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50 Cards in this Set
- Front
- Back
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-Paul Promoter enters lease on behalf of future corporation -How can Paul shift liability to future corp? 1. Before Corp created 2. After Corp created, first way 3. After Corp created, better way for Paul |
-Paul liable for own Ks unless: 1. K includes provision that LL will look only to future corp; and Paul signs as "disclaiming all personal liabl; all liab by future corp." 2. Corp adopts lease: Paul liable, but may seek indemnification 3. Corp does a novation: steps into Pauls shoes |
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Promoter duty to future corporation |
-Fiduciary duty -No secret profits from deals beforehand |
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Corporate formation is... |
BEANS -Bylaws adopted -Elect directors -Appoint officers -Name corporation (indicate corp) -Shares authorized |
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Corporation by estoppel |
Even if did not follow formalities -Estop third party from saying no corp if unjust to the corp -Estop corp from saying no corp if unjust to deprive third party from relief |
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Legal separation between Corp and SHs |
-Corp liable for own debts -SHs liable for price of their stock |
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When to pierce corporate veil |
- SHs treat corp as alter ego (commingling) - Corp is undercapitalized (failure to maintain funds for foreseeable liabilities) - Cts more willing for tort victim than K claimant |
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Stock issuance: - What is par value? - What if stocks issued below par? - What are preemptive rights? |
- Minimum issuance price. No par value means can buy stock for any valid consideration that the Board deems adequate - Directors must sign off on issuance - Right to maintain % of ownership before each issuance. Must be express in the articles of inc. |
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Board of Directors: - Needs what for action? - Needs what for valid vote? - What if can't be present? |
- Need quorum of directors present - Need majority of quorum for valid vote - Can act from afar if unanimous consent in writing |
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Doug Director does not get notice of the meeting: - He files written objection before meeting occurs - He attends, but does not vote |
- No waiver; meeting invalid - Waiver; meeting and vote valid |
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Director duties to Corp and SHs |
- Duty to manage corp (but BJR protects) - Duty of care - Duty of loyalty |
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Director duty to manage |
Protected from liability by Business Judgment Rule: Rebuttable presumption that director conducts duties in good faith and in best interest of corp |
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Director duty of care |
Act with reasonably prudent person standard As person would conduct her own business |
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Director duty of loyalty |
May not get unfair benefit to detriment of corp or SHs: - Self dealing - Usurp corp opportunity Unless: - Disclosure - Independent ratification |
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Officer duties |
- Duty of care - Duty of loyalty - Act as agents to the corp; can bind corp - Selected and removed by the board |
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When to indemnify Director's lawsuit expenses |
- In corp business and D loses suit: no - In corp business and D wins suit: yes - With third parties if good faith and in corp's best interest: maybe - Majority of independent Ds, or Majority shares of independent SHs will decide |
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How may SHs sue directors? |
- Direct actions: Ds breached duty owed to SH - Derivative action: Ds breached duty owed to corp. Must first give board chance to bring suit. |
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How can proxy voting happen? |
1. SH signs writing 2. Authorize other to vote in place 3. Valid for 11 months 4. Revocable unless - Proxy says "irrevocable" - SH passed an interest (like consideration) |
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What notice is needed for meetings? - General meeting - Special meeting |
- Time and place - Time, place, and purpose |
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What is a SH voting agreement? |
A written K to vote as promised in agmt. Binding and enforceable. |
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What is straight voting? What is cumulative voting? |
- 1 vote per share to each candidate - Can pool votes. 50 shares x 2 openings = 100 shares; could place all 100 with one candidate |
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Removing directors: - straight voting - cumulative voting |
- Removed if majority of shares that could vote to elect are cast to remove - If votes against removal are enough to elect, can't remove director |
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SHs have rights to.. |
- Ask ct for dissolution if Ds deadlocked and could injure corp or waste happens - View record books - Get dividends. Prioritize preferred shares, then common paid last and equally. - Maj SH duty to not unfairly prejudice Min SHs |
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Types of fundamental corporate changes |
- Merger - Consolidation - Dissolution - Fundamental amds to Articles - Sale of substantially all corp assets |
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Steps to take with fundamental corp change |
1. Board resolution made 2. Notice special meeting to SHs 3. Get maj approval of all voting shares 4. Get maj approval of voting groups adversely affected 5. File notice with State Exception: no need SH approval for short form merger (parent owns 90% of sub) |
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What can a SH dissenting from a fundamental corp change do? |
