Shareholders (Directors, Officers) Flashcards
(29 cards)
Shareholder Control
NO DIRECT CONTROL = gen rule; SHs have no right to directly control day-to-day mgmt of corp (this power rests in the bd. of directors and normally delegated to officers of the corp)
INDIRECT CONTROL =
(1) SHs elect and may remove directors w/ and w/o cause;
(2) SHs may modify bylaws
(3) SHs must approve fundamental corporate changes
Who has the right to directly control day-to-day management of corporation?
Board of directors (and normally delegated to officers of the corp.)
Who may modify bylaws?
Shareholders
Who may elect and remove directors with and without cause?
Shareholders
Who must approve fundamental corporate changes?
Shareholders
Who has indirect control of the corporation?
Shareholders
INDIRECT CONTROL =
(1) SHs elect and may remove directors w/ and w/o cause;
(2) SHs may modify bylaws
(3) SHs must approve fundamental corporate changes
Shareholder Derivative Suits
A lawsuit started by a shareholder to enforce a corporate cause of action
Reqs for Standing:
(1) Contemporaneous stock ownership
(a) when cause of action arose; AND
(b) throughout the entire litigation
(2) Written demand to board + wait 90 DAYS, unless:
(a) notified of rejection; OR
(b) irreparable injury would result
What are the reqs for standing in a shareholder derivative suit?
Reqs for Standing:
(1) Contemporaneous stock ownership
(a) when cause of action arose; AND
(b) throughout the entire litigation
(2) Written demand to board + wait 90 DAYS, unless:
(a) notified of rejection; OR
(b) irreparable injury would result
Shareholder Voting Rights
each share = one vote (unless otherwise specificed in articles of inc.)
registered owner on record date = record date set by the bd and can be any day w/in the 70 day window before the meeting
Proxies = delegates a SH’s right to vote to another person
Record Date
record date set by the bd and can be any day w/in the 70 day window before the meeting
What are the requirements for a valid proxy?
delegates a SH’s right to vote to another person
Reqs for Valid Proxy:
(1) in writing
(2) signed by record order
(3) sent to the corporation’s sec’y
(4) authorizes vote = valid for 11 months (unless provided otherwise)
REVOCABLE unless
- conspicuously states irrevocable; AND
- coupled w/ an interest in the shares
When is a valid proxy irrevocable?
When it conspicuously states irrevocable; AND coupled w/ an interest in the shares
Shareholders’ Meetings
Annual meetings = every corp must have an annual meeting where at least one director position is up for election
Special Meeting (SH meeting)
Who can call = Bd of directors; other authorized persons; OR 10% of votes entitled to be cast at meeting
Purpose? = proposals, fundamental changes
Notice reqs = (10 day
Who can call special meetings?
Bd of directors;
other authorized persons; OR
10% of votes entitled to be cast at meeting
Notice reqs for special meetings
- Not less than 10 days or more than 60 days (10 day
SH voting reqs
quorum req = majority of outstanding share represent at meeting (articles can set a lower quorum req BUT it cannot be less than 1/3 shares entitled to vote)
voting reqs for approval = votes cast in favor > votes cast against
director elections = plurality of the votes cats
SH inspection rights
5 days written notice; AND
state proper purpose
SH voting trusts
voting trust = formal delegation of voting power to a voting trustee
formalities of trust required:
(1) written trust agreement
(2) filed w/ corporation
(3) transfer of legal title of shares to voting trustee
(4) trust certificate issued
(5) 10 yr limit
Formalities of SH voting trust
formalities of trust required:
(1) written trust agreement
(2) filed w/ corporation
(3) transfer of legal title of shares to voting trustee
(4) trust certificate issued
(5) 10 yr limit
SH voting (pooling) agreements
agreement that provides the manner in which SH will vote their shares
in writing + signed by SHs entering into voting agreements
binding + enforceable on all signors
SH management agreements
SH may enter into agreements w/ each other regarding almost any aspect of the exercise of corp power
set forth in article/bylaws/written agreement approved by all shareholders
valid for 10 yrs
terminate upon listing on nat’l securities exchange
Priority of Dividends
(1) Preferred Stocks Paid First
- cumulative preferred stock
- participating preferred stock
(2) Common stock paid last and paid equally
Dividends are discretionary unless?
unless
- insolvent OR dividend will render corp insolvent
defense: good faith reliance
