Flbar Corporations Flashcards

Front 1

Advantages of Corporation

Back 1

1. Limited Liability of Shareholders
2. Centralized management
3. Continuation of Existence
4. Ease of Transferring Ownership
5. Access to capital through sale of shares

Front 2

Tax Purposes =

Back 2

Double taxation (corporation & shareholders) unless Subchapter S IRS filing for small businesses

Front 3

Political Contributions

Back 3

-State & local allowed subject to limitations
-Federal not allowed

Front 4

Liability of Corp.

Back 4

Liable for torts & contracts committed by agents (if intentional &/or gross negligence then may be liable for punitive damage but corp. must have condoned or participated in misconduct)

Front 5

Articles of Incorporation (MUST INCLUDE)

Back 5

-corp. name ("co.", "corp." or "Inc.")
-# of shares
-whether shareholders have preemptive rights
-address of registered office
-name of registered agent & written acceptance
-name/address of incorporators
-address of principal office

Front 6

Articles of Incorporation (MAY INCLUDE)

Back 6

-# of directors
-par value of stock
-personal liability of shareholders
-initial purposes
-any other provisions

Front 7

Authorized Shares
Issued vs. Outstanding shares

Back 7

-Authorized= max # shares a corp. is permitted to sell
-Issued shares: # shares a corp. has actually sold [may be less than # authorized - so corp. can sell more shares w/o amending articles]
Outstanding=have not been reacquired or bought back by corp. [may be less than # issued]

Front 8

Default Rules for Corp.'s

Back 8

-Perpetual duration
-same powers as individual
-lawful purpose

Front 9

If narrow purpose clause
i.e. purpose is "to sell motorcycles"

Back 9

If corp. sells books, then state or shareholders may seek injunction (officers & directors are liable)
--this would be an ultra vires K == VALID BUT may be enjoined

Front 10

Incorporator

Back 10

can be any person or entity
-submits articles to DOS (corp. existence begins when article filed) - conclusive proof of de jure corp.
-holds organizational meeting to elect directors then incorporators or directors can adopt bylaws & elect officers, etc...
-must file annual report

Front 11

De Jure Corporation Status

Back 11

-separate entity (legal person)
-limited liability of shareholders (may lose capital investment; not personally liable for debts) better than GP
-Internal Affairs Rule: governed by law of state in which incorporated.

Front 12

De Facto Corp.

Back 12

requires state corporation statute; good faith attempt to comply with it & an act on corporation's behalf . . . business is treated as a corp. except in action by state

Front 13

Corporation by Estoppel

Back 13

one who deals w/ business as if it were a corp. may be estopped from arguing its not a corporation

Front 14

Exception to De facto & estoppel

Back 14

- if shareholders KNOW articles have not been filed, they are liable

Front 15

By-Laws

Back 15

-Not required for dejure corp.
-incorporator or board adopts initial by-laws, unless power reserved to shareholders in articles
-amendment: either board or shareholders may amend bylaws unless power reserved
-conflict: if by laws and articles conflict = ARTICLES CONTROL!

Front 16

Preincorporation K's - by Promoter

Back 16

Promoter: person acting on behalf of corp. before formation
-corp. not liable on pre inc. K's until it ADOPTS the K as its own, expressly or impliedly
-promoter remains liable at all times on preinc. K unless novation (agreement b/w corp. & 3d party that corp. substituting promoter)
-NO FIDUCIARY DUTY if sole shareholder @ time of transaction

Front 17

Secret Profit Rule

Back 17

-Promoter cannot make secret profit
(can make profit is DISCLOSED)
-if property acquired before becoming promoter - corp. can recover (price it paid - FMV)
-if property acquired AFTER becoming promoter - corp. can recover (price it paid - price promoter paid)

Front 18

Foreign Corp.'s

Back 18

-if doing business in florida (intrastate transactions on a regular basis) - then MUST BE QUALIFIED TO DO BUSINESS IN FL!
-qualifying = certificate of authority from DOS [info. from articles + good standing in home state]

Front 19

Penalty for Transacting business if nonqualified foreign corp.

Back 19

-subject to civil fines & cannot bring suit in FLORIDA, but CAN BE SUED!

Front 20

Issuance of Stock

Back 20

-issuance = when corp. sells its own stock

Front 21

Subscriptions =

Back 21

signed, written offer to buy stock from corp.

