Va Corporations

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Characteristics of Corporations

Back 1

Centralize corporate management
Guarantee continued existence despite death of owners
Limit personal liability
Facilitate transfer of ownership

IS considered a Person for due process and equal protection but NOT Privileges and Immunities

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Promoter Liability

Back 2

Liable on preincorporation contract

Not relieved by corporation's creation or adoption, only if the third party agrees to substitute

Front 3

Failure to Incorporate

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Promoter must return all money to the subscribers

Front 4

Administrative Power of Corporations Governed

Back 4

By State Corporation Commission (SCC)

Right to appeal SCC decision to the Supreme Court within 4months

Article of Incorporation to be filed with SCC

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De Jure Corporations

Back 5

"As a matter of law" = fully + legally chartered because fulfilled all requirements to form corporation

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Articles of Incorporation Elements

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1. Name of the Corporation
2. Capital Stock Structure Description - # of shares + how divided
3. Name Registered Agent + Business Office Address. Must be VA resident.

Filed with SCC

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Powers

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Same as an individual - carry out business, borrow, loan and transfer assets, enter into partnerships + buy own stock

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Special Kinds of Conduct/Business Restriction

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Restricted to one of the following as its purpose:
1. Insurance
2. Banking/Trust
3. Savings/Loan
4. Railroad
5. Public Service Company

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Ultra Vires

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Act that is beyond the power or capacity of the corporation.
Asserted by:
1. Corporation vs. officers + directors
2. Commonwealth vs. Corporation
3. Shareholders vs. Corporations (injunctions)

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Creditors attack in Contract or Tort by

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Piercing the Corporate Veil:

1. Corporation is treated as owner's property and injustice results, e.g. treat assets as own, use corporate funds for own enjoyment
2. Corporation is undercapitalized (can't acquire funds they need
3. To prevent shareholder from abusing corporate funds for personal gain, prevent fraud or crime, commit injustice or gain unfair advantage

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Power to run day-to-day affairs

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Vested in the Board, shareholders only have power to elect the board.

Nonpublic corporations - shareholders can agree (need 100%) to run corporation in any manner, including eliminating the board

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Voting Trust

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Agreement by shareholders where legal title is conferred to a trustee and shareholder keep equitable title.
Limited to 10 years and must be filed.

Purpose: shareholder can combine to produce a unified voting block, locking shares in trusts can help deter hostile takeover, resolve conflict of interest and safeguard control

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Inspection of Books

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Any shareholder with 5% interest may examine accounting books and records with 5 days written demand/notice.

Any can inspect articles, bylaws, meeting minutes, etc., with 5 days notice.

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Election

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Annually.
If Cumulative - 3 each year.

Max term is 3 years

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Removal

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Majority of shareholders unless articles provides for cause.

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Actual Authority

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1. Proper notice given for directors' meeting
2. Quorum is present (majority) and approved action

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Duty of Loyalty and Disclosure

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Director must disclose any personal interest in the acts/transactions of the corporations and must be approved by Disinterested directors or shareholders

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Corporate Opportunity Doctrine

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Direct may not divert a business opportunity in which Corporation may be reasonably interested in, unless gives it a chance to act (Usurpation)

If fails to give change to act, may be forced to turn over the opportunity and any profits made.

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Liability

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Jointly and severally to corporation and its creditors for failing to comply with standard of conduct, including voting contrary to statute or article.

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Control Share Acquisitions

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Where a transaction takes the shareholder to a higher range of ownership (e.g. (1/6-2/6) to (3/6-5/6)) - Will Not Have Voting Rights unless granted by majority of disinterested voting shares

Purpose is so individual can't control company by buying shares.

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Improperly Issues Certificated Security

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No defense, considered valid if purchaser provided value and was without notice of the defect

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Derivative Suit

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By Shareholder, suing to enforce corporate cause of action.
Must: Own stock at time of act, make demand to directors, adequately represent the corporation

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Fundamental Changes vs. Regular Issues

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2/3 of all outstanding shares entitled to vote (no quorum) Majority Required, then filed with S.C.C., certificate is issued and it's recorded locally.

Regular Issues: If quorum - majority of shares present at meeting

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Merger, Consolidation, Conversion

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Merger - corporations merge together

Consolidation - two + combine to form a new corporation

Conversion - corporation changes into a LLC

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Making other Corporation a Subsidiary

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Acquiring 50% of the outstanding stock.
Not subject to liabilities absent assumption, no rights unless merger or transfer of assets

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Voluntary Dissolution

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1. Corporate act with resolution, notice + vote
2. Initial directors/incorporators
3. Consent of all shareholders in writing

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Involuntary Dissolution

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1. Automatic (fails to file annual report, pay annual registration fee, timely notify S.C.C. of change in registered agent)
2. By Order of S.C.C. Abuse authority by law, failed to maintain registered office/agent, file documents, violation of federal employee alien laws
3. Judicial Dissolution
4. Statutory

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Judicial Dissolution

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1. Directors deadlocked + irreparable injury or business can no longer be conducted to shareholders advantage
2. Acts of directs are illegal, oppressive or fraudulent
3. Shareholders are deadlocked in voting power or failed to conduct annual meetings
4. Corporate assets are being misapplied or wasted

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Limited Liability Companies ("LCs")

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1. Limited life - dissolves on unanimous written consent of all members, or death, retirement, resignation, expulsion or bankruptcy.
2. Ownership not freely transferable - unanimous written consent needed
3. Member or Centralized Management
4. Limited liability - not personally liable

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LCs Share of Profits

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As stipulate in articles or in proportion to members' capital contriubtions

Distributions only after solvent

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Business Trust

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Like LCs - limited liability, interest represented by transferable shares

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Service of Process

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Registered agent or S.C.C. clerk