Corporations

Front 1

VOTING - REGULAR ISSUES

What is required for their approval?

Back 1

VOTING - REGULAR ISSUES

Can be approved by a MAJORITY OF SHARES PRESENT AT A MEETING, so long as there is a QUORUM

Front 2

VOTING - FUNDAMENTAL CHANGES

What is required for their approval?

Back 2

VOTING - FUNDAMENTAL CHANGES

Must be approved by 2/3 OF ALL OUTSTANDING SHARES ENTITLED TO VOTE (NOT just those represented at a meeting)

Front 3

A majority of shares entitled to vote

Back 3

QUORUM: A majority of shares entitled to vote

* However, the articles can provide for a greater/lesser # than a majority, but CANNOT permit < 1/3 of the shares entitled to vote to constitute a quorum

Front 4

VOTING LIST

At least ____ DAYS before a meeting, the corporation must must make the voting list available to SH's entitled to vote.

Back 4

VOTING LIST

At least 10 DAYS before a meeting, the corporation must must make the voting list available to SH's entitled to vote.

Front 5

VOTING LIST

GENERAL RULE: Any ___________ has the right to inspect it.

EXCEPTION: If corporation is publicly traded, shareholder CANNOT inspect voting list UNLESS he has owned stock for at least ________ OR owns at least ___.

Back 5

VOTING LIST

GENERAL RULE: Any SHAREHOLDER has the right to inspect it.

EXCEPTION: If corporation is publicly traded, shareholder CANNOT inspect voting list UNLESS he has owned stock for at least 6 MONTHS OR owns at least 5%.

Front 6

VOTING - PROXIES

General rule: _________ at will.

Irrevocable if: (1) Proxy _____________ states that it's irrevocable; and (2) it's _______ w/ an interest.

Back 6

VOTING - PROXIES

General rule: REVOCABLE at will.

Irrevocable if: (1) Proxy CONSPICUOUSLY states that it's irrevocable; and (2) it's COUPLED w/ an interest.

Front 7

VOTING - PROXIES

Requirements:

(1) IN ___________;

(2) SIGNED BY A ___________;

(3) Directed to CORPORATE ___________;

(4) Authorizing another person to _____ on the shares.

Valid ___ MONTHS, unless it says otherwise.

Back 7

VOTING - PROXIES

Requirements:

(1) IN WRITING;

(2) SIGNED BY A SHAREHOLDER;

(3) Directed to CORPORATE SECRETARY;

(4) Authorizing another person to VOTE on the shares.

Valid 11 MONTHS, unless it says otherwise.

Front 8

VOTING TRUST

________ AGREEMENT filed w/ corporation


_______ TITLE to shares transferred to trustee


___________ retain other rights


Valid ___ YEARS maximum

Back 8

VOTING TRUST

WRITTEN AGREEMENT filed w/ corporation


LEGAL TITLE to shares transferred to trustee


SHAREHOLDERS retain other rights


Valid 10 YEARS maximum

Front 9

SHAREHOLDER AGREEMENTS

Only if _________ TRADED CORPORATION

Valid for ___ YEARS

__________ can agree to change corporate governance

Requirements:

Approved by all ____________

Written agreement or included in articles or ________

* NO BASIS FOR __________

Back 9

SHAREHOLDER AGREEMENTS

Only if PUBLICLY TRADED CORPORATION

Valid for 10 YEARS

SHAREHOLDERS can agree to change corporate governance

Requirements:

Approved by all SHAREHOLDERS

Written agreement or included in articles or BYLAWS

* NO BASIS FOR PIERCING

Front 10

VOTING TRUST

________ AGREEMENT filed w/ corporation

_______ TITLE to shares transferred to trustee

___________ retain other rights

Valid ___ YEARS maximum

Back 10

VOTING TRUST

WRITTEN AGREEMENT filed w/ corporation

LEGAL TITLE to shares transferred to trustee

SHAREHOLDERS retain other rights

Valid 10 YEARS maximum

Front 11

Right of an existing SH to maintain her percentage of ownership by buying additional stock in the corporation when there is a new issuance of stock for cash

Back 11

PREEMPTIVE RIGHT: Right of an existing SH to maintain her % of ownership by buying additional stock in the corporation when there is a new issuance of stock for cash

Front 12

If the articles of corporation are silent as to preemptive rights, what result?

Back 12

DEFAULT RULE: If articles of corporation are silent as to preemptive rights, then the SH has them!