1. File written notice of objection 2. Vote in objection 3. File written demand to be bought out 4. Can force corp to buy shares at fair value 5. Ct will appoint expert appraiser |
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Anti fraud Rule 10(B)(5) |
- Interstate activity - Scientur: intent to deceive - Deception: material misrep or misappropriate material non-public information - Connected with actual purchase/sale of securities |
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Insider trading |
- Tipper: improper purpose + benefit - Tippee: knew about tipper breach - Trading on market info in breach of duty of trust owed to information's source |
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Sarbanes Oxley |
- CEO/CFO of reporting corp must certify that filing doesn't contain material misrep - Willfully certify false report: $5M; 20 yrs - Restate false report: recover CEO/CFO profits from 12 months after filing |
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Types of Principals |
1. Disclosed: TP has notice of P and identify 2. Undisclosed: TP doesn't know P exists 3. Partially disclosed: TP knows there is a P, but doesn't know identity |
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When does A have authority? |
- Actual express authority - Actual implied authority (do what needs done) - Apparent authority (TP led to believe A acts with P's authority) |
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When is P liable: - P hires painters, bring own supplies - P hires blasters, bring own supplies - P hires ex-con as contractor - LL hires painters for tenant's apartment - LL hires contractor for dangerous roofing sitch |
- Ind Contractor, no P liability - IC, but inherently dangerous, P liable - IC, but duty to select non-negligently; P liable - IC, but special LL duty of care to select - IC, but special LL duty for dangerous disrepair |
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When is P responsible for A's action? |
- When A acts in scope of authority - Respondeat superior - Frolic: outside scope - Detour: mere departure, within scope - Even if A outside scope, P can ratify |
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P charged A with driving car to garage - A picked up car and drove home for lunch - A picked up car and drove to garage - A picked up car and drove quicker route - A drove home for lunch, then to garage |
- Frolic: P not liable for accidents - Completely in scope - Detour: P liable - Frolic, then returned to scope: liable for accidents on way to garage |
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4 consequences of the agency relationship |
- Duties exist between P and A - A can bind P in contracts - P is liable for A's actions in tort - A's knowledge imputed to P |
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P's duties to A |
- Compensate for work - Reimburse for expenses in scope - Indemnify and exonerate for liability arising from good faith performance - Cooperate - Take due care |
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A's duties to P |
- Act reasonably - Duty of care - No self dealing, usurpation, competition - Confidential - Candor - Inform P if act for other P as well |
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P is liable under apparent authority when.. |
- TP's belief is reasonable and caused by P - P knowingly or negligently allows A to exercise apparent authority - A along cannot create apparent authority |
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How does A delegate duties? |
- In emergency - If P agrees - Not if duty is for personal services |
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How to terminate an apparent authority relationship? |
P notify all TPs involved who might think A acts under P's authority
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General Partnership |
- Arises from conduct - Association of 2+ people carrying on as business for profit - Presume share profits |
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Liability in General Partnerships: - Agents - Incoming Partner - Dissociated Partner - Manifestation that a Gen Pship exists |
- Principles liable under agency rules - Not for existing debt, but incoming payments may satisfy old debt - Retain liability until actual notice given to creditors - Estoppel: liable as if Gen Pship exists |
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Limited Partnership |
- At least one general and one limited P - Requires certificate with names of all gen Ps - Gen P liable for all limited Ps' obligations |
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Limited Liability Partnership |
- Requires Statement of Qualification and annual reports - Liable only for own wrongdoing |
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Limited Liability Company |
- Requires Articles of Origination and Operating Agreement - Limited liability for debts and obligations |
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Duties between Partners |
Fiduciary Duty of loyalty - No self dealing - No usurpation - No secret profits Joint and severable liability |
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Rights between Partners |
- Each P gets equal vote unless agmt otherwise - No salary unless winding up - Profits and losses shared equally unless agmt |
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When might Dissociation happen? |
- Any Partner expresses desire to - P is expelled by unanimous vote - Unlawful to continue with the P - the P is a dissolved Pship - Judge determines |
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Wrongful dissociation may happen when.. |
- Breach - Before term expired Then, liable for damages |
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Dissociated Partner, rights and liabilities |
- If wrongful, then liable for damages - Duty of loyalty terminates for future events - Shares sold at liquidation value or as if wind up - Obligations continue if TP thinks he is a P, up to 2 years |
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Dissolution terms |
- Dissolution: begin to wind up - Winding up: settling all affairs - Termination: all affairs wound up |