Front 22

Revocability of Subscription

Back 22

-depends when subscription executed
-Pre-Inc: irrevocable for 6 months unless provides otherwise or all subscribers consent
-Post-Inc." revocable until board accepts offer

Front 23

Enforceability of Subscription

Back 23

-once board accepts it!
-corp. may sue subscriber or sell shares to someone else if payment NOT made w/in 20 days

Front 24

Consideration for issuance of stock

Back 24

-any tangible or intangible property or benefit to the corp. is sufficient

Front 25

Amount of Consideration

Back 25

-only important if shares have "par value"
-PAR VALUE = to protect corp.'s creditors - NO MANDATORY PAR VALUE IN FLORIDA!! but corp. can still elect to have par value

Front 26

Par Value

Back 26

MINIMUM ISSUANCE PRICE (NOT FMV)
-stated capital = total par value for issued shares
-capital surplus = surplus profit generated by issuance of shares

Front 27

Paying for Par Value with Property

Back 27

-as long as the property is worth the minimum par value
-board must determine that consideration is ADEQUATE - need not assign a dollar value; once consideration received, shares are considered fully paid and non assessable

Front 28

Watered Stock

Back 28

-paying less than par value for shares
-can recover water from original purchaser of watered stock and from directors ONLY IF directors knew property was worth less than par value
-SUBSEQUENT BFP NOT LIABLE FOR WATERED STOCK!

Front 29

Treasury Shares

Back 29

par value shares reacquired by a corp.
-can cancel or resell them w/o regard to par value since resale is NOT considered issuance

Front 30

Preemptive Rights

Back 30

-let an existing shareholder maintain her % of ownership interest by buying stock when new stock is issued
-LIMITED AVAILABILITY - available ONLY IF
1. articles provides preemptive rts
2. issuance is for cash
3. corp. has been in existence for at least 6 months
4. shareholder owns common stock

Front 31

Directors

Back 31

-Statutory reqmt's:
1. One or more natural persons 18yo
2. Election: shareholders elect directors @ annual meeting
3. Removal: w/ or w/o cause unless articles say may be removed only for cause - but director elected by particular class of shareholders may be removed only by that class.
4. Vacancies: either directors or shareholders fill vacancy on board
5. Meetings

Front 32

Board of Directors Meetings

Back 32

-REQUIRED unless all directors consent in writing
-Notice of regular meeting not required, TWO DAYS NOTICE FOR special meeting
-Quorum
-Voting

Front 33

Quorum

Back 33

-MAJORITY OF DIRECTORS ON BOARD unless:
-greater # req'd in articles or bylaws
-lesser # in articles (minimum 1/3)
-ALWAYS CHECK FOR QUORUM WHEN VOTE TAKEN (director can break quorum)

Front 34

Voting:

Back 34

-only need majority vote of directors PRESENT to pass resolution unless:
-greater # if bylaws or articles provide
-i.e. 8 of 15 directors present - need 5 for majority vote

Front 35

Voting By Proxy or Agreement

Back 35

-directors CANNOT vote by proxy or agreement

Front 36

Role of Directors (and delegation to committees)

Back 36

Management: manage business
Delegation: delegate management functions to committee; but committee cannot amend bylaws, fill vacancies or authorize issuance, sale or reacquisition of shares except w/in limits specified by board

Front 37

Directors' Duty of Care

Back 37

-ordinarily prudent person under similar circumstances
-Nonfeasance: does nothing - not liable bc hard to show doing nothing caused harm
-Misfeasance: does something causing loss - protected by business rule prob not liable

Front 38

Directors' Duty of Loyalty

Back 38

-must act in GOOD FAITH and with reasonable belief that what she does is in CORP.'S BEST INTEREST

Front 39

Interested Director Transaction

Back 39

-deal b/w corp. & one of its directors or directors close relative or another business of director
-can be set aside UNLESS director shows:
1. fair to the corp. OR
2. approved after full disclosure of conflict by maj. of all disinterested directors or a maj. of disinterested shares
3. interested director can vote but doesn't count!