*Only applies to VOTING STOCK

Front 13

Shareholder suing to enforce the corporation's COA

Back 13

DERIVATIVE SUIT: Shareholder suing to enforce the corporation's COA

Front 14

If a SH is successful in a derivative suit, the $ judgment goes to the ____________.

Back 14

If a SH is successful in a derivative suit, the $ judgment goes to the CORPORATION.

Front 15

REQUIREMENTS FOR SHAREHOLDER DERIVATIVE SUITS

What prerequisites and procedural steps are required to effect such a suit? (list 2)

Back 15

REQUIREMENTS FOR SHAREHOLDER DERIVATIVE SUITS

(1) STANDING

(2) DEMAND

Front 16

SHAREHOLDER DERIVATIVE SUITS - STANDING

(1) SH at the time of the _________; or

(2) Became a SH by ________ OF LAW from someone who was a SH at the time of the wrongdoing; or

(3) Became a SH before public disclosure and w/o ACTUAL _________; and

(4) Fairly and adequately REPRESENTS THE _________ of the corporation.

Back 16

SHAREHOLDER DERIVATIVE SUITS - STANDING

(1) SH at the time of the WRONGDOING; or

(2) Became a SH by OPERATION OF LAW from someone who was a SH at the time of the wrongdoing; or

(3) Became a SH before public disclosure and w/o ACTUAL KNOWLEDGE; and

(4) Fairly and adequately REPRESENTS THE INTERESTS of the corporation.

Front 17

SHAREHOLDER DERIVATIVE SUITS - DEMAND

VA is a _________ DEMAND STATE.

P must make a demand on the BOARD OF DIRECTORS.

Cannot file suit until either:

(1) ___ DAYS have passed; or

(2) Demand is _________,

UNLESS

(3) _________ HARM.


Suit CANNOT proceed against recommendation of:

(1) __________ DECISION-MAKER after

(a) INFORMED; and

(b) GOOD ______ REVIEW.

Back 17

SHAREHOLDER DERIVATIVE SUITS - DEMAND

VA is a UNIVERSAL DEMAND STATE.

P must make a demand on the BOARD OF DIRECTORS.

Cannot file suit until either:

(1) 90 DAYS have passed; or

(2) Demand is REJECTED,

UNLESS

(3) IRREPARABLE HARM.


Suit CANNOT proceed against recommendation of:

(1) INDEPENDENT DECISION-MAKER after

(a) INFORMED; and

(b) GOOD FAITH REVIEW.

Front 18

FUNDAMENTAL CORPORATE CHANGES

List 6.

Back 18

FUNDAMENTAL CORPORATE CHANGES

(1) Merger

(2) Consolidation

(3) Share exchange

(4) Dissolution

(5) Sale of substantially all of the assets

(6) Amendments to the articles (non-minor)

Front 19

FUNDAMENTAL CORPORATE CHANGE - MERGER OR CONSOLIDATION

Is a new or surviving corporation responsible for all previous liabilities?

Back 19

FUNDAMENTAL CORPORATE CHANGE - MERGER OR CONSOLIDATION

YES! A new or surviving corporation is responsible for all previous liabilities and may be substituted into lawsuit.

Front 20

TRUE/FALSE:

After MERGER or CONSOLIDATION, a new or surviving corporation IS responsible for all previous liabilities.

Back 20

TRUE!

After MERGER or CONSOLIDATION, a new or surviving corporation IS responsible for all previous liabilities.

Front 21

FUNDAMENTAL CORPORATE CHANGE - SALE OF ASSETS

SUCCESSOR LIABILITY

General rule: When one corporation buys the assets of another corporation, the purchasing corporation (does / does NOT) assume liabilities.

Back 21

FUNDAMENTAL CORPORATE CHANGE - SALE OF ASSETS

SUCCESSOR LIABILITY

General rule: When one corporation buys the assets of another corporation, the purchasing corporation does NOT assume liabilities.

Front 22

TRUE/FALSE: When one corporation buys the assets of another corporation, the purchasing corporation does NOT assume liabilities.

Back 22

TRUE!

When one corporation buys the assets of another corporation, the purchasing corporation does NOT assume liabilities.

Front 23

FUNDAMENTAL CORPORATE CHANGE - SUCCESSOR LIABILITY

EXCEPTIONS: Purchasing corporation DOES assume liabilities:

(1) BY __________;

(2) DE FACTO __________;

(3) ________ on creditors;

(4) "MERE __________"
(a) Identity of officers/directors
(b) Same business
(c) Less than adequate consideration.

