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59 Cards in this Set
- Front
- Back
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Six Issues
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1. Formation
2. Issuance of Stock 3. Action by and liability fo Dir. and Officers 4. Rights of SHs 5. Fundamental Corp Changes 6. Fed. Securities Law |
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2.
Pre-Inc Liability - For Promoter Actions |
- Promoter liable until novation (agreement between promoter, corp and 3rd party that corp will replace promoter)
- Corp liable when adopts k via x- Express BOD resolution or x- Implied adoption- Knowledge of k and acceptance of its benes. |
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1.
Promoters |
Promoter- Persons acting on behalf of corp not yet formed.
- Fiduciaries of each other and corp. (cant make secret profits) x- Sale of prop acquired by promoted before becoming P, can eb sold for up to FMV (otherwise profits recoverable by corp) x- If Prom sells corp prop acquired after becoming promoter, any profit is recoverable. |
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3.
Subscribers |
Person or entity who makes written offer to buy stock in corp not yet formed.
- No A needed in order for O to buy stock. - **Irrevocable for 6 mos. |
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4.
Incorporator |
- Signs and files Art of Incorp. w/ state.
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5
Articles of Incorp. (de jure corp status) A PAIN |
Req:
- Authorized Shares- - Purpose - Agent and Address of Registered Office (Official legal rep) - Incorporators - Name of Corp (must have some indicia of corp status) |
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6.
Articles of Incorp. - Authorized Shares |
- Max number of share corp may issue.
- Can sell less, but can never sell more without amendment of AOI. |
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7.
Articles of Incorp. - Purpose |
- Gen purpose and perpetual duration clause valid and presumed in absence of specific purpose or limited duration.
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9.
Articles of Incorp. - Specific Purpose |
- Allowed
- Where act is beyond purpose, ulta vires. |
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10.
Ultra Vires Remedies |
- Enjoinment by state.
- Corp can sue own director and officers for losses caused by the UV activity. |
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11.
AOI - By-laws |
- Corp need not have bylaws.
- Board has power to adopt and amend the bylaws unles articles give power to SH's |
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12.
De Facto Corp |
- When no De jue corp, corp if organizars:
x- Made good faith colorable attempt to comply with formalities and x - have no knowledge of lack of corp status. |
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13.
Formation of Corp - Legal Significance |
- Upon inc, corp becomes a seperate legal entity
- owners and controllers not liable for debts of org itself. - SH's liable only to extent of price of stock. |
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14.
Piercing Corp Veil |
- Gen SH not liable for debts of corp.
- PCV to prevent fraud or unfairness and will render SH liable to 3rd party victim. (PCV givne more gen to innocent tort victim than k claimants who go into k w. eyes open) |
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15.
Piercing Corp Veil |
- SH will be liable as corp alter ego when failing to observe suff corp formalities (ie co-mingling of funds)
- Liabile when corp undercapitalized so as to fail to maintain suff. funds to cover foreseeable liabilites. |
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16.
Foreign Corp |
Corp inc outside of state that wishes to engage in regular intrastate biz must file CEert of Auth with state that inc all info req by AOL
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17.
Issuance of Stock |
- Consideration
- Pre-Emptive Rights |
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18.
Issuance of Stock - Consideration |
- Must receive par value
x- min issuance price (cant recieve less) |
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19.
Issuance of Stock - Consideration - Prop |
- Any typ eof prop can be received so long as board value sit to be at least worth par value.
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20.
Issuance of Stock - No par stock |
- No min issuance price therefore any valid consideration can be received if deemed adequate by the board.
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21.
Treasury Stock |
- Stock past issued by corp, and then reacquired.
- Upon reissuance, deemed to be no par stock. |
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22.
Issuance of Par Stock for Less than Min Issuance Price - Liable Parties |
- Directors liable for authorizing a below par issuance.
- Buyer liable to extent of par value. |
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23.
Pre-Emptive Right |
- Right of exists owners of stock to maintain exisitng ownership percentage. buy buying up to same percentage of ownership any time corp issues new stocks for CASH.
- Don't exist unless expressly granted in AOI. |
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24.
Directors and Officers |
- All corp msut have board with at least 1 member that serves as central mngmt team.
- SH elect directors. - SH remove dir w/ or w/o cause. |
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25.
Board Actions |
- Must take place at valid meeting
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26.
Valid Meeting |
- Req for Board action unless all dir consent in writing to act w/o meeting.
