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67 Cards in this Set
- Front
- Back
ultra vires
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ultra vires certificates are valid and enforceable; S/H can seek an injunction; the responsible Os and Ds are liable to the C for ultra vires losses
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political contributions by corp;
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no more than $5k per candidate per year;
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loans
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can make a loan if approved by 2/3 of S/H eligible to vote
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de facto C
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if parties made a good faith, colorable attempt to comply with relevant incorporation statute and some exercise of corporate privileges
but C by estoppel is abolished in NY |
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C by estoppel
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abolished in NY
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Pre-incorporation Ks
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a corp is not liable until it adopts the K by express adoption or implied adoption by knowing acceptance of a benefit of the K
promoter remains liable until novation, even after adoption |
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secret profit rule
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promoter cannot make a *secret* profit by selling to the C, but can make a known profit
if secret property was acquired b/f becoming a promoter, profit-FMV; if after, then price - price |
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qualifying
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foreign C's doing business in NY must qualify; if they don't, then penalty when they do and can't sue
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debenture
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a loan / bond, payment not secured by corporate assets / collateral
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subscriptions
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a written, signed offer to buy the stock from the C
a pre-incorporation subscription is not revocable by the buyer for 3 months unless all other subscribers agree post-inc subscription is revocable until the BoD accepts the offer |
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if C accepts a subscription and subscriber defaults
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if < half is paid, C can cancel and keep the money
if ≥ half is paid, and new buyer pays more, S gets the difference, less costs |
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consideration for stock
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money; tangible or intangible property; labor or services already performed for the C; a binding obligation to pay or to perform services in the future
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water
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unpaid stock, like if someone pays in improper from
watered stock is stock sold for less than par; if C issues watered stock to X, C can sue for the balance but if X buys and transfers to TP, TP is not liable if she acted in good faith |
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treasury stock
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was previously issued and has been reacquired by the company; C may then sell the treasury stock
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preemptive rights
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if NEW issuance sold for MONEY, then right to buy to maintain ownership percentage
not new if treasury stock or originally authorized and sold w/in 2 years |
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are there preemptive rights
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if C is formed b/f 2/22/98, yes
if on or after, then only if certificate sez so |
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removal of directorfs
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S/H can remove a director for cause at any time
BoD can remove a director for cause if certificate or bylaws permit w/o cause, S/H only may remove, and only if certif or bylaws permit |
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filling vacancies
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generally, BoD chooses replacement
unless S/H remove w/o cause, then they replace |
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BoD meeting reqs
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for a valid act, need (a) unanimous written consent to act w/o mtg; or mtg; or invalid act later ratified
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quorum & proxies for BoD
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no proxies; no voting agreements
quorum is a majority of entire board (so need 5 of 9, even if 2 resigned) no business after the Q is broken |
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reducing Qurom size
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can reduce in certif. or bylaws, but must be ≥ 1/3 of directors; supermajority req's a change in certificate
passing a resolution always must be a majority or more; supermajority req's change in certif. |
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Duty of Care
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"A director must discharge her duties in good faith and with the degree of diligence, care and skill than an ordinary prudent person would exercise under similar circumstances in like position."
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Business Judgment Rule
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in misfeasance case, state duty of care. next,
"But a court will not second guess a business decision if it was made in good faith, reasonably informed and had a rational basis." |
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Duty of Loyalty
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"a director must act in good faith and with the conscientiousness, fairness, morality and honesty that the law requires of fiduciaries"
no BJR rule b/c of the conflict of interest |
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interested party transactions
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will be set aside UNLESS director shows: a) the deal was fair and reasonable when approved; or b) the material facts and her interest were disclosed and the deal was approved by S/H or board approval, not counting interested votes or unanimous vote of disinterested voters
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stock options
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must be approved by S/H if not listed on xchange
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corporate opportunity
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director cannot usurp. Unless he tells the board and waits for the board to reject it.
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corporate loans
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≤ 2/22/98, by S/H vote unless certif permits BoD to loan
> 2/22/98, BoD can do so unilaterally if it will benefit the C |
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BoD - how to avoid liabilty
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register dissent in writing in the minutes; or in writing to corp secretary; or in registered letter to C, promptly after adjournment; or if absent, in writing after learning
or, good faith reliance on officers, lawyers, or committee of which he is not a member |
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officers' duties
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duties of care & loyalty, like BoD
they are agents, so they can bind the C |
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officer removal
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if BoD selects, they remove, unless certif permits S/H
if S/H elects them, only S/H can remove or, the A/G or 10% of S/Hs can sue for a judgment removing an officer for cause |
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indemnification of O or D
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prohibited if O or D held liable to the C
of right: if she was successful in defending the case permissive: if she acted in good faith & with purpose reasonably believed to be in the corp's best interest certificate cannot eliminate personal liability for seriously improper D activity |
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PCV
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"S/Hs are generally not liable for the debts or acts of a corporation. But a court may pierce the corporate veil and hold S/Hs personally liable if..."
