Corporations

Front 1

Promoters

Back 1

Persons acting on behalf of a corporation not yet formed. Are fiduciaries of the corporation.

Front 2

Corporate Liability for Contracts by Promoters

Back 2

1. Express Board of Director's Resolution.
2. Implied adoption by acceptance of the benefits with knowledge.

Front 3

Duty of Loyalty

Back 3

1. No self-dealing.
2. No usurping.
3. No Secret Profits.

Front 4

Subscribers

Back 4

Persons who make written offers to buy stock before a corporation is formed (irrevocable for six months).

Front 5

Corporation Formation Requirements

Back 5

1. Incorporators
2. Articles (with Authorized Shares, Purpose, Agent, Incorporators, Name (with Indicia of Corporate Status))

Front 6

Ultra Vires

Back 6

Beyond the Power
1. State can enjoin.
2. Corporation can sue for losses.

Front 7

De Facto Corporation Doctrine

Back 7

good faith, colorable attempt to comply, no knowledge of lack of corporate status

Front 8

Shareholder Liability

Back 8

Liable only to pay full consideration for shares.

Unless corporate veil pierced.

Front 9

Piercing the Corporate Veil

Back 9

Alter Ego or Undercapitalization

Front 10

Foreign Corporation

Back 10

Must File Certificate of Authority with Secretary of State (APAIN)

Front 11

Par Value

Back 11

minimum issuance price

Front 12

No Par

Back 12

no minimum issuance price

Front 13

Treasury Stock

Back 13

stock reacquired by the corporation, considered to be no par stock

Front 14

Preemptive Rights

Back 14

existing shareholder, can maintain percentage of ownership, new issuance of stock for CASH

default: no preemptive rights

Front 15

Quorum

Back 15

Majority of ALL Directors

Front 16

Duty to Manage

Back 16

Can be delegated to a committee of one or more directors who will recommend action to the board. Subject to Business Judgment Rule.

Front 17

Duty of Care

Back 17

Act as a reasonably prudent person, unless the articles have limited director liability for breach.

Front 18

Ratification/Absolving

Back 18

Material Disclosure AND majority of independent directors (Board or committee of 2+) or a Majority of Independent Shareholders

Front 19

Indemnification of Directors and Officers

Back 19

NEVER when liable to corporation. ALWAYS for wins. MAYBE for settlement, or for acting good faith for the best interests of the corporation

Front 20

Who decided whether to grant permissive indemntiy?

Back 20

Majority of Independent Directors (Board or Committee), majority of independent shareholders, or special lawyer's opinion

Front 21

Shareholder Derivative Suit

Back 21

Suing to enforce corporation's case of action.
1. Contemporaneous stock ownership (1+ share at time of cause of action and through litigation).
2. Adequacy.
3. Demand on Directors (rejected or 90 days pass or futile in IL)

Front 22

Shareholder Voting by Proxy

Back 22

writing, signed by record shareholder, sent to secretary of corporation, authorizing, valid for 11 months

Front 23

When can a party revoke a right to vote by proxy?

Back 23

labeled irrevocable and coupled with an interest

Front 24

Who can call a specially noticed special meeting?

Back 24

board, president, or 10% of shareholders

Front 25

Notice for a Special Meeting

Back 25

special purpose, time, place

Front 26

Quorum for Shareholder Meetings

Back 26

A majority of shares at the time the meeting begins.

Front 27

Passing Vote at Shareholder Meeting

Back 27

Votes in favor exceed votes against.

Front 28

Voting Trust

Back 28

formal delegation of voting power to trustee, enforceable for up to 10 years

Front 29

Shareholder Voting Agreement

Back 29

Binding agreement in writing to vote a particular way.

Front 30

Cumulative Voting

Back 30

In a majority of states, no cumulative voting presumed. In IL, cumulative voting presumed.

Front 31

Common Share Stock

Back 31

get paid last and get paid equally

Front 32

Preferred Stock

Back 32

paid first

Front 33

Participating Stock

Back 33

get paid twice

Front 34

Closely Held Corporations

Back 34

1. Unanimous shareholder election evidenced in Articles, Bylaws, or Written Agreement.
2. Most states require a transfer restriction.

Front 35

Procedural Steps for Fundamental Corporate Change

Back 35

1. Resolution by Valid Board Meeting.
2. Notice of special meeting.
3. Approval by a Majority (2/3 in IL).

Front 36

Rights of Appraisal

Back 36

1. Written notice of objection and intent to demand payment before vote.
2. Not vote in favor of the proposed change.
3. Make prompt written demand.

Front 37

10(b) Securities Exchange Act

Back 37

1. Scienter
2. Deception (Liar/Insider Trading)
3. Sale or purchase of securities.
4. Reliance.
5. Causation.

Front 38

16(b)

Back 38

Short Swing Trading.
1. Big corporation.
2. Big shot defendant.
3. Sale or purchase within six moths.
Strict liability.

Front 39

Sarbanes-Oxley Act

Back 39

Willifully certifying false reports to the SEC.