Chapter 35- Directors, officers and shareholders

Cumulative Voting:

Cumulative Voting allows minority shareholders to get a board member elected.

Liab of directors and officers

Directors and officers may be liable for crimes and torts committed individually and/or those committed by employees under their supervision.

Duty to Exercise Reasonable Supervision. (directors)

Directors are expected to supervise officers when delegated work.

Duty of Care.

Duty to Make Informed Decisions. Directors are expected to be fully informed on corporate matters

Election of Directors

Generally, the number of directors is set forth in the articles of incorporation: appointed at first org meeting for a term of 1 year

Business Judgment Rule

Immunizes a director or officer from liability from bad decisions as long as decision was reasonable, informed, made in good faith and in the best interests of the corporation, BJR will apply

duties of shareholders

Majority shareholders owe a fiduciary duty to corporation, minority shareholders and creditors when selling their shares

Corporate Officers and Executives

Officers serve at the pleasure of the Board of Directors but have fiduciary duties to company as well. Their employment relationships are generally governed by contract law and employment law. Officers may be terminated for cause. Directors and officers are fiduciaries and owe the company ethical and legal duties

Rights of directors

Participate in corporate decisions and inspect corporate books and records corporation should buy liability insurance to protect directors

Board of Directors' Meetings.

Quorum must be present to conduct official business. min number of memebers must be present

Shareholders rights

Shareholders generally have no right to manage the daily affairs of the corporation, but do so indirectly by electing directors owe a fiduciary duty to minority shareholders. Shareholders may have various rights, depending on the articles and bylaws: Stock Certificates. Preemptive Rights: allows each shareholder to maintain his proportional control. Stock Warrants: buy at a stated price. dividends and insecpection rights w proper purpose Transfer of Shares. Rights on Dissolution.- when company goes under after everything is payed they get the last Shareholder's Derivative Suit

Shareholder's Derivative Suit

Shareholders sue a third party on behalf of the corporation, if the Directors fail or refuse to correct the wrong or injury. Shareholders must first 'make demand' on the board which then has 90 days to decide in the name of the company not individual

Shareholders' Powers

approving all fundamental changes to the corp Amending articles of incorporation or bylaws. Approval of mergers or acquisition. Sale of all corporate assets or dissolution. Shareholders also elect and remove the board of directors.

A corporation is governed by..

board of directors which are elected by shareholders director can also be a shareholder Individual directors are not agents of the corporation. Only the board itself can act as a "super-agent" and bind the corporation.

Removal of Directors

directors can be removed for cause. (failing to preform a required duty)

Conflicts of interest

full disclosure of any potential conflicts of interest and abstain from voting on any transaction that may benefit the director/officer personally

shareholders liab

generally not liable for the contracts or torts of the corporation. If the corporation fails, shareholders generally cannot lose more than their investment

Shareholders' Meetings

must occur at least annually notice shareholders at least 10 days prior but no more that 60 proxies- a form in which stockholder authorizes another party to vote the stockholders shares shareholder proposal- to board of directors

Shareholder derivative suits where

shareholder(s) sue directors on behalf of corporation

shareholder voting requirements

shareholders representing more than 50% of shares must be present to conduct business.

Duty to loyalty

subordination of personal interests to the welfare of the corporation. No competition with Corporation. No "corporate opportunity." No conflict of interests. No insider trading. No transaction that is detrimental to minority shareholders