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PCV situations
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alter ego; undercapitalization (S/H failed to invest enough to cover prospective liabilities); torts; wages and benefits of EEs in a close corp
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S/H derivative suits
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a S/H is suing to enforce the corp's claim, not her own (e.g. suing BoD for usurping)
generally, the C gets the recovery; S/H can get damages only if C would return the money to the bad guys if unsuccessful, S/H will be liable to the D for costs but not attys fees |
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reqs to bring derivative suit
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stock ownership when claim arose and throughout the axn; must adequately represent the interest of the C and the S/H's;
s/H must first make DEMAND that BoD bring suit unless futile P must plead with particularity |
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dismissal of derivative suit
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if independent directors find that the suit is not in C's best interests, and they are truly independent and investigation is sufficient, then dismissal
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joinder in derivative suits
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C must be joined as a D, even tho S/H is suing on its behalf
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settlement of derivative suits
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only w/ct approval
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proxies
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not for BoD, only S/H
in writing, signed by record S/H, good for 11 mos unless it sez otherwise; always revocable, even if it sez irrevocable |
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voting trust
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written & signed trust agreement; copy to the corp (not secret); transfer legal title of shares to voting trustee; 10 year max
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appraisal remedy
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statutory right of corporate S/H who oppose extraordinary corporate axn to have their shares appraised and demand the corp buy back their shares at the appraised value
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S/H meeting quoum
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majority of outstanding shares
certif or bylaws can decrease, as long as ≥ 1/3 increase to supermajority only in certif resolutions pass by majority actually voting quorum cannot be lost (unlike BoD quorum) |
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restraint on stock transfer by S/H
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restraints on transfer will be upheld "if reasonable under the circumstances and not an undue restraint on alienation"
must be conspicuously noted on stock certificate or actual knowledge |
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statutory right to inspect
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any S/H on 5 days written demand can inspect minutes & record of S/Hs if purpose not other than in the interest of the C and has not tried to sell any list w/in past 5 years
also can inspect balance sheet, P/L statement, interim statements, list of Ds & Os |
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c/L right to inspect
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to inspect records at a reasonable time and proper place for proper place
may be broader than statutory right |
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dividends
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preferred means pay first; preferred that is participating means pay again; preferred that is cumulative means add them up (for years in which no dividend is paid)
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funds that may be distributed
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surplus = assets - liabilities - stated capital
stated capital = issued stock * par value |
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unlawful distributions
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C cannot make distributions that would render it insolvent
Ds are personally liable, so are S/Hs who knew it was unlawful; C can sue or S/H as a derivative suit; but good faith reliance |
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fundamental corporate changes
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require BoD approval, then S/H approval
must notify dept of state |
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to get right of appraisal
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(not if not listed on exchange)
b/f vote, S/H must file written objection and intent to demand payment and after vote, make written demand to be bought out if no agreement on fair value, C sues to determine value |
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amendment to certificate
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major changes must be approved by BoD and majority of shares ENTITLED to vote (normally just actually voting)
if amendment will strike a supermajority or quorum req for S/H voting, need BoD and 2/3 of S/H ENTITLED to vote |
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mergers v. consolidation
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merger: A into B
consolidation: A & B form C |
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rights of appraisal in merger
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yes for the S/H of the Corp that disappears
but in merger, not for the surviving corp |
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short form merger
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parent corp owns ≥ 90% of sub and sub is merged into parent;
no S/H req'd but rights of appraisal, even tho they didn't vote |
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successor liability
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after merger, the surviving corp succeeds to all the rights and liabilities of the constituents
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transfer of all assets
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need BoD & S/H approval
rights of appraisal for SELLING company company buying will not be liable for the torts of the company acquired (unless fraudulently escaping) |
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dissolution
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voluntary - no BoD vote, just S/H vote
involuntary - (judicial) - need BoD resolution or S/H majority of ENTITLED resolution, stating C has insufficient assets or dissolution would be beenficial |
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S/H petition for involuntary dissolution
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usually takes 1/2 entitled,
but 20% of voting shares may petition if real bad shit |
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to avoid dissolution
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w/in 90 days of petition, the C or non-complaining s/H may buy the petitioner's shares at FMV; must be approved by ct
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controlling S/H
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generally, outside of close corp, S/Hs do not owe fiduciary duties to each other or to the corp
but a controlling S/H does |
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stock sales by controlling S/H
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can sell at a premium b/c of control;
but liability if sold to looters, for selling a corporate asset, or selling a position on the board |
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freeze out merger
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cashes out minority S/Hs unfairly
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insider trading
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breaches an affirmative duty to the corp
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stupid dates for preemptive rights
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rights if corp formed BEFORE 2/22/98; not if on or after
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stupid dates for loans to directors
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if certificate is silent, need S/H vote on or before 2/22/98; BoD after
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2/3, 1/3 and stupid dates
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on or before 2/22/98, need 2/3 S/H entitled;
after need 1/2 of S/H entitled to vote to amend certificate to strike supermajority quorum or voting req for director voting; for merger, consolidation or transfer of assts; for voluntary dissolution |