Corps Real

Front 1

Types of corps

Back 1

1. general business corp
2. close corp
3. foreign cor
4. professional corp

Front 2

features of general business corp

Back 2

1. must be organized in compliance with state statute

2. separate legal entity with perpetual existence

3. shareholders that can transfer shares and are usually not held personally liable

Front 3

Close corporation

1. defined

2. duty of loyalty

3. less harmful alternatives

Back 3

1.
- small number of shareholders (2-30)

- no ready market for corporate stock (not publicly traded

- substantial majoriyt shareholder participation in managment direction adn operations

2. duty of utmost good faith and loyalty is more stringent than other corps

- offers to purchase shares
from controlling shareholder must apply to minority shareholders

- no misappropriation of goodwill: can't use superior power to cause corp to be dissolved and start new corp with old customers

-- no termination of employment of minority shareholder without legitimate business reason

3. court will weight legitimate business purpose of any corporate action against practicality of less harmful alternatives

Front 4

Professional corporations

Back 4

Organized to provide personal services performed by members of profession

1. all members must be licensed to practice profession

2. doesn't shield from personal liability for professional services rendered

Front 5

Foreign corporation

1. defined
2. reqs

Back 5

1. formed under law of another jurisdiction

2. Foreign corps doing business in MA must:

- file cert w/ secretary of state w/in 10 days of commencing business in ma
- file report of condition each year
- must have registered agent that is MA resident, domestic corp, foreign corp registered in MA w/ offic ein MA

**doing business in MA:
- own/lease MA real estate
- activity in MA requiring performance of labor
- work on any structure, road in MA

-NOT bank account, meetings, proceedings

Front 6

when is business treated as corp?

Back 6

1. de jure corporation (formed in compliance with applicable laws)

2. de facto

3. by estoppel

Front 7

Requirements for forming a de jure corporation

Back 7

1. At least one incorporator
- signs and files articles of organization

2. Articles of incorporation
- name w/ corp. incorp. co. or ltd.
- number of shares authorized
- name/address of incorporators

3. supplemental form
- name/address of corp's registered agent
- name/address directors and officers

Front 8

Corp acting ultra vires

1. defined
2. effect

Back 8

1.
undertaking activities beyond scope of stated purpose (only if articles of organization have business purpose, but not necessary)

2.
shareholder (enjoin), state (dissolve corp), corp (damages against individ. at fault) may sue

Front 9

when can corp lend money to director?

Back 9

1. approved by holders of majority of outstanding voting shares, excluding those of benefiting director

OR

2. board determines that loan benefits corp and specifically approves it.

Front 10

1. When does corp existence begin?

2. when does de jure corp become operative?

Back 10

1. when articles submitted to state, found to comply with law, and filed.

2. when organizational mtg to adopt bylaws, elect officers

Front 11

Reason to incorporate

Back 11

To avoid personal liability for obligations of business

--available in de jure, de facto corps and corps by estoppel

Front 12

De facto corp
1. reqs
2. rights

Back 12

1.
(a) could be legally incorporated under corporate law like MBCA

(b) good faith attempt to comply with state law (colorable compliance)

(c) must act like corporation

**individuals who purport to act on behalf of corp, while knowing it doesn't exist are personally liable

2. all rights and powers of de jure but subject to attack in proceeding by state

Front 13

Corporation by estoppel

Back 13

persons who treat an entity as a corporation will be estopped from later claiming that entity was not a corporation

* usually not available in torts cases because not treated as corporation

Front 14

When no corporate status, who is held liable

Back 14

Associates held liable as partners under joint and several liability

Front 15

Piercing the corporate veil defined

Back 15

shareholders, officers, and directors held personally liable for corporate obligations because

1) corporate formalities ignored

2) corp inadequately capitalized at outset

3) to prevent fraud

Front 16

Alter ego (ignoring corporate formalities)

1. relevance

2. defined

Back 16

1. relevant because grounds for piercing corporate veil and holding members liable

2. when shareholders treat assets of corp as their own AND results in basic injustice

Front 17

Alter Ego grounds for piercing corp veil?

1. one person dominates stock ownership in several corps

2. parent and subsidiary dont' observe formalities of separate corp procedures--eg hold meetings together, have overlapping directors

3. shareholders mix their financies with copr, fail to hold meetings and issue stock

Back 17

1. corps will not be responsible for others on this ground alone

2. yes, alter ego grounds for piercing coproate veil

3. yes alter ego

Front 18

Adequate capitalization

1. defined

2. why relevant

Back 18

1. unencumbered capital reasonably adequate for its prospective liabilities
--insolvency may be indicator

2. relevant bc failure of shareholders to adequately capitalize corp at outset is grounds for piercing corp veil

Front 19

Piercing of corporate veil based on need to prevent fraud

Back 19

When shareholder uses corps to avoid personal liability
AND
engages in other unequitable acts

e.g. to avoid covenant not to compete

Front 20

Liability when corporate shield pierced

Back 20

1. people active in management or operation of business will be held personally liable under theory of joint and several liability

2.

Front 21

Who may pierce corp veil?

Back 21

Often creditors and tort victims

Rarely contract cases and shareholders--they have chose to deal wiht corporation and had chance to investigate

Front 22

Where does corporate capital come from?

Back 22

Securities

1. debt securities: debt security holder had no ownership interest
- mortgage: secured
- debenture: unsecured

2. equity securities: becomes part owner of business as shareholder

Front 23

authorized shares

Back 23

shares described in corps articles
- corp can't sell more than authorized

Front 24

Issued and outstanding shares

Back 24

shares that have been sold to investors

Front 25

what are shares called that are reacquired by corp?

Back 25

revert from issued and outstanding shares

to authorized shares

Front 26

common shares

Back 26

when only one type of shares giving each shareholder an equal ownerhisp right

- no classes, or series within a class

Front 27

Requirements for having classes of stock

Back 27

1. articles must prescribe shares for each class and name them
2. desciberights preferences and limitations

Front 28

blank stock

Back 28

directors may reclassify unissued shares into shares of a different class or series

Shares subject to this power are blank stock

Front 29

1. fractional shares

2. scrip

Back 29

1.
certs representing fractions of shares

holders have rights of shareholders

2.
entitles holder to full share on surrendering enough scrip

don't have rights of shareholder unless provided in scrip

Front 30

Subscription agreement

Back 30

offer to purchase shares from corp

Front 31

Preincorporation subscriptions

1. defined
2. rules

Back 31

1. offer to purchase shares from corp

2.
- irrevocable by subscriber for 6 mths from date of subscribption or unless consent

- payable on demand from directors (when demand from all subscription holders) unless otherwise provided

- if no payment w/in 20 days of demand, corp may effect rescission or forfeiture

Front 32

Consideration requirements for stock

Back 32

1. any tangible or intangible property or benefit to corp

2. Board can make conclusive good faith determination of what consideration is adequate. No par value approach.

3. Articles of org can give par value for consideration. Only effective if specifically state that shares can't be sold for less than par. E.g. "the shares shall have a par value of 10 and may not be sold for less than par"