Corporations

Front 1

Six Possible Corporations Questions

Back 1

1. Organization of a Corporations
2. Issuance of Stock
3. Directors and Officers
4. Shareholders
5. Fundamental corporate Changes
6. Federal SEcurities

Front 2

What does it take to form a corporation

Back 2

1. People
2. Paper
3. Act

Front 3

People

Back 3

One or more.

Front 4

Paper: Articles of Incorporation

Back 4

1. a. Articles are contract between corp and shareholders b. Contract between corp and state.
2. Information in articles
--Corporate name including (corporation, company, incorporated, or limited)
--Name and Address of each incorporator
--Name of Director
--Name of registered agent
(corporation's legal representative)
--Duration (presume perpetual)
--Purpose
--Capital Structure

Front 5

Ultra Vires

Back 5

Activities that are outside the purpose.
1. Valid
2. S can seek an injunction
3. Responsible managers are liable to corp for losses

Front 6

Act

Back 6

Deliver notarized articles to the state secretary of state and pay required fees.

Front 7

Legal Significance of Formation of Corporation

Back 7

1. Internal affairs of a corporation are governed by law of the state in which the corporation is formed.
2. A corporation is a separate legal person.

Front 8

De Facto corporation doctrine and corporation by estoppel

Back 8

The proprietors failed to form a de jure corportion.
1. There is a relevant incorporation statute
2. The parties made a good faith, colorable attempt to comply with it; and
3) Some exercise of corporate privileges

Front 9

By laws

Back 9

Purpose-internal governance
Adopted- board
Amend or repeal-shareholders and some states board
Articles control

Front 10

Pre-Incorporation Contracts

Back 10

A promoter is a person acting on behalf of a corporation not yet formed. For example, a promoter might enter a contract on behalf ofa corporation-not-yet-formed.

Front 11

Liability of the corporation on a pre-incorporation contract

Back 11

A corporation is not liable on pre-incorporation contracts until it adopts the contract-express, or implied.

Front 12

Liability on the promoter

Back 12

Generally,unless the contract clearly provides otherwise, the promoter remains liable on pre incorporation contracts until there has been a novation (agreement between parties to replace a party).

Front 13

Foreign Corporations

Back 13

Foreign corporations (out of state) transacting business in this state must qualify and pay prescribed fees

Front 14

Issuance of Stock

Back 14

Issuance of stock occurs when a corporation sells its own stock. It is a way to raise capital for the corporation.

Front 15

Subscriptions

Back 15

Written offers to buy stock from corporation
Revocation of pre-incorporation subscriptions-not revocable for six months.
post incorporated subscriptions revocable until acceptance.

Front 16

Consideration for stock

Back 16

1. money,
2. tangible or intangible property
3. Services already performed for corporation

Front 17

Par Stock

Back 17

minimum issuance price

Front 18

No par stock

Back 18

board sets price

Front 19

Treasury Stock

Back 19

This is stock the company issued and then reacquired. It is considered authorized but unissued, and the corporation can then resell it. If it does, the board sets any issuance price it wants.

Front 20

Watered Stock

Back 20

Stock sold for less than par value by the board. Directors if authorized. Buyer. TP not liable if she didn't know about the water.

Front 21

Pre-Emptive Rights

Back 21

Pre-emptive right is the right of an existing shareholder to maintain her percentage of ownership by buying stock whenever there is a nwe issuance of stock for money (cash or its equivalent) Most states require articles

Front 22

Director

Back 22

adult natural person

Front 23

Director

Back 23

Initial directors are usually named in the articles. Thereafter, shareholder elect directors

Front 24

Director removal

Back 24

Shareholder can remove directors before their terms expire-vote of a majority of the shares entitled to vote.

Front 25

Board Acts

Back 25

1. Unanimous agreement in writing
2. At meeting
--Notice (regular meeting none, special meeting yes)
--Quorum-must have a majority of all directors to do business
--If a quorum is present at meeting, passing a resolution requires only a majority of those present.

Front 26

Role of Directors

Back 26

Generally, the board of directors manages the business or corporation

Front 27

Duty of Care

Back 27

(plaintiff burden)
A director owes the corporation a duty of care. She must act in good faith and do what a prudent person would do with regard to her own business and caused a loss to corp.
Non-Feasance (not doing something).
Misfease (The board does something that hurts the corporation

Front 28

Business Judgment rule

Back 28

A court will not second-guess a business decision if it was made in good faith, was informed, and had a rational basis.

Front 29

Duty of Loyalty

Back 29

A director owes the corporation a duty of loyalty. She must act in good faith and with reasonable belief that what she does is in the corporations best interest.

Front 30

Interested Director transaction

Back 30

Interested director transaction will be set aside unless the director shows either 1) the deal was fair to the corporation when entered, or 2) her interest and the relevant facts were disclosed or known and the deal was approved by a majority of disinterested directors or shares.

Front 31

Competing Ventures

Back 31

A director may not compete directly with the corporation

Front 32

Corporate Opportunity

Back 32

Director cannot usurp a corporate opportunity. That means the director cannot take it unti he 1) tells the board about it and 2) waits for the board to reject the opportunity. A corporate opportunity occurs if the company has interest or expectancy in or the defdant found on company time or resources.

Front 33

Other State law bases of director liability

Back 33

Ultra Vires Acts
Improper distributions
Improper loans (loans ok if reasonably expected to benefit the corp).

Front 34

Directors liable for decisions exceptions

Back 34

dissent in writing or
abstention is noted in writing in corporate records (minutes, deliver in writing to he presiding officer, written dissent to the corp immediatly after the meeting.
Absent director not liable
Good faith reliance on info presented by an officer, employee, or committe, or professional reasonably beleived competent.

Front 35

Officers

Back 35

Shareholders hire and fire director, but directors hire and fire officer, generally, then, shareholder do not hire and fire officers.

Front 36

Indeminfication

Back 36

None-directors is held liable
Mandatory-director win
permissive-settlement, she shows she did not breach her duty of loyalty. Disintersted directors .