Corporations

A de jure corporation

A corporation formed in accordance with all applicable laws is known as:

The uncle can vote the shareholder's shares under the proxy, but the aunt cannot vote her shares because the purchase was made after the record date

A corporation's bylaws fix a record date of 20 days before any shareholders' meeting. The week before a meeting, a shareholder sold half of her shares to her aunt and executed a written proxy authorizing her uncle to vote the remainder of her shares. Assuming the sale and proxy appointment are both valid, can the aunt or the uncle vote at the meeting?

The incorporators made a good faith attempt to comply with the state's corporate law, and the entity has since exercised corporate privileges

At common law, in spite of a defective incorporation, a business entity can be recognized as a de facto corporation if:

When the corporation becomes insolvent due to poor management

In which situation is a court least likely to pierce the corporate veil?

The rule should be placed in the bylaws; it would be more difficult to change the articles of incorporation later because normally that would require a vote of both the directors and the shareholders

The directors of a corporation incorporated under the default rules of the Revised Model Business Corporation Act ("RMBCA") want to enact a particular management rule, but they also want to maximize future flexibility on that issue. They are unsure whether the rule should be included in the articles of incorporation or the bylaws. What would you advise them?

The name and address of each of the corporation's initial directors

Under the RMBCA, all of the following must be included in the articles of incorporation EXCEPT:

The shareholder must have been a shareholder at the time of the alleged wrongful act or omission, or become a shareholder through transfer by operation of law from one who was a shareholder at that time, and he must be able to fairly and adequately represent the interests of the corporation

Under the RMBCA, what is necessary for a shareholder to have standing to bring a derivative action?

Filing an intent to exercise his dissenters' rights with a court within 10 days of receiving notice of the proposed action

Under the RMBCA, when a proposed action would trigger dissenters' rights, which of the following actions is NOT required of a shareholder to guarantee payment for his shares?

He must give five days' written notice of his request, stating a proper purpose for the inspection

Under the Revised Model Business Corporation Act ("RMBCA") approach, what must a majority shareholder do to inspect the corporation's accounting records?

Not less than 10 days or more than 60 days before the meeting

Under the Revised Model Business Corporation Act ("RMBCA") notice of a shareholders' meeting must be delivered:

Money damages for failure to take action as a director

Under the Revised Model Business Corporation Act ("RMBCA"), a corporation's articles of incorporation can limit or eliminate a director's personal liability for:

Six months

Under the Revised Model Business Corporation Act ("RMBCA"), a preincorporation subscription is irrevocable by the subscriber for ____________________ from the date of the subscription unless otherwise provided in the terms of the subscription, or unless all subscribers consent to revocation.

If the votes cast in favor of the action exceed the votes cast against the action, the action will be deemed approved

Under the Revised Model Business Corporation Act ("RMBCA"), assuming that the articles of incorporation are silent on the issue and a quorum exists, what is the default standard used for determining the outcome of an ordinary shareholders' vote?

Yes, with or without cause

Under the Revised Model Business Corporation Act ("RMBCA"), can duly elected directors be removed by the shareholders?

A shareholder has a right to notice of both special and annual meetings but will be deemed to have waived her right to notice to a meeting by attending that meeting and not objecting to the lack of notice

Under the Revised Model Business Corporation Act ("RMBCA"), what statement regarding a shareholder's right to notice of a shareholder meeting is true?

Shares issued in exchange for money

Under the Revised Model Business Corporation Act ("RMBCA"), which of the following could trigger preemptive rights in a corporation that provides preemptive rights?

A person who is charged with filing the articles, but who enters into a lease contract on behalf of the corporation the day before filing

Under the Revised Model Business Corporation Act ("RMBCA"), which of the following people can be held personally liable for business transacted before the articles of incorporations are filed?

Regular board meetings may be held without notice, but special meetings require at least two days' notice of the date, time, and place of the meeting, but a purpose need not be included in the notice

Under the Revised Model Business Corporation Act ("RMBCA"), which of the following statements regarding meetings of the board of directors is correct?

