BUSINESS ORGANIZATIONS: CORPORATIONS - CORPORATE MANAGEMENT: BOARD OF DIRECTORS + OFFICERS

How are special meetings held by the Board?

*May hold regular or special meetings, so long as the majority or directors are present. *Usually called by the Chairman of the Board or by the President, unless bylaws say differently. *May act without a meeting if all of the Board or a particular committee consent in writing. *Don't forget for special meetings to notify pursuant to §607.0822, Fla. Stat. (at least 2 days notice which specifies time, place and date) or have them sign a waiver.

What is the business judgement rule?

*This is known as the "Business Judgment Rule"- Liability is not imposed simply for poor business judgment. One perfect example of this rule is the recent case of Disney. The Board had agreed to hire and fire Michael Ovitz who recovered 140 million in termination benefits even though he only served for 14 months!!!! Ct held the Board not liable. Didn't rise to the level of gross negligence.

How is voting done by the Board?

*Unless articles or bylaws say differently, a Quorum is the majority of Directors, and majority rules.

What are the federal laws concerning the board?

A) 1933 Securities Act -Directors may be held personally liable to purchasers of securities issued by the corporation for any material or misleading statement in the registration statement filed with the SEC. B) Sarbanes-Oxley Act of 2002 -Created in response to corporate scandals. It primarily affects companies who are traded on a national security exchanges or that have at least 500 SH and more than 10 million in assets.

What is the agency relationship of officers?

AGENCY RELATIONSHIP: *Officers are considered agents of the corp.

What are the agendas and requirements of the annual meeting of Board?

ANNUAL MEETING OF THE BOARD: 1. Elect Officers 2. Ratify Acts of the Officers and Directors for the past year 3. Approve minutes of last meeting 4. Approve dividend to be paid to SH 5. Approve annual report to be filed with the state 6. Review financial report 7. Approve bonuses for the officers and directors *Must take minutes and put in corporate books.

What do BOD have the power to do?

AUTHORITY OF DIRECTORS: *Directors manage the business of the corporation, and thus, make most decisions regarding corporate operations. Consequently, they have the power to: 1. Elect and Remove Officers and fix compensation 2. Declare dividends 3. Initiate changes for submission to SH vote 4. Inspect records 5. Be reimbursed for expenses and be paid 6. Delegate authority to the officers and to committees (ex/ finance committee, public affairs committee) 7. Adopt and amend bylaws 8. Issue stock *Role can be expanded or limited by the articles or bylaws.

How do you become and officer?

BECOMING AN OFFICER: *Elected or appointed by the Board of Directors or by a fellow officer (ex/ Board may allow the President to appoint the VP) *An officer may also serve on the Board of Directors

How are directors compensated?

COMPENSATION OF DIRECTORS - § 607.08101, Fla. Stat. *The right to compensation is addressed in the Bylaws. *Unless articles or bylaws say otherwise, directors may fix their own compensation!!

How are officers compensated?

COMPENSATION:*Statute is silent; thus, should be set forth in bylaws.

CORPORATE OFFICERS

CORPORATE OFFICERS

What are the duties of the Board of Directors?

DUTIES OF DIRECTORS: 1. Duty of Good Faith*There is a "fiduciary" relationship between directors and SH. 2. Duty to act with care of an ordinarily prudent person in like position would exercise under similar circumstances. 3. In a manner he/she reasonably believes to be in the best interest of the corporation. *****Courts have also added: Duty of Loyalty.***** *NOTE: Directors can rely on information obtained from reports or statements prepared by fellow directors, officers, or employees, legal counsel, financial counsel etc...

What are the duties of corporate officers?

DUTIES OF OFFICERS: 1. Perform the duties in the bylaws or consistent with the bylaws: (typically) a) Title of the officers b) Description of duties c) Method for electing the officers 2. Perform the duties prescribed by the Bd. of Directors.

How are directors elected?

ELECTION OF DIRECTORS: 1. Initial Directors named in Articles. 2. Elected at the organizational meeting of incorporators and directors. Typically, the term is one year. They may have a "staggered system," meaning that the board doesn't turn over completely every year. 3. Elected at every annual SH meetings thereafter usually by plurality voting.

How are officers elected?