Back 23

FUNDAMENTAL CORPORATE CHANGE - SUCCESSOR LIABILITY

EXCEPTIONS: Purchasing corporation DOES assume liabilities:

(1) BY AGREEMENT (express or implied);

(2) DE FACTO MERGER;

(3) FRAUD on creditors;

(4) "MERE CONTINUATION"
(a) Identity of officers/directors
(b) Same business
(c) Less than adequate consideration.

Front 24

JUDICIAL DISSOLUTION

List 3 instances.

Back 24

JUDICIAL DISSOLUTION

(1) Deadlock

(2) Oppressive conduct

(3) Waste of assets

Front 25

LIMITED LIABILITY COMPANIES

Two major characteristics:

(1) "PASS THROUGH" __________

(2) __________ LIABILITY for MEMBERS

Back 25

LIMITED LIABILITY COMPANIES

Two major characteristics:

(1) "PASS THROUGH" TAXATION

(2) LIMITED LIABILITY for MEMBERS

Front 26

LIMITED LIABILITY COMPANIES

FORMATION: Organizer files _______ OF ___________ w/ the SCC

TRANSFERABILITY: Restricted - ________ VOTE needed

Back 26

LIMITED LIABILITY COMPANIES

FORMATION: Organizer files ARTICLES OF ORGANIZATION w/ the SCC

TRANSFERABILITY: Restricted - MAJORITY VOTE needed

Front 27

Foreign corporations need a _________ OF __________ from the SCC to transact business in VA.

Back 27

Foreign corporations need a CERTIFICATE OF AUTHORITY from the SCC to transact business in VA.

Front 28

TRUE/FALSE:

A non-professional CANNOT own stock in a professional corporation.

Back 28

TRUE!

A non-professional CANNOT own stock in a professional corporation!

Front 29

An individual in a professional corporation (is / is NOT) personally liable for his own malpractice.

Back 29

YES!

An individual in a professional corporation is personally liable for his own malpractice.

Front 30

VOTING - REGULAR ISSUES

To be approved, what is required?

Back 30

VOTING - REGULAR ISSUES

Must be approved by a MAJORITY of shares PRESENT AT A MEETING, as long as there is a quorum


QUORUM: A majority of shares entitled to vote

*NOTE: The articles may provide, however, for a lesser or greater number than a majority, but CANNOT permit less than 1/3 of the shares entitled to vote to constitute a quorum

Front 31

VOTING - What vote is required for approval?

1. Regular issues

2. Fundamental corporate change

Back 31

VOTING

1. Regular issues: Majority of shares PRESENT AT A MEETING, as long as there is a quorum

2. Fundamental corporate change: 2/3 of ALL OUTSTANDING SHARES entitled to vote, not just those represented at a meeting

Front 32

AMENDMENTS TO ARTICLES

The board must make a finding that the proposed amendments are _____________________________
____________

Back 32

AMENDMENTS TO ARTICLES

The board must make a finding that the proposed amendments are IN THE BEST INTERESTS OF THE CORPORATION

Front 33

List 4 fundamental corporate changes.

Back 33

1. Charter amendments

2. Mergers + consolidations

3. Sale of assets

4. Dissolution

Front 34

MERGER vs. CONSOLIDATION

Back 34

MERGER: When one existing corporation merges into another existing corporation

CONSOLIDATION: When two or more existing corporations combine to form a new corporation

Front 35

ELIGIBILITY TO VOTE

Who is eligible to vote?

Back 35

ELIGIBILITY TO VOTE

Holders of shares of record as of the record date


RECORD DATE: The day the eligibility to vote is determined. May NOT be > 70 days prior to the meeting. Set by the board of directors if not fixed by the bylaws.

Front 36

Shares may be voted in 2 ways. What are they?

Back 36

In person

By proxy

Front 37

To how many votes is each share entitled?

Back 37

Each outstanding share (regardless of class) is entitled to ONE VOTE (unless the articles allow otherwise).

Front 38

QUORUM: Majority of shares entitled to vote (represented in person or by proxy).

The articles may provide, however, for a < or > number than a majority, but CANNOT permit < 1/3 of the shares entitled to vote to constitute a quorum

If a quorum is present, an action is approved if the votes cast in favor of the action exceed the votes cast opposing the action

Back 38

If there is no quorum, the meeting may adjourn

One CANNOT break a quorum by leaving the meeting

Front 39

PROXIES

When do they expire?

