Flash Cards for Bar Courses - Corporations

Question 1

Transfer of shares

Answer 1

A shareholder may transfer shares freely to other investors unless the corporation is a closed corporation.

Question 2

S- Corp

Answer 2

Requirements:
- Not subject ot double taxation
- No more than 100 shareholders,
- Shareholders mus tbe US citizens and individuals
- Only one class of stock

Question 3

B-Corp

Answer 3

intends to benefit the public and the environemnt. Are treated the same as c corps for tax purposes. Articles must state the that corp is a b corp

B Corp must also file an annual busienss reot assessing how it pursued its stated social mission.

Question 4

De Jure Corp

Answer 4

A corp formed in accordance w/ the law
-Need a person, paper and an act

Question 5

De facto corp

Answer 5

Req.
- state must have a incorporation statute (all US states DO)
- parties made a good fairth, colorable attempt to comply wiothy the stattute
- There has been some exercise of corporate privledges (parties acted as if there was a corp.)

Question 6

Article of Incorporatrion

Answer 6

Req. Contents:
- Name of corp.
- name and address of each incorporator
- registered agent & st address of registered office
- info of corp stock. (Authorized stock, class of stock)

Optional contents:
- initial directors

Question 7

When does corp existence begin

Answer 7

Upon the filing by the state

Question 8

Organizational meeting - objectives

Answer 8

1) adopt bylaws
2) appoint officers

held by initial direcrtors listed in articles but if none then the incorporator

Question 9

Internal affairs doctrine

Answer 9

internatl affairs of a corp are governed by the law of thet state of incorporatioon

Question 10

Corp by Estoppel

Answer 10

Persons who have dealt with the company as if it were a corp. Applies only to contract cases

Question 11

Promoter

Answer 11

A person acting on behalf of a corporation not yet formed.

Question 12

Promoter’s agreements w/ 3rd parties

Answer 12

The unincorporated corporation is not boiund. But can become liable only by expresss or implioed adoption of the promoter’s K.

Promoter is jointly and severally liable – the liability continues after the corporation is formed even if the corp adoptrs. Can only be relased on novation.

Question 13

Foreign Corporations

Answer 13

Are corporations transacting buisness in a state:

transact9ing business: the regular course of intrastae business activity

MUST register in the state it wishes to do business in.

Question 14

Debt security

Answer 14

is a bond that the corp will repay the loan with interest

Question 15

Authorized shares

Answer 15

number of shares that have been authorizsed in the articles

Question 16

Issued Shares

Answer 16

Number of shares that have been sold.

Question 17

Outstanding Shares

Answer 17

Number of issued shares not owned by the coporation

Question 18

Issuance

Answer 18

when the corporation sells its own stock.

Question 19

Par value

Answer 19

Price at which stock cannot be issued less than.

Question 20

Watered stock

Answer 20

occurs when par value stock is issued for less than its par value

Question 21

Corporation Directors Reqs.

Answer 21

• Must be adults with capaicity
• must be at least 1 director foir the corporation
• shareholders elect the BOD

Question 22

Staggered Board

Answer 22

is divided into half or thirds with 1/2 or 1/3 elected each year

Question 23

Removal of directors

Answer 23

Sharehodlers can remove directors before their term expires with or without cause.

Question 24

How board takes action

Answer 24

• Unanimous agreemtn in wititing (consent)
• at a meeting, which must satisfy the quorum and voting req.

Question 25

Board meetings

Answer 25

Notice: only need 2 days notice for ONLY speciual meetings (written) NO PROXIES Quorum: a majority of all directs unless bylaws say otherwise. IF director leaves and breaks quorum, then no action can be taken (different than stockholder meeting) Approval of action: if there is a quorum, then there only needs to be majority vote of those present.

Question 26

Directors duties to the corporation

Answer 26

DIrector must discharge her duties in good faith and with the reasonable belief that her actions are in the best interest of the corp.

Question 27

Busienss Judgement rule

Answer 27

is the presumption that a director's decsion mayt not be challenged if the dirctor acted in - good faith - with care that a person in that position owuld have - in a manner the direcort beliuevbed to be in the best interest of the corp

Question 28

Common conflicts of interewst

Answer 28

- self dealing - OK iuf it was approved by 2/3 of the disinterested direcotrs OR a majority of shareholders OR it was fair to the corp.

Question 29

Corporate opportunity doctrrine

Answer 29

A direcrto cannot usurp the board untill - he tells the board abt it - waits for board to reject to the opportunity

Question 30

Director is presumed to concur with the board unless

Answer 30

Direcor gives her dissent or abstentaiton and it is noted in writing in the corporate recordses. Exception: if the direcort is absent

Question 31

How are Officers appointed and removed?

Answer 31

Officers are selected and removed by the board.And can remove with or without cause

Question 32

Close Corporations

Answer 32

The stock is not publicly traded. Can be set up by -Articles of inc and approved by all shareholders - By unanimous written shareholder agreement

Question 33

Piercing the corporate veil

Answer 33

-Shareholders must hae avused the privlege of incorporating and - fairness must require holding them liable 3 situations - Alter Ego - Under capitalization - fraud, avoidance of existing obligations, or evasion of statutory provisions

Question 34

Derivative Suit

Answer 34

A shareholder is suing to enforce the corporation's claim*** Can only be settled upon ct approval

Question 35

Shareholder voting rights

Answer 35

Each outstanding share is entitled to vote, meaning hte shareholder as of the record date is entiteld to a vote Shareholders vote to : - elect directors - remove directors - on fundamental corporate changes

Question 36

Proxy

Answer 36

Is a -writing - signed by the record shareholder - directed to the secretary of the corporation - authorizing another to vote the shares

Question 37

Voting Agreements

Answer 37

are in writing and signed.

Question 38

Shareholder vote Qurom

Answer 38

Generally, a quorum is a majority of outstandinfg shares entited to vote, and quorum is not lost if people leave the meeting.

Question 39

Voting thresholds for shareholders

Answer 39

Elect a director: pluralityu (person who gets most votes for the seat on the baord) Fundamental Change: majority of the sharehodlers entitiled to vote remove a director: majority of shareholders entited to vote Other matters: Majority of shares that actually vote on the issue.

Question 40

Fundamental Corp Changes

Answer 40

- Amending Articles - Merging or Consolidating - Transferrign substantially all assets - Converting to antoehr form of business - Dissolving We need (1) board action adopting a resolution of fundamental change (2) the board submits the proposal tro the shareholders with written notice, and (3) shareholder approval

Question 41

dissenting Shareholder right of appraisal

Answer 41

If a corp approves of a fundamental change and a shareholder voted against, they have a right of appraisal (or to be bought out) ONLY IN A CLOSE CORP. or if the corp. has less than 2000 shareholders