Front 40

Competing Venture

Back 40

NOT GOOD - unless board permits

Front 41

Corporate Opportunity

Back 41

-Director cannot usurp a "corporate opportunity" for himself
-must present opportunity to board and give them chance to turn it down
REMEDY: if director still has property, MUST SELL IT TO CORP. AT HIS COST! If already sold for profit, CORP. GETS PROFIT

Front 42

Other State Law Bases of Director Liability

Back 42

1. Ultra Vires - outside scope of purpose (liable for losses caused by director)
2. Loans to directors allowed if board reas. expects corp. to benefit (Treated as Interested Director Transaction)
3. Liability - director who is present is presumed to concur w/board action unless objects to holding meeting or votes against or abstains from action (ABSENT DIRECTORS NOT LIABLE)
4. Defense: directors can rely in good faith

Front 43

Limit on Director Liability for Breach of Fiduciary Duty *** VERY UNIQUE
MANDATORY IMMUNITY FROM LIABILITY
-available even against 3d parties

Back 43

-not automatically liable for for damages for breaching duty of care or loyalty
-liable only if also violated criminal law; received improper personal benefit; authorized unlawful dividend; or engaged in reckless or willful misconduct.

Front 44

Officers

Back 44

Same duty of care and loyalty as directors
-Corporate Agents
-no particular officers req'd - can hold multiple offices
-Selected and removed by directors
-liable to director for breach of K if remove before K over

Front 45

Sarbanes-Oxley Act

Back 45

-"S-OX"
-CEO & CFO must certify reports filed with SEC fairly represent the corp.'s financial position (civil + criminal penalties) imposed for willfully certifying an untrue report

Front 46

Indemnification of Directors & Officers

Back 46

-person sued for acting in capacity as officer or director seeks reimbursement from corp. for costs, attorneys fees, a judgment and/or settlement.
-INDEMNIFICATION PROHIBITED IF: director held liable to corp. or received improper benefit or violated crim. law

Front 47

Mandatory Indemnification

Back 47

If director wholly unsuccessful on the merits or otherwise

Front 48

Permissive Indemnification

Back 48

1. Corp. permitted to indemnify director for anything else (i.e. settlement)
2. Director must show acted in good faith + reas. belief that actions were in company's best interests
3. Disinterested directors, shareholders, committee or independent legal counsel determine eligibility

Front 49

Judicial Discretion

Back 49

-court can order indemnification if it feels its equitable to do so.

Front 50

Shareholder Liability

Back 50

-not liable for debts
-PCV (pierce corporate veil) to hold personally liable to avoid "FRAUD OR IMPROPER CONDUCT"

Front 51

Alter Ego Liability

Back 51

-If shareholder commingles personal & private funds
-fact driven analysis

Front 52

Gross Undercapitalization

Back 52

1) gross undercapitalization when corp. formed;
2) no insurance though business is extremely dangerous
(i.e. haul nuclear waste and no insurance)

Front 53

Deep Rock Doctrine

Back 53

EQUITABLE SUBORDINATION
-inside/outside creditors are treated on par
-court can subordinate shareholder claims against corp. if corp. is too thinly capitalized
-PAY OFF CREDITORS, then shareholders with any $$ left that they loaned corp.

Front 54

Shareholder management

Back 54

-can eliminate board & run corp. via unanimous shareholder agreement if 100 or fewer shareholders (& shares not publicly traded)
-managing shareholders have SAME FIDUCIARY DUTIES AS DIRECTORS

Front 55

Shareholder Derivative Suits=

Back 55

shareholder sues to enforce rights of the corp. . . if corp. could have brought suit its probably a derivative suit

Front 56

Recovery in shareholder derivative suit

Back 56

goes to corporation; however successful P receives attorneys fees & expenses

Front 57

Requirements for Shareholders Derivative Suit

Back 57

1. Contemporaneous Ownership: shareholder must have owned stock when claim AROSE or acquired it by operation of law (divorce or inheritance) from someone who did, AND continue to own throughout lawsuit
2. Demand: always make demand on board that corp. bring suit
3. Dismissal
4. Expenses

Front 58

Dismissal of Shareholders Derivative Suit

Back 58

-disinterested directors or disinterested committee can move to dismiss derivative suit if find after REASONABLE INVESTIGATION it is not in corp.'s best interests
-CORP. has BURDEN OF SHOWING independence & good faith

Front 59

Expenses of Derivative Suits

Back 59

-Judge may require P to pay for D's reasonable expenses if it finds suit commenced w/o reasonable cause

Front 60

Joinder in derivative suit

Back 60

-corp. joined & becomes nominal D

Front 61

Alter Ego Liability

Back 61

-If shareholder commingles personal & private funds
-fact driven analysis

Front 62

Gross Undercapitalization

Back 62

1) gross undercapitalization when corp. formed;
2) no insurance though business is extremely dangerous
(i.e. haul nuclear waste and no insurance)

Front 63

Deep Rock Doctrine

Back 63

EQUITABLE SUBORDINATION
-inside/outside creditors are treated on par
-court can subordinate shareholder claims against corp. if corp. is too thinly capitalized
-PAY OFF CREDITORS, then shareholders with any $$ left that they loaned corp.