ELECTION/APPOINTMENT OF OFFICERS: *Statute is silent: thus, should be set forth in the bylaws.

How do officers hold meetings?

MEETINGS OF OFFICERS: *Statute is silent; thus, should be set forth in bylaws.

What are the main provisions for the Sarbanes-Oxley Act of 2002?

Main provisions: *The Board for each company must establish an audit committee who will hear complaints about accounting practices and will oversee the CPA's for the company. *Prohibit insider trades during certain periods of time. *Stops personal loans by executives.

What are the number of directors?

NUMBER OF DIRECTORS: *Must have a minimum of one board member, with the maximum specified in the articles or bylaws. *The # may be increased or decreased as set forth in the bylaws. There is no maximum.

Can officers be personally liable for damages done to the corp?

PERSONAL LIABILITY OF OFFICERS: *FL statute is silent. Book says liability of officers is the same as the liability of directors (ie.. may be personally liable if act in bad faith)

Can a director be personally liable for damages caused to the corp?

Personal Liability of Directors: *Generally, directors cannot be held personally liable for damage caused to the corporation as a result of decisions made in good faith. There are circumstances, however, where a director may be personally liable. § 607.0831, Fla. Stat.

How are directors removed from the board?

REMOVAL OF DIRECTOR - § 607.0808, Fla. Stat. *SH may remove director with or without cause unless the articles provide that they may only be removed for cause. *By vote of the SH- majority rules. Must happen at an annual meeting of SH if "proper notice" has been given (the notice must specify that the re-moval is on the agenda to be decided).

How are officers removed?

REMOVAL OF OFFICERS: § 607.0842, Fla. Stat. *Bd. of Dir. may remove an officer at any time with or without cause.

What are the requirements of officers?

REQUIRED OFFICERS: § 607.08401, Fla. Stat. *Statutory requirements are minimal! 1. Bylaws will set forth what officers there will be. 2. At least 1 officer must be responsible for preparing minutes of both director meetings and SH meetings and for authenticating records of the corp. 3. Same individual may hold more than one office. *Typical Corp Officers: Pres.; VP; Chairman of Bd; Chief Financial Officer; Treasurer; Secretary; Asst. Secretary

What are the REQUIREMENTS FOR BECOMING A DIRECTOR?

REQUIREMENTS FOR BECOMING A DIRECTOR: *§ 607.0802, Fla. Stat. 1. Natural Person (need not be a resident) 2. Over 18 3. And any other requirement set forth in the articles or bylaws (Most common addition: Must also be a SH) *Generally, directors have other "real jobs." Some people serve on multiple board of directors.

How do directors resign and what are requirements?

RESIGNATION OF DIRECTOR - § 607.0807, Fla. Stat. *Can resign at any time by delivering written notice to the Bd. or to the corp. *Effective upon delivery, unless notice says otherwise. *If a vacancy occurs, it may be temporarily filled by a majority of the remaining directors or the SH, unless the articles provide otherwise.

When can an officer resign?

RESIGNATION OF OFFICERS: § 607.0842, Fla. Stat. *An Officer may resign at any time by giving written notice to the corp. Effective upon delivery unless notice says otherwise.

What is the role of the paralegal?

Role of the Paralegal *Paralegals frequently asked to assist the attorney and corporation with complying with the statutory requirements, maintaining record books, preparing for meetings.

What are the circumstances where a director may be personally liable?

There are circumstances, however, where a director may be personally liable. § 607.0831, Fla. Stat.: 1. When a director fails to perform his duties as a director! 2. If director knowingly violates criminal law. 3. If director derived an improper personal benefit from a transaction. 4. If a director acts in conscious disregard for the best interest of the corp. or with willful misconduct. 5. If a director acts recklessly or with wanton and willful disregard.

What do corps do to encourage the directors to serve on the board?

To encourage Directors to want to serve on Boards, corporations often purchase "D and O" insurance. It is insurance that the corporations purchase on behalf of directors and officers that protects them from liability. This type of insurance does not cover willful misconduct or illegal acts! *The book also says that some companies agree to indemnify(compensate) directors for any claim (and the legal expenses associated with them.

Can the Articles and Bylaws set forth a more strict standard?

Yes, Articles and bylaws can set forth a more strict standard.