Study your flashcards anywhere!

Download the official Cram app for free >

  • Shuffle
    Toggle On
    Toggle Off
  • Alphabetize
    Toggle On
    Toggle Off
  • Front First
    Toggle On
    Toggle Off
  • Both Sides
    Toggle On
    Toggle Off
  • Read
    Toggle On
    Toggle Off

How to study your flashcards.

Right/Left arrow keys: Navigate between flashcards.right arrow keyleft arrow key

Up/Down arrow keys: Flip the card between the front and back.down keyup key

H key: Show hint (3rd side).h key

A key: Read text to speech.a key


Play button


Play button




Click to flip

11 Cards in this Set

  • Front
  • Back
How many Directors are required in a corporation?
Common law; 3 or more
Modern view; 1 or more

Only natural persons can reside on the Board. Provision of the no. of Board members is included in the Bylaws
How is the Board elected?
May have varied systems, refernced in the bylaws.
Example; Elect Board members every year, 9 members, 3 each year.. 3 year term for each member.

Staggered elections

Board members may be elected aligned with the classes of stock, each stock class can elect a certain no. of board members.

This distributes shareholder power.
How can a Board member be removed from the Board?
At common law, a board member could be removed only for cause.

Modern view, shareholders can remove Directors with or without cause, unless AoI stipulate can remove only for cause.
Can a court of law remove a Director of a private corp.?
A court may remove a Board member only under extraordinary circumstances as in situations of gross fraud and abuse, serious misconduct.
How are Board decisions made?
All Board decisions must be made within a meeting, allowing all members opportunity to hear and contribute to discussion.
Exception to a meeting:
1) All board members consent in writing, no meeting is needed.
Can conference calls be considered a board meeting?
Yes, if everyone on the phone is able to hear the discussion.
May Directors transfer their proxy vote, if they will not be attending the meeting?
No, no transfer of votes allowed for Directors. The rule is Directors must exercise their own independent judgement. No Voting agreements or transfer of proxy vote rights are allowed.
What is a quorum?
A quorum represents the minimum number of Directors required to hold a meeting. It is typically, a majority of members unless there is a different provision in the bylaws.

To pass a yes vote, a majority of those in attendance must vote yes.

9 Directors, 5 must attend the meeting and 3 of 5 must vote yes to pass a resolution.
What is the Board's Duty of Care to the Corporation?
A Duty of care is a fiduciary duty imposed on individual board members by operation of law.

The duty requires the Board member to act as a prudent person would in handling their own affairs. They must act in good faith in the best interest of the corporation, as a prudent person in similar circumstances.
A director fails to act to protect the corporation where there is a duty to act.
Ex. Board member never attends Board meetings, or votes.
What is the Approach in analysing the Board's Duty of Care?
1) Set out legal standard and General rule.
2) Apply standard to the facts.
3) Check loss to the corporation as a result of the Director's breach.. If no harm resulted to the corporation, then no liability attaches. If you can argue a loss, then Director is liable.