Front 64

Shareholder management

Back 64

-can eliminate board & run corp. via unanimous shareholder agreement if 100 or fewer shareholders (& shares not publicly traded)
-managing shareholders have SAME FIDUCIARY DUTIES AS DIRECTORS

Front 65

Shareholder Derivative Suits=

Back 65

shareholder sues to enforce rights of the corp. . . if corp. could have brought suit its probably a derivative suit

Front 66

Recovery in shareholder derivative suit

Back 66

goes to corporation; however successful P receives attorneys fees & expenses

Front 67

Requirements for Shareholders Derivative Suit

Back 67

1. Contemporaneous Ownership: shareholder must have owned stock when claim AROSE or acquired it by operation of law (divorce or inheritance) from someone who did, AND continue to own throughout lawsuit
2. Demand: always make demand on board that corp. bring suit
3. Dismissal
4. Expenses

Front 68

Dismissal of Shareholders Derivative Suit

Back 68

-disinterested directors or disinterested committee can move to dismiss derivative suit if find after REASONABLE INVESTIGATION it is not in corp.'s best interests
-CORP. has BURDEN OF SHOWING independence & good faith

Front 69

Expenses of Derivative Suits

Back 69

-Judge may require P to pay for D's reasonable expenses if it finds suit commenced w/o reasonable cause

Front 70

Joinder in derivative suit

Back 70

-corp. joined & becomes nominal D

Front 71

Alter Ego Liability

Back 71

-If shareholder commingles personal & private funds
-fact driven analysis

Front 72

Gross Undercapitalization

Back 72

1) gross undercapitalization when corp. formed;
2) no insurance though business is extremely dangerous
(i.e. haul nuclear waste and no insurance)

Front 73

Deep Rock Doctrine

Back 73

EQUITABLE SUBORDINATION
-inside/outside creditors are treated on par
-court can subordinate shareholder claims against corp. if corp. is too thinly capitalized
-PAY OFF CREDITORS, then shareholders with any $$ left that they loaned corp.

Front 74

Shareholder management

Back 74

-can eliminate board & run corp. via unanimous shareholder agreement if 100 or fewer shareholders (& shares not publicly traded)
-managing shareholders have SAME FIDUCIARY DUTIES AS DIRECTORS

Front 75

Shareholder Derivative Suits=

Back 75

shareholder sues to enforce rights of the corp. . . if corp. could have brought suit its probably a derivative suit

Front 76

Recovery in shareholder derivative suit

Back 76

goes to corporation; however successful P receives attorneys fees & expenses

Front 77

Requirements for Shareholders Derivative Suit

Back 77

1. Contemporaneous Ownership: shareholder must have owned stock when claim AROSE or acquired it by operation of law (divorce or inheritance) from someone who did, AND continue to own throughout lawsuit
2. Demand: always make demand on board that corp. bring suit
3. Dismissal
4. Expenses

Front 78

Dismissal of Shareholders Derivative Suit

Back 78

-disinterested directors or disinterested committee can move to dismiss derivative suit if find after REASONABLE INVESTIGATION it is not in corp.'s best interests
-CORP. has BURDEN OF SHOWING independence & good faith

Front 79

Expenses of Derivative Suits

Back 79

-Judge may require P to pay for D's reasonable expenses if it finds suit commenced w/o reasonable cause

Front 80

Joinder in derivative suit

Back 80

-corp. joined & becomes nominal D

Front 81

Alter Ego Liability

Back 81

-If shareholder commingles personal & private funds
-fact driven analysis

Front 82

Gross Undercapitalization

Back 82

1) gross undercapitalization when corp. formed;
2) no insurance though business is extremely dangerous
(i.e. haul nuclear waste and no insurance)

Front 83

Deep Rock Doctrine

Back 83

EQUITABLE SUBORDINATION
-inside/outside creditors are treated on par
-court can subordinate shareholder claims against corp. if corp. is too thinly capitalized
-PAY OFF CREDITORS, then shareholders with any $$ left that they loaned corp.

