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25 Cards in this Set
- Front
- Back
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Corporations
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Corporations
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Who controls a corporation?
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Unless stated otherwise in bylaws or CoF, a board of directors
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What documents are necessary to form a corporation?
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- CoF, containing purpose and structure of corp
- bylaws, amendable by board unless otherwise stated |
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What is a de facto corporation?
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If there is a defect in the filing process, there may still be limited liability based on de facto corp
- must be good faith |
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When can the corporate veil be pierced?
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1. corporate formalities ignored and injustice resulted
2. corp. inadequately capitalized OR 3. necessary to prevent fraud Only applies to active shareholders. Passive investors never liable. |
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What is a corporation by estoppel?
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In a K sitation, parties have acted as if there is a corporation.
- This doctrine is questionable in TX |
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When will a promoter forming a corporation be liable under a K?
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Usually. If a promoter is organizing a corporation and contracts under its name, there is no corp yet to be bound
- promoter is usually personally liable in this case |
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What is a stock issuance?
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When a corp sells its own stock
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What is a subscription agreement?
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Offer to buy stock from a corporation
- pre-incorp: irrevocable for 6 months - post-incorp: revocable at any time - if board accepts offer, corp and sub are bound - sub buys stock, becomes a shareholder |
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What is watered stock?
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- stock issued for less than par value
- ex. to an executive for $1 when par is $5 - buyer can be personally liable - stock can be traded for services. board determines value - valid unless actual fraud |
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What is the duty of loyalty?
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- Directors must act in GF and with reas belief that actions in corp's best interest
- cannot compete w/o approval of disinterested Ds (constructive trust is remedy) - cannot usurp corporate opportunity (unless tells board and board passes) |
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Can a corporation indemnify a D or O?
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Only if D/O not liable for willful/intentional misconduct
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What is a derivative suit?
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- S suing on behalf of corp (ex. S suing board for usurping corp opp)
- If S wins derivative suit, corp gets the recovery - S gets attorney fees |
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What is a voting trust?
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- written agreement controlling how shares will be voted
- legal title to shares to voting trustee - copy of trust agreement to corp |
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What is a voting agreement?
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- writing detailing agreement
- sent to corp |
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What shareholders have a right to inspect a corp's books?
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1. any S for at least 6 months
2. owns at least 5% and states a proper purpose in writing |
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What are the distributions to different types of shares?
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- common stock: split evenly
- preferred stock: gets paid first - preferred part. stock: paid first, and paid w/ common stock (double dip) - preferred cum. stock: paid first, and if div. skipped one year, made up the next |
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What funds are eligible for distribution to shareholders?
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- surplus (assets - liabilities - stated capital)
- stated capital NEVER eligible |
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What are the requirements for a fundamental corporate change?
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1. board adopts resolution
2. board submits written notice to Ss w/in 21 days 3. Ss must approve |
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What are the requirements to amend the CoF?
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1. board action
2. Sh approval of 2/3 of all shares entitled to vote |
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What are the requirements to approve a merger?
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1. board action
2. Sh approval (2/3 entitled unless a 90% owned sub of parent) |
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What are the requirements to approve a conversion?
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1. board action
2. 2/3 Shs entitled to vote |
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What are the requirements to bring a derivative suit?
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1. stock ownership
2. fairly and adequately represent corp's interests 3. must make written demand on Ds that the corp bring the suit 4. must join corp as a party in the case |
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What is necessary for a corporation to act?
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1. majority vote by the board (bylaws or CoF can change this)
2. at a meeting where a quorum (majority of directors) are present 3. If not a regular meeting, Ds must have notice |
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What must a certification of formation contain?
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1. name of corp
2. names and addresses of initial Ds 3. purpose of corp ("any lawful purpose") 4. duration (can be perpetual) 5. corp stock structure and S rights 6. name and address of corp agent and each organizer |