- Req notice. - No proxies, voting agreement. Conf call gen allowed - Quorum.- Maj of all directors mus tbe presnt ( unless diff % in by laws - Vote- Req maj of those present to pass . - All Dir presumed to have concurred in action unless dissent or absention recorded in writing. |
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27.
Liabilty of Dir to Corp and SH - Dir Duty to Manage |
- Manage- BJR- VERY strong presumption that dir manage corp in good faith and in best interest of corp and SHs. (not liable for innocent mistakes of business judgment)
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28.
Liabilty of Dir to Corp and SH - Fiduciary Duties |
- Duty of Loyalty
- Duty of Care |
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29.
Liabilty of Dir to Corp and SH - Fiduciary Duties - Duty of Care |
Owes corp duty of care that a prudent person would use in managing their own business, unless AOI limits dir. liability for breach.
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30.
Liabilty of Dir to Corp and SH - Fiduciary Duties - Duty of Loyalty |
"dir cant recieve unfair bene (Self Dealing/Usurping Corp Opp) to determine of corp or SH unless *disclosure of material fact and some form of *independent ratification.
- Ratification- x- Maj vote of independent dirs x- Maj vote of committee of at least 2 ind dir. x- Maj cot of shares held by independent owners of stock. |
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31.
Officers |
- Same duty of care and loyalty as Dir.
- Agents of corp. and bind w/ authorized acts - Corps must have Pres, Sec. and Treasurer. - Serve at whim of dir. (dir may still be liable for breach of k damages) |
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32.
Indemnification of Dir and Officer - Mandatory |
- Where incurred cost of atty fees or judgment in course of corp business and now seeks reimbursement.
- Never if: Dir held liable to own corp. - Always if: Dir wins lawsuit agaisnt any party (inc corp). |
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33.
Indemnification of Dir and Officer - Permissive Indemnity |
- May indemnify if:
x- Liability to 3rd party or settlement with corp. x- Dir or officer show he acted in good faith and believed conduct was in corp best interest. |
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34.
Rights of SHs - SH Derivative Suit |
- Goal is to enforce corp's COA. (Derives from corp COA.)
Req: - Contemporaneous stock ownership- Must own at least 1 share of stock when claim arose (maj- and throughout litigation) - Must gen make demands on BOD that they cause their own corp to bring suit. (demand must be made, and rejected, by the board or at least 90 days must have passed since demand) |
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35.
SH Voting |
- Only owner on record date has right to vote the shares.
x- Record date- Voter eligiblty cut off date, set by board on any day up 70 days before meeting.(never same as meeting date) |
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36.
SH Voting by Proxies - Proxy |
Req:
1. Writing (fax email) 2. Signed by record SH 3. Directed to sec of corp 4. Authorizes another to vote the shares. 5. Valid only for 11 mos. - Revocable unless labeled irrevocable and coupled with an interest. |
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37.
Annual Meeting |
- All corp must have an annual meeting at which at least 1 Dir position is open for election.
- Must be notice containing time and place of meeting. |
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38.
Specially Noticed Meeting |
- Can only be called by board, pres or holders of 10% or more of shares.
- Meeting of SH to vote on proposals or fundamental corp changes. - Must be notice containing meeting special purpose. (only items in notice can be addressed) |
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39.
Quorom for SH Metting |
- Maj of all shares must be represented at the meeting when it starts.
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40
SH Voting Req |
- Shares in favor must exceed shares cast against.
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41.
Pooled or Block Voting |
- Can agree to vote alike via:
x- Formal voting trust- Formal written agreement delegating voting power to trustee. Valid for no more than 10 years unless extended by the agreement. x- Simple Agreement- Written agreement to vote shares as required by agreement itself. (no formalities req or time limit) |
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42.
Voting for Dir - Straight - Cumulative |
Straight Voting- Have same votes as shares. No matter how many open slots.
Cumulative Voting- Votes= Share *Slots, and can be applied wherever. N/A unless expressly granted in AOI. |
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43.
Right to Examine Books and Records |
- All SHs have right upon proper notice and proper time.
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44.
Dividends - Right to Dist/Receive |
- No right to receive, entirely w/in board discretion
- Board has no power to declare dividend if corp is insovlent or dividend would cause insolvency. x- Dir will be personally liable unless good faith reliance of financial officer's representation. |
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45.