Front 84

Shareholder management

Back 84

-can eliminate board & run corp. via unanimous shareholder agreement if 100 or fewer shareholders (& shares not publicly traded)
-managing shareholders have SAME FIDUCIARY DUTIES AS DIRECTORS

Front 85

Shareholder Derivative Suits=

Back 85

shareholder sues to enforce rights of the corp. . . if corp. could have brought suit its probably a derivative suit

Front 86

Recovery in shareholder derivative suit

Back 86

goes to corporation; however successful P receives attorneys fees & expenses

Front 87

Requirements for Shareholders Derivative Suit

Back 87

1. Contemporaneous Ownership: shareholder must have owned stock when claim AROSE or acquired it by operation of law (divorce or inheritance) from someone who did, AND continue to own throughout lawsuit
2. Demand: always make demand on board that corp. bring suit
3. Dismissal
4. Expenses

Front 88

Dismissal of Shareholders Derivative Suit

Back 88

-disinterested directors or disinterested committee can move to dismiss derivative suit if find after REASONABLE INVESTIGATION it is not in corp.'s best interests
-CORP. has BURDEN OF SHOWING independence & good faith

Front 89

Expenses of Derivative Suits

Back 89

-Judge may require P to pay for D's reasonable expenses if it finds suit commenced w/o reasonable cause

Front 90

Joinder in derivative suit

Back 90

-corp. joined & becomes nominal D

Front 91

Alter Ego Liability

Back 91

-If shareholder commingles personal & private funds
-fact driven analysis

Front 92

Gross Undercapitalization

Back 92

1) gross undercapitalization when corp. formed;
2) no insurance though business is extremely dangerous
(i.e. haul nuclear waste and no insurance)

Front 93

Deep Rock Doctrine

Back 93

EQUITABLE SUBORDINATION
-inside/outside creditors are treated on par
-court can subordinate shareholder claims against corp. if corp. is too thinly capitalized
-PAY OFF CREDITORS, then shareholders with any $$ left that they loaned corp.

Front 94

Shareholder management

Back 94

-can eliminate board & run corp. via unanimous shareholder agreement if 100 or fewer shareholders (& shares not publicly traded)
-managing shareholders have SAME FIDUCIARY DUTIES AS DIRECTORS

Front 95

Shareholder Derivative Suits=

Back 95

shareholder sues to enforce rights of the corp. . . if corp. could have brought suit its probably a derivative suit

Front 96

Recovery in shareholder derivative suit

Back 96

goes to corporation; however successful P receives attorneys fees & expenses

Front 97

Requirements for Shareholders Derivative Suit

Back 97

1. Contemporaneous Ownership: shareholder must have owned stock when claim AROSE or acquired it by operation of law (divorce or inheritance) from someone who did, AND continue to own throughout lawsuit
2. Demand: always make demand on board that corp. bring suit
3. Dismissal
4. Expenses

Front 98

Dismissal of Shareholders Derivative Suit

Back 98

-disinterested directors or disinterested committee can move to dismiss derivative suit if find after REASONABLE INVESTIGATION it is not in corp.'s best interests
-CORP. has BURDEN OF SHOWING independence & good faith

Front 99

Expenses of Derivative Suits

Back 99

-Judge may require P to pay for D's reasonable expenses if it finds suit commenced w/o reasonable cause

Front 100

Joinder in derivative suit

Back 100

-corp. joined & becomes nominal D

Front 101

Who is entitled to vote?

Back 101

whoever owns stock at the record date
-cannot be more than 70 days before a meeting; if not set, it is close of business on day before 1st notice of meeting is delivered to s/h

Front 102

Can s/h vote by proxy?

Back 102

Yes
-must send corp.'s secretary a signed writing authorizing the other person to vote the shares

Front 103

How long is a proxy good for?

Back 103

11 months unless stated otherwise

Front 104

Are proxies revocable?

Back 104

Yes; unless proxy holder has hi own interest in the corp.

Front 105

What are the reqs for a voting trust?

