee of directors cannot do

Answer 59

Declare a distribution Fill a vacancy on board Recommend fundamental change

Question 60

How can a director be removed?

Answer 60

With or without cause unless there is a staggered board

Question 61

Who must replace a director?

Answer 61

Shareholders if they removed the director If the director resigns either the board or the shareholders

Question 62

Duty of care - definition and who has burden of proof

Answer 62

Care that a person in like circumstances would reasonably believe appropriate Can be breached by not acting or acting inappropriately Challenger has burden of proof Breach must cause harm to impose liability

Question 63

Self dealing

Answer 63

Transactions will be set aside as breaching a duty of loyalty unless director shows Fair and in best interest of corporation Other directors knew the director was interested and all material facts and majority of other disinterested directors approved it or majority of disinterested shareholders approve

Question 64

Is it a breach of loyalty for director to set own compensation ?

Answer 64

If it is not done in good faith and unfair to corporation (like if excessive, not reasonable ) then yes

Question 65

Business opportunity that breaches duty of loyalty - factors

Answer 65

Something the company would be interested in - something within or related to its line of business Something found using company resources or on company time

Question 66

Loan from corporation to director - ok?

Answer 66

If it is reasonably expected to benefit the corporation (likelihood of repayment, if it’s for something the corporation will use)

Question 67

Officer right to resign

Answer 67

Can do this at any time If there is a contract and term is not up can be liable for breach (and company can be if they fire before term is up)

Question 68

An officer or director is sued- does the company have to reimburse him for costs of defense and judgment?

Answer 68

1 cannot if he is liable to the corporation or judgment decided he received an improper benefit 2 must if he is found not liable after defending on the merits- attorney fees and reasonable expenses 3 may if he acted in good faith and reasonably believed he was acting in best interest of corporation. Majority of board makes decision. 4 court can order it if fair under all circumstances but if liable to the corporation just gets attorneys fees and costs

Question 69

Corporation attempts to limit liability

Answer 69

Duty of loyalty - invalid Duty of care- can be limited but cannot liability for intentional misconduct

Question 70

Professional corporation

Answer 70

Shareholders directors officers must be licensed professionals Advantage is not liable for malpractice of other shareholders directors or officers Employees don’t have to be licensed

Question 71

Close corporation duty of majority shareholders to minority shareholders

Answer 71

Duty not to use their power to benefit themselves at the expense of minority. Minority can sue for breach of fiduciary duty because minority cannot get out by selling shares on the market Must also disclose material info about corporation to minority

Question 72

If a shareholder did not make a demand or wait long enough before filing a shareholder suit is the claim improper?

Answer 72

Yes unless the state allows it to be waived if doing so would be futile (demand for directors to sue themselves for breach of duty) If a demand was made it’s still proper if the demand was rejected or if the corporation would suffer irreparable injury by waiting 90 days

Question 73

outstanding shares

Answer 73

shares the corporation has issued and has not reacquired (would have to mention that some have been reacquired)

Question 74

record date

Answer 74

cutoff date to become a record shareholder to be eligible to vote. must be 70 days or less before the meeting exception when the corporation reacquires stock before the record date - no one can vote it bc it's not outstanding exception 2- record shareholder on record date dies, the executor can vote them. Exception 3- valid proxies

Question 75

methods to pool votes

Answer 75

voting agreement voting trust

Question 76

are restrictions on a shareholder's right to transfer stock ok?

Answer 76

yes if they are reasonable restraints on alienation to enforce against a third party it has to be noted on the certificate or the third party has to actually know about the restriction

Question 77

can a board be forced to make a distribution? when is a board prohibited from making one?

Answer 77

only upon a showing of abuse of discretion, like the corporation always profits and the board gives themselves and officers a bonus but never pays dividends board cannot make a distribution if the corporation is insolvent or the distribution would make it insolvent. if they make a distribution the directors are jointly and severally liable unless they relied in good faith on financial advice

Question 78

preferred stock

Answer 78

stock that receives payment before the other shares ex: 20,000 shares with $2 preference. deduct $40,000 from the distribution amount (400,000) and 360,000 goes to common share holders

Question 79

distribution

Answer 79

dividends distribution of assets on liquidation repurchases of shares redemption of shares

Question 80

approval of fundamental changes

Answer 80

board action board written notice to shareholders shareholder approval by: some states say majority of shares entitled to vote some states say you have to have a majority of votes that actually vote

Question 81

perfecting a right of appraisal

Answer 81

give written notice before the meeting that you object abstain or vote against the proposal at the meeting make a written demand to be bought out and deposit the stock with the corporation

Question 82

corporation obligations when a proposed action triggers a right of appraisal

Answer 82

notify shareholders in the shareholder meeting notice that the shareholders can exercise their dissenting rights if the action is approved, within 10 days, notify the dissenting shareholders they can make a claim to be bought out, the deadline to do so, the terms of repurchase, and where to send the shares when they receive proper demands, pay the appraised price plus interest for the shares to the shareholder

Question 83

merger vs consolidation

Answer 83

in a merger company A merges into company B and company A disappears in a consolidation, company A and company B combine to form a new company- company C surviving corporation inherits all rights and liabilities of the original 2 corporations

Question 84

substantially all assets

Answer 84

75% or more of the seller's assets

Question 85

share exchange

Answer 85

one corporation acquires all of the shares of another corporation

Question 86

if a company sells substantially all of its assets, is the buyer liable for the seller's debts?

