Term
| How do you create a corporation in VA? |
|
Definition
1. File the articles of incorporation with the State Corporation Commission and maintain a statutory agent (super easy)
2. Hold an organizational meeting where you adopt bylaws, appoint officers, and elect the board of directors |
|
|
Term
| Does VA recognize de facto corporations (where filing requirements have not been met but owner believes he has a corporation)? |
|
Definition
| No, but they do recognize corporation by estoppel, which prevents an organization that holds itself out as a corporation from using lack of corporate status as a defense |
|
|
Term
| Who usually authorizes distributions to shareholders? |
|
Definition
|
|
Term
| What are the two federal causes of action that may arise from the purchase or sale of stock? |
|
Definition
1. 10b-5: Fraudulent purchase or sale of any stock or other security
2. Section 16b: During any 6 month period, an insider of a certain type of public corporation may be liable to the corporation for any profits made on stock bought and then sold during that period (short-swing profits) |
|
|
Term
| Direct vs. Derivative actions: |
|
Definition
1. Direct actions are actions by a shareholder to enforce rights, or other actions brought by non-shareholders against the corporation (for tort, etc.); shareholder or other individual is entitled to any recovery
2. Derivative actions are brought by shareholders on behalf of a corporation, and the corporation is entitled to any recovery (except litigation expenses) |
|
|
Term
| Factors considered by the court under the piercing-the-corporate veil doctrine: |
|
Definition
1. Shareholder's wrong caused injury or unjust loss to the plaintiff
2. Shareholder's impermissible control or domination over the corporation, and
3. Wrongful, misleading, or fraudulent dealings with a corporate creditor |
|
|
Term
|
Definition
| Generally 1 year, but staggered terms may be up to 3 years |
|
|
Term
| Are voting agreements between directors enforceable? |
|
Definition
|
|
Term
| What decisions are outside the authority of a committee of directors (rather than the whole board)? |
|
Definition
1. Declare distributions, except within limits set by the board
2. Recommend actions that require shareholder approval
3. Fill vacancies on the board or its committees, or
4. Adopt, amend, or repeal bylaws |
|
|
Term
| What is the Sarbanes-Oxley Act? |
|
Definition
1. A law that says outside auditors cannot otherwise be employed by the corporation
2. Also says that the CEO and CFO of publicly traded corporations must certify the accuracy of the corporation's financial reports that are filed with the SEC |
|
|
Term
| What are the duties a director owes to the corporation? |
|
Definition
1. Duty of care (business judgment rule - rebuttable presumption that a director reasonably believed his actions were in the best interest of the corporation)
2. Duty of loyalty (no self-dealing unless it is open, fair, and honest; no competing or corporate waste)
3. Duty to discharge these duties in good faith |
|
|
Term
| What are the rules governing when a corporation must, may, or cannot indemnify directors against liability? |
|
Definition
1. A corporation must indemnify a director in the successful defense of a proceeding against the director in his role as director, or when ordered by the court
2. A corporation cannot indemnify a director against liability due to the receipt of improper financial benefit
3. A corporation may indemnify a director in unsuccessful suits when the director acted in good faith, or in criminal proceedings when the director did not have reason to believe his conduct was unlawful; permissive indemnification must be approved by a disinterested majority of shareholders or directors, or an independent attorney chosen by disinterested directors |
|
|
Term
|
Definition
1. Board of directors for each corporation must approve
2. Notice must be given between 60 and 25 days before the meeting, and include a summary of the merger plan
3. Shareholders of each corporation must approve the merger
4. Required documents must be filed with the state |
|
|
Term
| What decisions must be approved by shareholders? |
|
Definition
1. Election of directors
2. Changes to the articles of incorporation
3. Fundamental changes |
|
|
Term
| Limited Partnerships (NOT LLCs/LLPs): |
|
Definition
1. A limited partnership is like a general partnership except that there is at least one general partner and one limited partner; a silent partner is usually a limited partner who invests money in the partnership, while the general partner performs the duties associated with running a business
2. The only legal step necessary to form a limited partnership is the filing of a certification of limited partnership with the state
3. A general partner is personally liable to the partnership and other partners except as outlined in the partnership agreement; a limited partner’s liability is generally limited to the amount he invested
4. However, a limited partner may be held liable if he entered into a business transaction on behalf of the partnership and the person he transacted with believed he was a general partner
5. No type of partnership is taxes as a separate entity; any profit or loss is passed to each individual partner in proportion to her interest in the partnership and each partner then reports the profit or loss on her own individual tax return |
|
|
Term
| Limited Liability Partnership (LLP): |
|
Definition
1. A limited liability partnership ("LLP") is a partnership in which a partner’s personal liability for obligations of the partnership is eliminated
2. An LLP is formed when by filing a statement of qualification with the state
3. A limited partner in an LLP is not personally liable for an obligation of an LLP, regardless of the type of obligation (e.g., tort, contract); a limited partner is personally liable for his own personal misconduct
4. A limited liability partnership has the same tax consequences as a general partnership |
|
|
