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29 Cards in this Set
- Front
- Back
Forming the Corporation: |
1. Incoporators
2. Articles of Incoporations (Name, address, purpose & duration, capital structure - registered office and agent in Indiana)
3. File Articles w Secretary of State |
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Forming the Corporation: |
1. Good faith effort to comply with formation statutes, but some flaw keeps from beinga actual corp.
2. Some exercise of corp power.
3.. Treated as a full corp for all purposes except state action. |
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MEMORIZE!!!!!! essay
STANDARD OF Board of Directors:
"Business Judgement Rule (BJR)" |
1. Directors must discharge their duties in good faith, with the care of a RPP under similar facts, and in a manner the director reasonably believes to be in the corp's best interest.
2. Insulates directors from liablity UNLESS he failed to perform to the BJR standard AND it constitutes willful misconduct or recklessness. |
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STANDARD OF Board of Directors:
"Business Judgement Rule (BJR)"
DIRECTOR DUTIES: (2) |
1. Duty of care: Burden on P to prove Director failed to meet the BJR standard.
2. Duty of Loyalty: Burden shifts to D if P establishes: --a. interested director transaction (remedy transac void at corp option)
--b. competing venture (remedy constructive trust on profits)
--c. usurping corporate opportunity |
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STANDARD OF Board of Directors:
"Business Judgement Rule (BJR)"
DIRECTOR DUTIES: Duty of loyalty: Interested Director Transaction |
Director must show:
1. deal was fair to the corporation at the time it was entered. OR
2. Director's interest and all relevant facts were fully disclosed and the deal was still approved by the BoD or shareholders. |
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SHAREHOLDER PROTECTION:
"Piercing the Corporate Veil"- PUFFICAP |
Courts are reluctant to pierce the corporate veil but will do so if the corporate form is ignored, controled, or manipulated so that it is the mere instrumentality of another, and that misuse constitutes fraud or promotes injustice.
1. Public or closed corp? 2. Undercapitalized? 3. Formalities ignored? 4. Fradulent misrepresentation made? 5. Identity of officers/directors/SH? 6. Commingling of funds? 7. Absence of corporate records? 8. Payment of individual obligations? |
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Piercing the Corporate Veil: |
1. start with rule of Limited Liability, |
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SHAREHOLDER PROTECTION:
requirments for bringing a DERIVATIVE SUIT (4)
"A.T.V.D." |
1. Adequate representation
2. Timing: must own shares all time
3. Verified complaint filed
4. Demand made to BoD to bring suit unless futile. |
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SHAREHOLDER PROTECTION:
requirments for bringing a DERIVATIVE SUIT
"American Rule": Direct suit |
A direct suit, rather than a derivitive, may be brought in close corporations so long as the policy reasons behind derivative suits are met.
(Creditors and shareholders protected, multiple lawsuits avoided) |
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SHAREHOLDER RIGHTS/ BoD Rights |
1. BoD may approve if the corporation is financially sound.
2. Must be paid from surplus, not from capital.
3. Within BoD's discretion; they MAY but don't HAVE to make dirstributions just because there;s a surplus.
4. May only be compelled when there is an abuse of discretion AND bad faith or illegal or oppresive conduct (tough std). |
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SHAREHOLDER RIGHTS/ DISSENTER RIGHTS |
1. Sale of substantially all assets
2. Merger or consolidation
3. Exchange of shares IF dissenter's shares that are being acquired by another company.
4. Acquisition if the aquirer is accorded voting rights and owns a majority of shares.
5. Rigths otherwise authorized in the Articles, Bylaws, or BoD resolutions.
6. Fundamental changes typically required BoD resolution be passed and apporvall by a majority of shareholders entitled to vote. |
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SHAREHOLDER RIGHTS/ DISSENTER RIGHTS
SPECIAL NOTES: "Remember" |
1. Dissenters rights are not available for a publicly-traded company.
2. Remedy is "fair value" immediatly before the funamental change occurred. if no agreement then pettitioning for judicial approval within 60 days of SH demand. |
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DISSOLUTION:
"Who gets the money?" |
1. Secured creditors
2. unsecured creditors
3. Prefered shareholders
4. Common shareholders |
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LLC's:
What is the Liability situation for the LLC and its Members? |
LLC = vicariously liable under agency principles, and |
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S-Corp:
How is an S-Corp taxed? What is the benefit of this type of taxation? |
- tax is "passed through" to shareholders. |
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S-Corp:
What are the five (5) Qualifications a corporation must have to choose S-Corp status? |
1. 100 shareholders or less, |
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Corporate Fiduciary Duties:
What are the three (3) ways to breach the "Duty of Loyalty"? |
1. Interested Director Transaction (director does business with the corp). |
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Corporate Fiduciary Duties:
Who has the "Burden of Proof" in an action alleging a breach in the "Duty of Loyalty"? |
The Defendant. |
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Corporate Fiduciary Duties:
What are the four (4) duties under the "Duty of Care"? [aka "business judgment rule"] |
1. "REASONABLE and PRUDENT DECISIONS", |
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Dissenter's Rights:
What "Right" are you seeking by dissent? What does that get you? |
- "Right of Appraisal" |
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Dissenter's Rights:
What actions by the corporation trigger "dissenter's rights"? [S.M.E.A.R.] |
S = Sale of all or most of corporate assets |
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Dissenter's Rights:
What must you "have" and "do" to be a "dissenter"? When do you never have dissenter's rights? |
- must have the right to vote |
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Corporate Opportunity Doctrine:
What are the two (2) conditions that would need to be satisfied before a fiduciary of the corporation could take a business opportunity for themselves resulting in personal profit? |
1. outside the "line of business" and
2. corporation is "unable" or "unwilling" to take it. |
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Business Judgment Rule:
Under the "Liability" part of the Business Judgment Rule... What are the two (2) types of acts that will expose the fiduciary to liability? |
1. Willful Misconduct, and
2. Recklessness |
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Right of Shareholder to Inspect Records:
Records which MUST be delivered upon request? [A.B.C.D.E.F.S.] |
A = ARTICLES OF INCORPORATION
B = BYLAWS C = COMMUNICATIONS TO SHAREHOLDERS D = DIRECTORS' NAMES AND ADDRESS E = EVERY "MINUTE" FROM LAST 3 YEARS F = FINANCIAL STATEMENTS FROM LAST 3 YEARS S = SECRETARY OF STATE'S BI-ANNUAL REPORT |
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Right of Shareholder to Inspect Records:
Records to be delivered if in "Good Faith" and with "Proper Purpose"? [A.B.C.D.S] |
A = ACCOUNTING RECORDS
B = BANK SHAREHOLDER MINUTES C = COMMITTEE RECORDS D = DIRECTOR MINUTES S = SHAREHOLDER LIST |
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Right of Shareholder to Inspect Records:
Where Must the Records be Kept? ABCDEFS? ABCDS? |
ABCDEFS? = in Principal Office
ABCDS? = in a Reasonable Place |
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Right of Shareholder to Inspect Records:
What is a "Proper Purpose" for Requesting ABCDS? |
Proper = evaluation for estate tax purposes,
Improper = any "competitive" purpose (like trade secrets). |
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Right of Shareholder to Inspect Records:
What is the remedy for corporate failure to produce records to shareholder for inspection? |
Court order for inspection, and
Attorney's Fees! |