Answer 86

no as a general rule exception: if the buyer has the same shareholders and same management

Question 87

corporation obligations upon voluntary dissolution

Answer 87

pay debts distribute assets to shareholders stop carrying on business and just liquidate and wind up

Question 88

creditor claims after dissolution

Answer 88

if assets are undistributed they can make claims if assets are distributed, can recover from shareholders for their pro rata share of the claim time limit based on the kind of notice given to creditors (120d if creditors notified of dissolution in writing, 3 years if newspaper publication)

Question 89

liquidation preference

Answer 89

a requirement to pay the shareholder first at dissolution

Question 90

winding up- steps

Answer 90

after dissolution: notify creditors of dissolution in writing publish notice of dissolution in a newspaper in the county of principal place of business liquidate assets (get cash for them) pay creditors pay shareholders

Question 91

shareholder liability for improper distribution

Answer 91

only if they knew it was improper

Question 92

are shares transferable?

Answer 92

yes unless a restriction is imposed on transfer

Question 93

insolvent corporation

Answer 93

unable to pay debts as they become due, or total liabilities exceed total assets

Question 94

things that shareholders get to vote on

Answer 94

electing directors removing directors fundamental corporate changes

Question 95

shareholder annual meeting requirements

Answer 95

must at least have annual meetings annual meetings must be any time w/in the 6 mo. after the end of fiscal year or 15 mo. after last annual meeting main item at an annual meeting is election of directors

Question 96

shareholder action without a meeting

Answer 96

unanimous written consent

Question 97

can shareholders vote by proxy?

Answer 97

Yes

Question 98

determining if a shareholder suit is direct or derivative

Answer 98

who is harmed most? who is duty owed to direct = suit for officer or director breach of fiduciary duty owed to shareholder

Question 99

are proxies revocable? how do you revoke one?

Answer 99

generally they are revocable. a proxy is irrevocable only if 1. it so states + coupled w/ interest (proxy + stock option) or 2. given as security (ex: stock transfer) proxy revoked if: 1, shareholder goes to vote 2. sends a writing revoking it to the secretary or 3. executes a new proxy in favor of someone else

Question 100

voting trust

Answer 100

several directors enter into a written trust agreement stating how shares will be voted legal title to the shares is transferred to the voting trustee, but trustee is only given voting rights & shareholders keep all other SH rights the trust agreement is given to the corporation

Question 101

cumulative vs typical voting- elections

Answer 101

normally each shareholder votes their shares for each position because each seat is elected separately (ex: has 100 shares and 2 directors being elected, can vote up to 100 shares for seat 1 and 100 for seat 2) if articles allow cumulative voting- # of shares x # of bd vacancy shareholders divide votes among the candidates in any manner. can put all of their votes toward one seat if they want to

Question 102

quorum for directors or shareholders approving a transaction where a director has a conflict of interest

Answer 102

majority of disinterested directors or majority of disinterested shareholders

Question 103

how do you know if an officer has authority to do something?

Answer 103

apply agency law 1 actual authority- actually authorized by the board of directors expressly, or implicitly 2 apparent authority by officer's title

Question 104

Methods of adoption of pre incorporation contract

Answer 104

1. board resolution (express) OR 2. Implied Ratification through knowledge and acceptance of benefits

Question 105

Theories for piercing the corporate veil

Answer 105

Theories: 1. Alter Ego - Identity of Interests Failure to observe sufficient corporate formalities like holding meetings, commingling personal and corporate assets or funds, treating corp assets as his own 2. Undercapitalization - at time corp is formed, failure to maintain sufficient funds to cover reasonably forseeable liabilities 3. Fraud - pierce when necessary to prevent fraud or to prevent individual from using entity to avoid existing personal obligations (NOT future liab b/c that's whole point of a co)

Question 106

Duty of loyalty- specific things that breach it

Answer 106

- may not receive any personal benefit at co's expense (COI) * may set own compensation but unreasonable amt will be benefit at co's expense - may not compete with the corporation - duty not to divert a business opportunity (Corp Opp) remedy for competing venture- constructive trust

Question 107

How are shareholders paid at dissolution?

Answer 107

pro rata by share unless there's a liquidation preference

Question 108

Watered stock

Answer 108

Stock issued for less than par value The directors can be liable for breach of fiduciary duty The person who bought the stock can be liable for difference between par and price paid

Question 109

if a promoter's contract with a third party says the promoter is not liable what is the effect?

Answer 109

it is not a contract and is an offer to the corporation

Question 110

does the business judgment rule apply in duty of loyalty cases?

Answer 110

no, unless it's not a self dealing DOL case

Question 111

what is the remedy when a director or officer engages in a transaction that violates the duty of loyalty?

Answer 111

damages an injunction to stop the transaction constructive trust (usually corp opportunity)

Question 112

disinterested shares

Answer 112

shares not owned or controlled by the shareholder with a conflict of interest

Question 113

what is required for valid director action?

Answer 113

unanimous written consent OR a yes vote on the proposal from a majority of the directors at a meeting with a quorum

Question 114

fairness factors in duty of loyalty cases

Answer 114

adequacy of consideration other alternatives corporation's financial position whether there is a strong need to enter into the transaction

Question 115

When is a fact material?

Answer 115

A fact will be considered material if a person would consider it important in deciding whether to proceed with the transaction

Question 116

when does a corporation begin to exist?

Answer 116

on the date of filing

Question 117

acceptable forms of consideration for stock

Answer 117

Majority of states approve: 1. money (cash/check), 2. tangible/intangible property, 3. services already performed for Corp 4. Future services 5. Promissory note Consideration can be money or any other tangible or intangible property or benefit (employment services).