Dividends - Priority |
1. Cumulative Preferred Shares- Receives dividends of previous unpaid years, plus current dividends.
2. Preferred Participating Shares- Get paid as preferred and as common shares. 3. Preferred w/ divident preference. 4. Common stock paid last and equally. |
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46.
CHC - Define - Req |
- Agreement among SHs to operate by eliminating corp formalities.
- Req: Unanimous SH election choice evidenced in articles, bylaws, or filed agreement. And maj. reasonable share txr restriction. (no public trading) - No more than 100 SHs and only 1 class of stock. |
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47.
Professional Corp |
- Licensed professions can form PC if:
x- AOI have label x- SHs are licensed professional x- Can be only one designated profession Effect: x- Personally liable for own malpractice x- Not liable for each others malpractice or obligations of corp. |
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48.
SH Liabilities |
- SH not liable for corp obligations unless:
x- Corp veil pierces x- Controlling SH owe fiduciary duty to minority SHs (liable for selling corp to 3rd party who loots corp, unless reasonable measure taken to investigate buyers rep and plans for corp.) |
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49.
Fundamental Corp Changes - 5 kinds |
- Process for change for all the same.
1. Merger (A becomes B) 2. Consolidation (A nd B become C 3. Dissolution 4. Fundamental Amendment of AOI 5. Selling of most of assets. |
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50.
Fundamental Corp Changes - Steps to Effect |
1. Resolution by Board at valid meeting
2. Notice of Special Meeting 3. Approval by majority of all shares entitled to vote, and by majority of each voting group that is adversely affected by change. x- No sh approval req when parent corp that own 90% of stock in subsidiary merges w/ subsidiary. 4. Dissenters Rights of Appraisal 5. File notice with state |
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51.
Fundamental Corp Changes - Dissenters Rights of Appraisal |
Dissenters Rights of Appraisal- Owner who does not vote for change has right to force corp to buy back share at fair value(court can appoint expert to det. value(binding on parties) if right is perfect by:
x- filing notice of rejection of intent to be bought out before vote x- does not vote for change at voting time x- Prompt demand in writing to be bought out following vote. |
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52
Fed. Securities Laws - 10(b) |
- Gen anti-fraud provision in re buying of selling stock securities
Elements - Scienter- Intent to deceive - Deception - Connected to actual buying or selling of stock. - In pvt right of actio must also show |
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53
Fed. Securities Laws - 10(b) - Deception |
- Liar- Misrep of material fact, or failure to disclose material fact in breach of material duty.
- Insider Trader x- Missappropriator- Misapp, material nonpulbi indo and uses it to purchase or sell securities x- Tipper- Gives inside info for personal bene to another who trades on it x- Tippe- One who recieves inside ino and trades on it w/ knowledge that indo was disclosed in breach of tippers fiduciary duty. |
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54.
Fed. Securities Laws - 10(b) - Private right of Action |
Must also show:
- Reliance- Investors actually relied on fraud or bought at market price caused by fraud. - Loss Causation- Fraud not only induced buying or selling, but also caused economic loss. |
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55.
16(b)- Short Swing Trade Profits |
Applies to big corp (listed on national exchange or 500 Shs and 10 mill in assets)
- Applies only to Officers Directors or more than 10% SH - Forbids buying and selling stock withing 6 mo period. - If does corp can recover profit from doing do. - Profit if, withing 6 mo before or after sale, there was purchase at price lower than sale price. |
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56.
Sarbane-Oxley Act |
- Applies to CEO and CFO of reporting corp.
- Must certify that based on officer knowledge report filed with SEC dont contain false provision.(others 5 mill fine and 20 years) - If false reports have to be corrected corp can recover (directly or derivatively) may recover officer bene made from trading co sec w/in 12 mo after false reports filed. - Corp can also recover any bene may from trading of corp stock during black out period when employees prohibited from trading in retirement plan securities. |
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33.1
Indemnification of Dir and Officer - Permissive Indemnity - Authorization |
Can be authorized by:
x- Maj of Independent Dir. x- Maj of committee of independent dir. x- Maj of shares held by independent SHs vote to approve. x- *Special lawyer opinion may recommend. |
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46.1
CHC - Effect |
x- No piercing of corp veil even if fail to observe formalities.
x- Poss sub-chapter (s-corp) status.(taxed as if pship). |
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56.1
Sarbane-Oxley Act - Summary |
(No knowingly false filings and no bene during falsehood or blackout date).
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