Back 105

1. written agreement controlling how shares will be voted;
2. must file copy with the corp.
3. must transfer legal title of shares to the voting trustee - has irrevocable rt to vote shares
4. s/h exchange their shares for trust certificates but retain all s/h rts - except rt to vote

Front 106

What are reqs for voting agreement?

Back 106

All you need is a signed written agreement

Front 107

How many s/h needed to pass a plan w/o a meeting?

Back 107

written consent from minimum # of shares needed to take action at a meeting where all shares entitled to vote on it are present & voting

Front 108

how much notice is needed for s/h meeting?

Back 108

written notice to every s/h entitled to vote no fewer than 10 days no more than 60 days before meeting date
-action taken at meeting called w/o proper notice is void UNLESS waived in signed writing or by attending meeting w/o objection

Front 109

what is quorum for s/h meeting?

Back 109

A majority of outstanding shares represented @ the meeting - taken at start of meeting; not each time vote is taken (can't be broken)

Front 110

How many votes needed to pass resolution (NOT electing directors)?

Back 110

Votes cast FOR it more than votes cast against it (unless articles require a greater # of aff. votes)

Front 111

A director is elected by a plurality? true or false

Back 111

True - top vote getters are elected whether they got a majority or not

Front 112

How does s/h cumulate votes?

Back 112

# of shares he owns x # of directors to be elected

Front 113

How many shares needed to elect director w/ cumulative voting?

Back 113

1 director must have > S/(D+1) shares
S = # of shares voting
D = # of directors to be elected at that meeting

Front 114

Is there a rt to cumulate voting?

Back 114

No - no rt unless provided for in the articles

Front 115

When will stock transfer restriction be upheld? (i.e. right of first refusal, prohibition on selling to particular party, right of corp. to approve sale, etc.)

Back 115

Action Against Seller? -[look at validity of restriction] reasonable under circumstances which means not an undue restraint on alienation
Action Against Buyer? -[look @ buyer's knowledge or notice] only if restriction was CONSPICUOUSLY NOTED or the transferee actually knew

Front 116

Who can demand access to corp. books & records?

Back 116

Any S/H

Front 117

What must s/h do to inspect the books?

Back 117

-written demand at least 5 days in advance stating proper purpose - can be hostile to management but CANT use it for personal reasons

Front 118

Inspecting books - when is proper purpose not needed?

Back 118

1. articles
2. bylaws
3. board resolutions creating classes of shares
4. minutes of s/h meetings
5. written comm. to s/h for last 3 yrs
6. list of current directors
7. most recent annual report

Front 119

What is a distribution?

Back 119

Payment to s/h in respect of shares (DISCRETIONARY - determined by board)
court won't compel unless abuse of discretion

Front 120

Which s/h get dividends?

Back 120

1. preferred paid first, (doesn't mean paid more)
2. common s/h divide outstanding stock
3. participating preferred = paid first AND again
4. cumulative part.preferred - pay them for years outstanding (carried forward if not paid)

Front 121

Tests for Distribution eligibility:

Back 121

-protect creditors against excessive distributions to s/h
-INSOLVENCY TEST: corp will be able to pay its debts as they become due
-BALANCE SHEET TEST: assets will be = to or > than total liabilities + dissolution preferences

Front 122

If corp. gives its s/h more of its own stock is this distribution?

Back 122

NO - not subject to insolvency or balance sheet tests

Front 123

Who is liable for unlawful distributions?

Back 123

Directors + s/h who knew distribution was unlawful when they received it
-remember defense of good faith reliance for Directors

Front 124

Non profit cannot distribute income or profit to its members, directors or officers

Back 124

TRUE - may not pay dividends; may pay out reas. salaries, rent, etc.

Front 125

Articles of a non profit corp. must also set forth its purpose

Back 125

True - can be organized for any purpose except pecuniary gain

Front 126

How many directors does non profit need?

Back 126

At least 3

Front 127

How is non profit dissolved? How are its assets distributed?

Back 127

By majority vote of the board + members
-assets must be transferred to another org. doing substantially the same work

Front 128

What are fundamental corporate changes that require board resolution + s/h approval?

Back 128

1. dissolution
2. merger + share exchanges
3. sale of all or substantially all corp.'s assets outside ordinary course of business
4. amendment of articles

Front 129

What are appraisal rts? What situations trigger them?

