Reading...
Play button
Play button
Use LEFT and RIGHT arrow keys to navigate between flashcards;
Use UP and DOWN arrow keys to flip the card;
H to show hint;
A reads text to speech;
34 Cards in this Set
- Front
- Back
|
DEFINE
Corporation |
Legal entity separate from personell; no legal change to entity when personnel changes; governed by WBCA
|
|
|
Management of corporation
|
Directed/controlled by Board of Directors
BOD appoints officers Owned by shareholders |
|
|
Rule for issuance of stock
|
BOD must authorize
Shares must be issued for sufficient consideration Shares sold at same time must be sold at same price as well |
|
|
FORMATION
of corporation |
Must file:
Articles of Incorporation w/incorporator's name/address, corporation name, classes/shares, agent/office, number of directors Copy of Articles Agent's Consent to Act Filing fee must be paid Organizational meeting had within 120 days of filing to name directors/officers and adopt bylaws |
|
|
Corporate existence begins...
|
only at the time of proper filing
|
|
|
DEFINE
promoter |
someone who directly/indirectly takes initiative in setting up corporation
|
|
|
Promoter fiduciary duties
|
Owed to each other, investors, and corporation
Disclosure Promote interest Good faith |
|
|
Promoter liability
|
if person acts on behalf of corporation, knowing that corporation does NOT yet exist, they are jointly/severally liable
|
|
|
Annual requirements to maintain corporate existence
|
Prepare annual balance sheet and income statement
File annual report and pay license fees Hold annual meeting specified by bylaws; written notice 10-60 days to shareholders |
|
|
Record maintenance rule
|
Must keep, at principal office:
Articles/bylaws Shareholder actions Financial statements for 3 years Written communication to shareholders Annual report Shareholders have right to inspect; cannot be taken away in articles |
|
|
Special meetings rule
|
Special meeting can be called by board, 10% of shareholders via vote, or by court
Notice must be included; 20 days if meeting is for fundamental matter |
|
|
Errors in meeting notices
|
Meeting is invalid unless waived by attendance or written waiver
|
|
|
Shareholder duties
|
Generally NO duties
|
|
|
Controlling shareholder duties
|
Same as officers/directors
Twin fiduciary duties of loyalty and care; care = the care an ordinary prudent person would exercise in similar circumstances; loyality = corporation interests placed above own |
|
|
Shareholder rights
|
Voting rights
Inspection of books and records Preemptive rights Dissenter rights Litigation rights |
|
|
Shareholder VOTING rights
|
Director elections/removal: cumulative voting, plurality prevails
Article amendments proposed by board OR fundamental changes: 2/3 vote To vote IN meetings: majority of shares entitled to vote required, can be present physically/virtually/proxy To vote OUT of meeting: unanimous consent required |
|
|
Shareholder inspection rights
|
Right to inspect books and records; cannot be taken away in articles
Can be charged copy fee |
|
|
Shareholder preemptive rights
|
Right to acquire additional shares to maintain same ownership percentage
|
|
|
Shareholder dissenter rights
|
Right to vote "no" on fundamental corporate change and receive fair value or shares
|
|
|
Shareholder litigation rights
|
Shareholders can sue corporation/officer/director/controlling shareholder to enforce personal claims - recovery for benefit of personal shareholder
Can also sue for derivative actions that harm corporation; necessary demand must be made on BOD and recovery is for benefit of whole corporation |
|
|
Director duties
|
Twin fiduciary duties: loyalty and care
|
|
|
Director duty of loyalty
|
Corporation's interests are placed above director's interests
Cannot be divided from conflict of interest |
|
|
Director duty of care
|
Care ordinary prudent person would exercise in similar circumstances
|
|
|
Director DEFENSES to breach of duties
|
DARE
Dissent from board action Absence from meeting Ratification by shareholders (unamimous) of board action Expert advice relied on in good faith |
|
|
Director conflict of interest
|
Loyalty cannot be divided from conflict of interest
Must give full disclosure or transaction may be rescinded/profit recovered Majority of disinterested shareholders can ratify decision if full disclosure made |
|
|
Corporate opportunity doctrine
|
Conflict of interest includes director taking/diverting business opportunity in same line of business that corporation is in
|
|
|
Director liability protectors (not defenses)
|
Business judgment rule = rebuttable presumption that director acts in conformance with duties
Liability limitation articles can also limit/eliminate personal liability in duty/care breaches |
|
|
Merger rule
|
Boards of both merged and surviving companies must approve merger by vote
In shared exchange, both boards and ONLY merged shareholders must approve |
|
|
Asset sales rule
|
Asset sale = sale of all or substantially all corporation assets other than in ordinary course of business
Boards of seller/buyer and shareholders of seller must approve |
|
|
Four types of corporate DISSOLUTION
|
Voluntary dissolution before shares issued
Voluntary dissolution after shares issued Involuntary dissolution by Secretary of State Involuntary dissolution by court |
|
|
Rule for voluntary dissolution before shares issued
|
Majority of either promoters or initial directors may vote to dissolve and do so by delivering articles of dissolution to the Secretary of State
|
|
|
Rule for voluntary dissolution after shares issued
|
Board recommends dissolution to shareholders for approval; if approved by 2/3 approval, articles of dissolution delivered to Secretary of State and corporation begins winding up under governing documents and laws
|
|
|
Rule for involuntary dissolution by Secretary of State
|
Occurs when corporation fails to pay fees, fails to deliver reports when due, has no registered agent, or stated period of duration expires
60 days to cure; if not cured and dissolved, can seek reinstatement in 5 years |
|
|
Rule for involuntary dissolution by court
|
AG can initiate suit for fraud/abuse of legal authority
Shareholder can initiate for director/shareholder deadlock or if directors act illegally/oppressively/fraudulently/wastefully Creditor can initiate suit if unpaid claim reduced to judgment and corporation is insolvent |