Shareholders do not have preemptive rights unless the articles of incorporation so provide

Under the Revised Model Business Corporation Act ("RMBCA"), which of the following statements regarding preemptive rights is true?

Changing the preferences of one class of shares

Under the Revised Model Business Corporation Act ("RMBCA"), which of the following would be considered a fundamental corporate change requiring a vote by the shareholders?

That a majority of votes entitled to be case on a matter were present at the meeting before a vote on the matter took place

Under the default rules of the Revised Model Business Corporation Act ("RMBCA"), what does it mean for there to be a "quorum" at a shareholder's meeting?

The transaction will result in any tangible or intangible benefit to the corporation

What alone is NOT an adequate reason for upholding a transaction in which a director has a conflicting personal interest?

A corporation in which the sole shareholder uses the assets of the corporation to pay her personal bills leaving the corporation unable to pay its own creditors

What corporation would most likely be deemed the "alter ego" of its sole shareholder for the purposes of piercing the corporate veil and holding that shareholder personally liable for the corporation's debts?

The director must act in reliance on her own business judgment and not in reliance on the opinions of others

What is NOT a requirement to satisfy a director's duty of care?

The share is entitled to a $5 payment before a distribution can be made on account of common shares

What is true if a share has a $5 noncumulative preference?

A promoter remains liable even if the corporation is formed and adopts the contract

What is true regarding a promoter's personal liability on a preincorporation contract?

The president of a corporation has implied authority to enter into contracts on behalf of the corporation in the ordinary course of corporate affairs

What is true regarding the president of a corporation is true?

The board adopts a resolution recommending the change; a notice describing the proposed change is sent to the shareholders; the change is approved by the shareholders; the change is formalized in articles that are filed with the state

What outlines the proper steps for adopting a fundamental corporate change?

Flow-through taxation

What quality is NOT considered a characteristic of the corporate form?

Shareholders can bring direct actions against their corporation to enforce their own rights and any recovery will be for their own benefit; shareholders can sometimes bring derivative actions to enforce the rights of the corporation, but in those cases recovery generally goes to the corporation and the shareholders bringing the action can only recover their reasonable expenses

What statement regarding shareholder lawsuits is most accurate?

Creditors' claims must be brought against the shareholders personally since the corporation ceases to exist upon dissolution

What statements regarding creditors' claims against a dissolved corporation is false?

A director places the deciding vote that a corporation will make an interest-free loan to a start-up company that the director has formed, after fully disclosing his personal connection to the company to the other voting board members

What would most likely be considered a conflicting interest transaction that could be enjoined or give rise to an award of damages?

The amount the corporation estimates as the fair value of the shares, but if the shareholder disagrees with the assessment, the corporation must either pay the amount the shareholder demands or file a court action to determine the fair value of the shares

When an action creating dissenters' rights is taken, the corporation must pay the dissenters:

When the state files the articles of incorporation

When does corporate existence begin?

When the corporation expressly or impliedly adopts the contract as its own

When is a corporation liable for a pre-incorporation contract that a promoter signed on behalf of the corporation?

When the parent corporation has inadequately capitalized the subsidiary without a reasonably expectation that the subsidiary will achieve financial independence

When is a court most likely to disregard the separate identity of a subsidiary corporation and allow recovery from the parent corporation?

The votes cast against her removal would have been sufficient to elect her if cumulatively voted at an election of the board

If less than the entire board is to be removed, a director elected by cumulative voting may NOT be removed by a shareholders' vote if:

Yes, unless the parties agree to a novation

Does a promoter who signs a contract in the name of a planned, but as of yet unformed corporation, remain personally liable on the contract once the corporation is formed?

Shareholders have very little right to compel the payment of a dividend; declaration is generally solely within the board's discretion

How much power do shareholders generally have in determining whether or not to declare the payment of a dividend?

Yes, a proxy is revocable at any time, unless the appointment form states that the proxy is irrevocable and the appointment is couples with an interest

Once a shareholder appoints a proxy to vote his shares, can the shareholder later revoke that proxy?