Back 129

A dissenting s/h may have right to force corp. to buy shares back at their fair value.
1. merger or share exchange
2. transfer of substantially ALL the corp.'s assets other than in the usual course of business -- first two are very limited
3. amending articles to adversely affect s/h (before 10.1.03)

Front 130

Limitations on Appraisal Rts?

Back 130

Not available if stock is publicly traded or has a market value of at least $10 million + 2,000 or more s/h
-a market = no need for appraisal

Front 131

How does shareholder perfect rt of appraisal?

Back 131

-filing notice of objection + intent to demand payment AND
-abstaining or voting against the proposed change AND
-depositing shares + executing an appraisal form after the vote
-court can appoint appraiser if corp. & s/h can't agree to a fair value of s/h shares

Front 132

When amending the articles, what are reqs and how do appraisal rts work?

Back 132

Reqs: 1. board approval AND 2. s/h approval;
-appraisal rights - for s/h whose voting and/or distribution rts adversely affected (but only for shares prescribed in articles before 10.1.03)

Front 133

Reqs for a Merger?

Back 133

1. board approval from both corporations
2. s/h approval from both corporations - ABSOLUTE majority of all shares entitled to vote
EXCEPTION: no s/h approval reqd for short form merger (if 80% or more owned subsidiary merged into parent or another sub)

Front 134

Appraisal Rts for a Merger?

Back 134

-available but for short form merger, only s/h of subsidiary have appraisal rts.

Front 135

Successor Liability after Merger

Back 135

-surviving company succeeds to all rights & liability of constituent corp.'s

Front 136

Reqs for Sale of all Assets?

Back 136

-fundamental corp. change for selling corp. only
1. approval by board
2. approval by selling corp.'s s/h - ABSOLUTE MAJORITY
-appraisal rts for s/h of selling corp.

Front 137

How does corp. voluntarily dissolve?

Back 137

1. board resolution recommending dissolution & shareholder approval by absolute majority OR
2. written consent of absolute majority of shares

Front 138

How is corp. involuntarily dissolved?

Back 138

by court order [completely discretionary]
1. s/h can petition ct to dissolve IF:
-director deadlock
-s/h deadlock
-waste of corporate assets <35 s/h
-fraud or illegal conduct by directors <35 s/h
2. creditor can petition if co. is insolvent + either she has an unsatisfied judgment against it or corp. acknowledges debt

Front 139

Winding Up

Back 139

1. convert all assets to cash,
2. pay off creditors,
3. distribute rest to s/h pro-rata by share unless there's a dissolution preference

Front 140

How does corp. resolve unknown claims when dissolving?

Back 140

File notice of dissolution with DOS or publish notice once a week for 2 weeks in newspaper where principal office is located or where it owns real or personal property
-creditor must file w/in 4 years or barred - if the $ is gone, can collect from $$ distributed to s/h's

Front 141

Federal Securities Law:
What is rule 10b-5

Back 141

Targets deceitful behavior
-in interstate commerce (phone, mail, national exchange)

Front 142

Types of Transactions covered by 10b-5

Back 142

1. misrepresentation of material info.
2. non-disclosure of material inside info. when duty to disclose exists
3. tipping -passing along material inside info. for wrongful purpose

Front 143

Possible P's

Back 143

-SEC
-Private action for damages by buyer or seller of securities ** must buy or sell stock not just hold on to it

Front 144

Possible D's (anyone!!)

Back 144

-corp. that issues misleading press release
-buyer or seller of securities who misrepresents info.
-buyer or seller who fails to disclose where duty to disclose
-tipper OR tippee BOTH!!

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Scienter in 10b-5 action

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D must have intent to deceive, misrepresent, manipulate, defraud [recklessness enough - but negligence NOT!!]

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What is 16b

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-covers speculation by directors, officers & 10% s/h's
-lets corp. recover "short swing profits" gained by certain insiders from buying & selling its stock w/in a 6 month period (bad for market confidence0

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To what corp.'s does 16b apply?

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1. listed on nat'l exchange
OR
2. at least 500 record s/h + more than $10 million in assets

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Who is potential Defendant? for what transaction?

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1. officers, directors, or 10% s/h (either when bought or sold.
2. transaction = buying & selling stock w/in single 6 month period (order doesn't atter)
Note: neither fraud nor inside info. is required.