Back 39

PROXIES

Expire after 11 months from their date (unless provided otherwise in the proxy)

*Proxy may be irrevocable if the appointment is coupled w/ an interest

Front 40

VOTING LIST

When must it be made available?

Back 40

VOTING LIST

Must be made available at least 10 days before a meeting

NOTE: If shares are traded on a national exchange, only a SH of record for at least 6 months or who owns at least 5% of the corporation's shares may inspect

Front 41

VOTING LIST - WHO MAY INSPECT?

Back 41

VOTING LIST - WHO MAY INSPECT?

If traded on a national exchange,

(1) SH of record for at least 6 months; or

(2) Who owns at least 5% of the corporation's shares

Front 42

VOTING TRUST: Agreement by SH's where _____ TITLE is conferred to a TRUSTEE and the SHAREHOLDERS keep _________ TITLE

Back 42

VOTING TRUST: Agreement by SH's where LEGAL TITLE is conferred to a TRUSTEE and the SHAREHOLDERS keep EQUITABLE TITLE

May NOT exceed 10 years!

Must be filed w/ the corporation!

Its purpose is to vote as the signers direct

Front 43

VOTING AGREEMENT

What is it?

Back 43

VOTING AGREEMENT: Agreement among SH'S to vote their shares as the majority of signers direct

Front 44

SHAREHOLDER AGREEMENTS

Corporations w/ 300 or fewer SH'S may enter into agreements to __________________________________________________________________________

Back 44

SHAREHOLDER AGREEMENTS

Corporations w/ 300 or fewer SH'S may enter into agreements to RUN THE CORPORATION IN ANY MANNER THAT THEY DESIRE

Ex. Running the corporation in the same manner as a partnership would be run

Front 45

SH'S RIGHTS

Upon _ DAYS advance written notice, a SH may _______ and ____ certain corporate documents at the corporation's _________ _______.

Back 45

SH'S RIGHTS

Upon 5 DAYS advance written notice, a SH may INSPECT and COPY certain corporate documents at the corporation's PRINCIPAL OFFICE.

*Who? Any SH who has been a SH of record for at least 6 MONTHS or who owns at least 5% of the outstanding stock of a corporation

May examine the books and records of the corporation for ANY PROPER PURPOSE

MANDAMUS is the remedy upon failure to produce records for inspection

Front 46

BOARD OF DIRECTORS - POWERS

o __________________

o __________________

o __________________

o __________________

Back 46

BOARD OF DIRECTORS - POWERS

o Manages corporation

o Elects officers

o Adopts initial bylaws

o Amends bylaws

Front 47

DIRECTOR

Need NOT be a VA resident or shareholder

Must be at least ONE director

Back 47

DIRECTOR

Need NOT be a VA resident or shareholder

Must be at least ONE director

Front 48

Can directors be removed? By whom?

Back 48

W/ or w/o out cause, shareholders (by a majority of shares entitled to vote) may remove a director at a meeting called expressly for that purpose

Front 49

DIRECTORS - VOTE

A majority of directors constitutes a quorum w/ NO PROXY VOTING ALLOWED

The act of a majority of directors present at a meeting at which a quorum is present is effective as an act of the board (unless the articles or bylaws specify a greater number)

The vote of an interested director does not count towards a quorum

Directors CANNOT vote by proxy or enter into voting agreements

Back 49

DIRECTORS - VOTE

A majority of directors constitutes a quorum w/ NO PROXY VOTING ALLOWED

The act of a majority of directors present at a meeting at which a quorum is present is effective as an act of the board (unless the articles or bylaws specify a greater number)

The vote of an interested director does not count towards a quorum

Directors CANNOT vote by proxy or enter into voting agreements

Front 50

NOTE: A director does NOT have the power to bind the corporation on EXTRAORDINARY K's unless there is ACTUAL AUTHORITY.

Back 50

NOTE: A director does NOT have the power to bind the corporation on EXTRAORDINARY K's unless there is ACTUAL AUTHORITY.

Front 51

ACTUAL AUTHORITY generally can arise ONLY IF:

(1) Proper notice was given for a directors' meeting

(2) Quorum was present

(3) Majority of directors approved the action

Back 51

ACTUAL AUTHORITY generally can arise ONLY IF:

(1) Proper notice was given for a directors' meeting

(2) Quorum was present

(3) Majority of directors approved the action

Front 52

DUTY OF CARE

A director must discharge his duties in accordance w/ his good faith business judgment of the best interests of the corporation

Back 52

DUTY OF CARE

A director must discharge his duties in accordance w/ his good faith business judgment of the best interests of the corporation