Bar Bri New York Fine Points - Corporations

Front 1

I. ORGANIZATION AND FORMATION OF CORPORATION
Certificate of Incorporation (requirements)

Back 1

1. Name of Corp
2. Incorporator
3. Registered Agent
4. Purpose Clause (Can be Any Purpose)
5. Capital Structure
6. Must Be Filed With Secretary of State

Front 2

Bylaws - "rules" established by the corporation for its running - requirements -

Back 2

1. Internal document NOT filed with secretary of state
2. A corporation may exist without bylaws

Front 3

Pre-incorporation Contracts - Promoter's Liability

Back 3

Has Novation Occurred? If yes, Promoter has no liability, Corp is not liable.

Front 4

II. CAPITAL STRUCTURE
Subscription Agreements

Pre and Post Incorporation

Back 4

1. Written &
2. Signed
3. Offer to buy stock from the Corporation
-- Pre - Irrevocable for 3 months
-- Post - Irrevocable until Corp Accepts

Front 5

Consideration for Stock

5 General Things...

Back 5

Basically Anything & Everything

1.Money
2. Tangible or Intangible Property
3. Services ALREADY Performed
4. A Binding Obligation to Pay in the FUTURE
5. A Binding Obligation to Perform FUTURE services.

Front 6

Preemptive Rights - Only Applicable to:

Back 6

the right of an existing shareholder to maintain his percentage of ownership by buying stock whenever there is a new issuance of common stock for MONEY (including cash or checks).

1. Newly Authorized Stock
-- Two-year rule apply? (Does Not Include anything sold within 2 years of formation)
2. Sold for Cash

Front 7

Rules of Dividends

Back 7

1. No right to them
2. Irrevocable once declared
-- insolvency exception
3. Payable out of:
-- Surplus: always
-- Stated Capital: never

Front 8

Redemptions and Repurchases of Stock

Back 8

Redemptions - are set in the certificate and must be done proportionately within each class of stock.

Repurchases - are individually negotiated and the corporation can discriminate (buyback some but not others)

Front 9

III. OPERATION AND MANAGEMENT OF CORPORATION
Promoters liability rules

Back 9

1. Promoter ALWAYS liable until there is novation.
2. Corporation NEVER liable until there is adoption.

Front 10

Shareholders
Liability

Back 10

1. No personal Liability
2. Exceptions:
a. watered stock
b. when shareholders are fiduciaries (i.e. closed corporations)
c. piercing corporate veil. (alter-ego doctrine)

Front 11

Shareholders
Voting Rights
Meeting

Back 11

1. Record date
2. Written Consent (100% of voting shares signed, no meeting required)
3. Annual Meeting
4. Special Meeting

Front 12

Shareholders
Voting Rights
Proxies

Back 12

1. Requirements
a. written
b. signed
2. Expiration - when it says, but always after 11 months
3. Revocation - easily revocable unless proxy holder has an interest beyond the proxy.

Front 13

Shareholders
Voting Rights
Effective Shareholder Action

Back 13

1. Quorum necessary
2. Majority of votes cast wins
3. Cumulative Voting (for appointing directors only)

Front 14

Shareholders
Voting Rights
Shareholder Agreements to Control Voting

Back 14

1. Voting Agreements
2. Voting Trusts
-- on file
-- expires after 10 years (but renewable)
3. Stock transfer restrictions

Front 15

Shareholders
Inspection Rights

Back 15

1. May ONLY inspect records, books, shareholder lists, etc. (whats on paper... as opposed to inspecting a factory)
2. Need Proper Purpose

Front 16

Shareholders
Derivative Suits Requirements

Back 16

1. Shareholder at time of, and when suit is brought
2. Prior demand on Board of Directors unless this would be futile (If demand turned down in good faith -- That's it!)
3. Corporation must be a party to the action

Front 17

Shareholders
If Derivative Suit is Successful...

Back 17

1. Recovery goes to Corporation
2. Individual who brought the suit gets reimbursed by Corporation for litigation costs.

Front 18

Shareholders
Controlling Shareholder's Responsibilities

Back 18

Is fiduciary for Shareholders & Corporation.

Front 19

Directors
Effective Board Action Requirements

Back 19

1. Need Quorum
2. Majority of Quorum wins
3. Voting agreement NOT allowed
4. Action in lieu of meeting

Front 20

Directors
Board Vacancy may be filled by...

Back 20

1. Other directors
2. shareholders

Front 21

Directors
Directors Duties (& Remedies for Breaching Duties)

Back 21

1. Duty of Care
-- Nonfeasance
-- Misfeasance (Note: Business Judgment Rule)
2. Duty of Loyalty
-- Insider Trading
-- Self-dealing ("Interested Director" transaction OK if either:
-- -- Fair, or
-- -- After Full Disclosure of Material Facts, by a vote of the disinterested.
3. Corporate Opportunity Doctrine
-- Remedies are: Damages, Constructive Trust or Corporation gets opportunity at cost
4. Compete with Corporation
-- Remedies are: Damages, Injunctive Relief

Front 22

Officers

Back 22

1. Agent of Corporation
2. Bar Exam Issues essentially same as for Directors.
-- Duties of Care & Loyalty

Front 23

IV. FUNDAMENTAL CORPORATE CHANGES
Mergers are Approved by...

Back 23

Directors AND Shareholders of BOTH Corporations

Shareholders must approve by a Majority of ALL outstanding shares.

Front 24

Mergers
Requirements to Attain Appraisal Rights of Dissenting Shareholder

Back 24

1. Written Objection Before Meeting & had to have
2. Voted Against the Merger
3. Also must File Written Claim

Front 25

Requirements to approve a Sale of all Assets

Back 25

1. Majority of directors from BOTH selling and buying corporations must approve sale (no quorum concept)
2. Majority approval needed by shareholders
3. No appraisal rights for shareholders of buying corporation
-- May be treated as "de facto merger." If so, Merger rules apply.

Front 26

Requirements to approve an Amendment of Certificate of Incorporation

Back 26

1. Majority of shares entitled to vote must approve
2. Director approval required
3. Remember Special Rules re:
-- Supermajority quorum
-- Voting Requirements
-- Restricting Board Authority

Front 27

Requirements to a approve an Amendment of Bylaws

Back 27

1. Shareholder can amend/repeal any bylaw (in the manner set forth in the bylaws)
2. Directors can amend/appeal bylaws ONLY if power provided in certificate of incorporation or the bylaws.

Front 28

Requirements to approve Dissolution and Liquidation

Back 28

1. Majority of all outstanding shares must approve
2. If liquidation, pay outside creditors first.