Directors & Officers Flashcards
(45 cards)
Can a director be a person or entity?
No, must be human
Who elects directors after the organisational meeting?
Shareholders
When will the Board be re-elected?
Once a year, unless it’s a staggered Board.
Can a director be removed before the election period? If so, by whom?
Yes, they can be removed by a shareholder WITH or WITHOUT cause
If there is a vacancy on the Board, who can appoint the new member?
Either the Board or the Shareholders, but if the director was removed by the SH, then they must appoint.
The directors must act as a group. That means…?
Unanimous written agreement to take an action (Resolution)
OR
At a meeting that must satisfy quorum and voting requirements
If the directors agree to have the company take an act that doesn’t satisfy the formalities of making such a decision, will their decision still stand?
It’s VOID, unless ratified by one of the two proper methods.
What are the two kinds of Board meeting?
Regular meeting
Special meeting
What notice is required for regular meetings vs. special meetings?
Regular — no notice
Special — At least 2 days notice of the meeting DATE, TIME and PLACE (unless Bylaws state otherwise).
Typically, does the notice of a special meeting need to state the purpose of the meeting?
No, just date, time and place.
If notice of the meeting fails to meet the requirements, can the requirement be waived? If so, how?
Yes, the directors can waive notice defect: (1) in writing at any time; or (2) by attending the meeting without objecting at the outset of the meeting.
Can you appoint a proxy for a director?
No because they have non-delegable fiduciary duties.
Unless the Bylaws state otherwise, what is the quorum for a Board meeting?
Majority of all directors.
Passing a resolution requires what vote?
A majority vote of the directors who are present at the Board meeting (as opposed to majority of all directors).
Can a quorum be lost part way through a Board meeting?
Yes (e.g. someone leaves)
What is the role of the Board of Directors?
They manage the company
Set policy
Supervise officers
Declare distributions
Determine issuance of stock
Recommend fundamental corporate changes to SH
The Board can delegate some decision-making to a committee. However, the committee cannot make which decisions?
Declare distributions
Fill a Board vacancy
Recommend a fundamental corporate change to shareholders
But the committee can RECOMMEND all of these things to the Board.
What is the Duty of Loyalty standard you must memorise for the exam?
Directors must discharge his/her duties in GOOD FAITH
With the REASONABLE BELIEF that their actions are
In the BEST INTERESTS of the company
What is the Duty of Care standard you must memorise for the exam?
A Director must use the care that a PRUDENT PERSON in a LIKE POSITION would use under the circumstances.
Who has the burden of proof when it comes to proving the Duty of Care Standard?
Plaintiff
Broadly speaking, a director may breach the duty of care standard in which two ways?
Misfeasance (Board’s act hurts the corporation)
Nonfeasance (Director does nothing)
If the director commits nonfeasance (i.e. does nothing), what else will the plaintiff have to show to breach of duty?
Causation — D’s failure to act caused loss to the company.
Regarding a breach of duty by a director for misfeasance, what steps should you work through to analyse the exam question?
- State the duty Of care and duty of loyalty standard in full, but focus on the former.
- Business Judgment Rule / Appropriate homework presumed
- State that burden is on the plaintiff to show Board did not follow these rules
- State that court will usually uphold Board’s business decision if made in:
— GOOD FAITH,
— was INFORMED, and
— had a RATIONAL BASIS.
Under the Duty of Care Standard, what is the Business Judgement Rule?
The BJR is a presumption that when the Board took an act, they did APPROPRIATE HOMEWORK
