Term
|
Definition
| Corporation is managed by the board of directors, who are elected by the shareholders |
|
|
Term
|
Definition
Describes purpose and structure of the corporation
-Name of corporation
-Number, names & addresses of the directors
-Purpose of corporation
-Duration (if not perpetual) |
|
|
Term
|
Definition
| Corporation formed in accordance with all applicable laws |
|
|
Term
|
Definition
If there's a mess up in the incorporation process, may still limit personal liability under this doctrine if there's been
-Good faith attempt to comply with the law in formation
-Business has been conducted in the corp's name
UNCLEAR WHETHER TX APPLIES THIS DOCTRINE |
|
|
Term
| Piercing the Corporate Veil |
|
Definition
Shareholders liable if:
-Treat corp assets as theirs
-Use corp funds to pay their private debts
-Fail to keep separate books
-Fail to hold SH or director meetings
-Fail to issue stock
-AND injustice results --
-Holds an individual personally liable
-PARENT-SUBSIDIARY will be held liable on same basis |
|
|
Term
| Formation Requirements for a Corporation |
|
Definition
PEOPLE - one or more organizers (person or entity) to execute the certificate and deliver to the SoS
PAPER - certificate of formation creates K b/w corp and shareholders and corp and state
Must include a purpose for the corp - something simple like "engage in lawful activity" is OK
ACT - sign certificate, deliver it to SoS, and pay required fee
ORGANIZATIONAL MEETING - at which directors select officers, adopt bylaws, transact other company business - need to give 3 days' notice of the meeting - doesn't have to be held in TX |
|
|
Term
| Pre-incorporation Contracts |
|
Definition
Promoter - person acting on behalf of a corp. not yet formed - might contract with a 3rd party
Liability - corp not liable on pre-incorp Ks until it adopts the K
Promoter MAY be liable on pre-incorp Ks until there is a novation and corp takes over the liability |
|
|
Term
|
Definition
When corporation sells its own stock to raise capital
Pre-incorp subscriptions - written, signed offers to buy stock |
|
|
Term
| Forms of Consideration for Stock |
|
Definition
Any tangible or intangible benefit
Money, discharge of debt, property, services already rendered for the corp, notes and contracts for future services
AMOUNT: Par = minimum issuance price - no par means board can set any price
WATERED STOCK - issuing stock for below its par value |
|
|
Term
|
Definition
| Right of an existing shareholder to maintain her % ownership by buying stock whenever there's a new issuance for money |
|
|
Term
| Statutory Requirements for Directors |
|
Definition
One or more adult natural persons - initially the # is set in the certificate but later set in the cert of bylaws
Shareholders elect directors at the annual meeting
Shareholders can vote them out before their term expires by a majority with or w/o cause
If there's a vacancy, the board or shareholders selects someone to serve out the term |
|
|
Term
| How does a board of directors take an act? |
|
Definition
Unanimous written consent (email or fax are OK) to do something OR a meeting that satisfies quorum/voting requirements
Notice isn't required for meetings unless they're special meetings
QUORUM - must have a majority of directors at a meeting to do bsiness - if quorum, just need a majority vote of those present |
|
|
Term
|
Definition
Manages business or corporation, sets policies, supervises officers, etc.
DUTY OF CARE (burden on P): must act in good faith and exercise ordinary care and prudence |
|
|
Term
|
Definition
| If director's actions caused a loss to the corp, not liable if the decision was informed, made in good faith, and had a rational basis |
|
|
Term
|
Definition
Burden on D - must act in good faith nd with a reasonable belief that she's acting in the corp's best interest
Interested director transactions will be voided unless director shows she met her duty
Competing ventures - director can't compete without approval from majority of disinterested directors |
|
|
Term
| Indemnification of Directors and Officers |
|
Definition
Directors & officers will be held liable for willful or intentional misconduct in performing a duty and won't be indemnified
Corp must indemnify Ds & Os if D or O wins a judgment on the entire case |
|
|
Term
|
Definition
Has just a few shareholders and the stock isn't publicly traded
Can, but doesn't need to have a board of directors - shareholders can manage
SHs don't owe each other a fiduciary duty as a matter of law - but court could find it depending on the facts
SHs are NOT liable for corp's acts |
|
|
Term
| Shareholder derivative suits |
|
Definition
SH sues to enforce the corporation's claim (not her own personal claim) b/c the corp didn't sue when it should have
REQUIREMENTS TO BRING SUCH A SUIT:
-Stock ownership
-Fair and adequate representation of the corp's interests
-Must make a written demand on directors that the corp bring suit - can't file until 90 days after demand (unless waiting would cause irreparable damage)
-Corp must join as a D
-Corp may move to dismiss if it's not in corp's best interest (low chance of success, cost would exceed recovery)
IF CLOSE CORPORATION OF 35 OR FEWER SH's: court might treat a derivative suit as a direct action - recovery would go straight to P, not the corp |
|
|
Term
|
Definition
Record SH as of record date has the right to vote - the person shown as the owner in the corp records - voter eligibility cutoff of no more than 60 days before the meeting
EXCPETIONS: corp that reacquires stock before the record date can't vote on it (treasury stock) - executor for SH can vote the shares - can send a proxy to vote for a SH (good for 11 mos) |
|
|
Term
| Voting trusts/voting agreements |
|
Definition
REQUIREMENTS FOR TRUST:
-Written agreement controlling how the shares will be voted
-File a copy with the corp
-Transfer legal title of shares to voting trustee
-Original SHs receive trust certificates and retain all SH rights other than voting
REQUIREMENTS - POOLING AGREEMENT:
-In writing
-Copy to the corporation |
|
|
Term
| Right of Shareholder to Inspect the Books |
|
Definition
| Any SH who has owned stock for at least 6 months OR owns at least 5% of outstanding shares can inspect the books if they make a written demand related to their interest as SH |
|
|
Term
| Which shareholders get dividends? |
|
Definition
Preferred stock - paid first
-Participating preferred - pay again
Common stock |
|
|
Term
| Fundamental Corporate Change |
|
Definition
Board takes an action adopting a resolution of a fundamental corp change
Board must submit the proposal to the SHs with written notice
Change must be approved by the SHs |
|
|
Term
|
Definition
| Board of director action AND SH approval (unless it's a 90%+ owned subsidiary merging into its parent corp) |
|
|
Term
|
Definition
Corp can convert to another form of business organization - requires board action and 2/3 approval of SHs
Transfer will not be of most of the assets if the corp continues to engage in the same business after the transfer |
|
|
Term
|
Definition
VOLUNTARY:
-Written consent of all SHs or
-Board of director action AND approval of 2/3 of shares entitled to vote
-Send notice of intent to wind up creditors
-Follow liquidation process
INVOLUNTARY (court ordered):
-TX AG can institute a proceeding and wind up for fraudulent procurement of cert, ultra vires activities, misrepresentation
-Creditors can seek immediate termination based on irreparable harm to unsecured creditors
-SH can seek appointment of a receiver for insolvency/waste of assets
ADMINISTRATIVE:
-TX SOS may issue a certificate for termination if the corp doesn't pay fees or maintain registered agent or required reports |
|
|
