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52 Cards in this Set

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VOTING - REGULAR ISSUES

What is required for their approval?
VOTING - REGULAR ISSUES

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

What is required for their approval?
VOTING - FUNDAMENTAL CHANGES

Must be approved by 2/3 OF ALL OUTSTANDING SHARES ENTITLED TO VOTE (NOT just those represented at a meeting)
A majority of shares entitled to vote
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
VOTING LIST

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

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

General rule: _________ at will.

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

________ AGREEMENT filed w/ corporation


_______ TITLE to shares transferred to trustee


___________ retain other rights


Valid ___ YEARS maximum
VOTING TRUST

WRITTEN AGREEMENT filed w/ corporation


LEGAL TITLE to shares transferred to trustee


SHAREHOLDERS retain other rights


Valid 10 YEARS maximum
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 __________
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
VOTING TRUST

________ AGREEMENT filed w/ corporation

_______ TITLE to shares transferred to trustee

___________ retain other rights

Valid ___ YEARS maximum
VOTING TRUST

WRITTEN AGREEMENT filed w/ corporation

LEGAL TITLE to shares transferred to trustee

SHAREHOLDERS retain other rights

Valid 10 YEARS maximum
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
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
If the articles of corporation are silent as to preemptive rights, what result?
DEFAULT RULE: If articles of corporation are silent as to preemptive rights, then the SH has them!

*Only applies to VOTING STOCK
Shareholder suing to enforce the corporation's COA
DERIVATIVE SUIT: Shareholder suing to enforce the corporation's COA
If a SH is successful in a derivative suit, the $ judgment goes to the ____________.
If a SH is successful in a derivative suit, the $ judgment goes to the CORPORATION.
REQUIREMENTS FOR SHAREHOLDER DERIVATIVE SUITS

What prerequisites and procedural steps are required to effect such a suit? (list 2)
REQUIREMENTS FOR SHAREHOLDER DERIVATIVE SUITS

(1) STANDING

(2) DEMAND
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.
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.
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.
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.
FUNDAMENTAL CORPORATE CHANGES

List 6.
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)
FUNDAMENTAL CORPORATE CHANGE - MERGER OR CONSOLIDATION

Is a new or surviving corporation responsible for all previous liabilities?
FUNDAMENTAL CORPORATE CHANGE - MERGER OR CONSOLIDATION

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

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

After MERGER or CONSOLIDATION, a new or surviving corporation IS responsible for all previous liabilities.
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.
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.
TRUE/FALSE: When one corporation buys the assets of another corporation, the purchasing corporation does NOT assume liabilities.
TRUE!

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

List 3 instances.
JUDICIAL DISSOLUTION

(1) Deadlock

(2) Oppressive conduct

(3) Waste of assets
LIMITED LIABILITY COMPANIES

Two major characteristics:

(1) "PASS THROUGH" __________

(2) __________ LIABILITY for MEMBERS
LIMITED LIABILITY COMPANIES

Two major characteristics:

(1) "PASS THROUGH" TAXATION

(2) LIMITED LIABILITY for MEMBERS
LIMITED LIABILITY COMPANIES

FORMATION: Organizer files _______ OF ___________ w/ the SCC

TRANSFERABILITY: Restricted - ________ VOTE needed
LIMITED LIABILITY COMPANIES

FORMATION: Organizer files ARTICLES OF ORGANIZATION w/ the SCC

TRANSFERABILITY: Restricted - MAJORITY VOTE needed
Foreign corporations need a _________ OF __________ from the SCC to transact business in VA.
Foreign corporations need a CERTIFICATE OF AUTHORITY from the SCC to transact business in VA.
TRUE/FALSE:

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

A non-professional CANNOT own stock in a professional corporation!
An individual in a professional corporation (is / is NOT) personally liable for his own malpractice.
YES!

An individual in a professional corporation is personally liable for his own malpractice.
VOTING - REGULAR ISSUES

To be approved, what is required?
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
VOTING - What vote is required for approval?

1. Regular issues

2. Fundamental corporate change
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
AMENDMENTS TO ARTICLES

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

The board must make a finding that the proposed amendments are IN THE BEST INTERESTS OF THE CORPORATION
List 4 fundamental corporate changes.
1. Charter amendments

2. Mergers + consolidations

3. Sale of assets

4. Dissolution
MERGER vs. CONSOLIDATION
MERGER: When one existing corporation merges into another existing corporation

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

Who is eligible to vote?
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.
Shares may be voted in 2 ways. What are they?
In person

By proxy
To how many votes is each share entitled?
Each outstanding share (regardless of class) is entitled to ONE VOTE (unless the articles allow otherwise).
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
If there is no quorum, the meeting may adjourn

One CANNOT break a quorum by leaving the meeting
PROXIES

When do they expire?
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
VOTING LIST

When must it be made available?
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
VOTING LIST - WHO MAY INSPECT?
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
VOTING TRUST: Agreement by SH's where _____ TITLE is conferred to a TRUSTEE and the SHAREHOLDERS keep _________ TITLE
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
VOTING AGREEMENT

What is it?
VOTING AGREEMENT: Agreement among SH'S to vote their shares as the majority of signers direct
SHAREHOLDER AGREEMENTS

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

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

o __________________

o __________________

o __________________

o __________________
BOARD OF DIRECTORS - POWERS

o Manages corporation

o Elects officers

o Adopts initial bylaws

o Amends bylaws
DIRECTOR

Need NOT be a VA resident or shareholder

Must be at least ONE director
DIRECTOR

Need NOT be a VA resident or shareholder

Must be at least ONE director
Can directors be removed? By whom?
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
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
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
NOTE: A director does NOT have the power to bind the corporation on EXTRAORDINARY K's unless there is ACTUAL AUTHORITY.
NOTE: A director does NOT have the power to bind the corporation on EXTRAORDINARY K's unless there is ACTUAL AUTHORITY.
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
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
DUTY OF CARE

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

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