Fl Corporations

Director indemnification

A corporation is required to indemnify a director for any reasonable expense incurred in the successful defense of a proceeding against the director in her role as a director. In addition, a corporation must indemnify a director when ordered by the court. A corporation may indemnify a director, but is not required to do so, when the director (i) acted in good faith; (ii) in a manner he or she reasonably believed to be in, or not opposed to, the best interests of the corporation; and (iii) in the case of a criminal proceeding, the director did not have reasonable cause to believe that her conduct was unlawful. However, the mere reasonable belief that the director's conduct was lawful does not trigger mandatory indemnification.

Removal of directors rules

A director may be removed at a meeting of the shareholders, provided that the notice of the meeting states that removal of the director is the purpose, or one of the purposes, of the meeting. In the absence of a contrary term in the articles of incorporation, a director may be removed with or without cause. A director elected by a voting class of stock can only be removed by that same class. A director can be removed by a shareholder vote.

Director meeting voting requirements

A director may not vote by proxy. Accordingly, the proposal to issue additional shares of common stock garnered only two votes. Typically, the assent of a majority of the directors present at the time the vote takes place is necessary for board approval, and five directors were present at this meeting. Consequently, the board did not approve of the proposal. Answer choice A is incorrect because notice is required only for special meetings, and not for regular meetings. Answer choice B is incorrect because a majority of directors were present at the meeting. A director must be present to be counted for quorum purposes. Presence includes appearances made via communications equipment that allows all persons participating in the meeting to hear and speak to one another. Because there were five directors in attendance, the quorum requirement was satisfied.

LP rights to withdraw v. GPs

A general partner may withdraw from a limited partnership at any time, rightfully or wrongfully, though that partner may be liable to the partnership for any damages caused by wrongful dissociation. A partnership agreement for a limited partnership can deny a limited partner the power to elect to withdraw from the partnership even if the partner express a desire to withdraw. In this case, George is a general partner so he may withdraw from SunShine Partners at any time. Linda, as a limited partner, cannot withdraw because she has neither sought nor acquired the consent of a majority of the other partners as required by the partnership agreement. As a limited partner, Linda's right to withdraw from the partnership can be limited.

Apparent Authority in a partnership requirements

A partner's act that was not authorized may still be binding on the partnership under the principle of apparent authority. In order for a partner to have apparent authority, the partner's unauthorized act must be performed in the ordinary course of apparently carrying on the partnership business. Additionally, the third party dealing with the partner cannot have known or received notification that the partner was acting without authorization. Here, Lula was aware that Leon was a partner in the partnership, and was not aware of the partnership agreement. Additionally, because this was her first dealing with the partnership, she did not know that they had this arrangement. Further, repairing batting machines does seem to be in the ordinary course of business for a partnership that runs a batting cage. Accordingly, Leon acted with apparent authority, and the partnership will be bound to Leon's contract with Lula.

Partnership obligation to partnership upon disability/death

A partner's obligation to contribute money, property, or other benefit to a limited partnership - including a promise to perform personal services - must be in a signed writing in order to be enforceable. If it is in a signed writing, the obligation may not be excused by the partner's death, disability, or inability to perform personally. Because Leo's promise was oral, Cowabunga has no recourse against the Leo's estate.

Notice requirements for inspecting/copying corporate records

A shareholder has a right to inspect and copy corporate records, books, papers, etc., upon five days' written notice. For many types of corporate records, the request must also state a proper purpose. In this case, while determining whether the corporate directors were behaving improperly is clearly a proper purpose to inspect the corporation's records, the shareholder did not provide his notice in writing, and thus it was not proper.

Shareholder rights to inspect and copy corporate records, books, papers, etc.

A shareholder has a right to inspect and copy corporate records, books, papers, etc., upon five days' written notice. For many types of corporate records, the request must also state a proper purpose. In this case, while determining whether the corporate directors were behaving improperly is clearly a proper purpose to inspect the corporation's records, the shareholder did not provide his notice in writing, and thus it was not proper. Accordingly, he may be prevented from inspecting the records at the time requested.

Proper purpose requirement for reviewing records

A shareholder's inspection right with regard to many corporate records, including the minutes of board meetings, is conditional upon the shareholder having a proper purpose for reviewing the records. A proper purpose is one that relates to the shareholder's interest in the corporation and is not meant to harass corporate officials or acquire corporate secrets. Because Delilah seeks to gain access to undisclosed arrangements with suppliers (i.e., corporate secrets) to aid her in forming her own business, the corporation was entitled to deny her rights.

Shareholder's inspection right

A shareholder's inspection right with regard to many corporate records, including the minutes of board meetings, is conditional upon the shareholder having a proper purpose for reviewing the records. A proper purpose is one that relates to the shareholder's interest in the corporation and is not meant to harass corporate officials or acquire corporate secrets. Because Delilah seeks to gain access to undisclosed arrangements with suppliers (i.e., corporate secrets) to aid her in forming her own business, the corporation was entitled to deny her rights.

Filing document for conversion to Limited Partnership versus Limited Liability Partnership.

A statement of qualification is filed to convert to a limited liability partnership (no general partners, only limited partners). A certificate of limited partnership is filed to convert to a limited partnership (general partners and limited partners).

Limits and procedures for removing a partner not pulling his weight

Although a partner can always choose to dissociate from a partnership, a partner generally cannot be expelled from a partnership by a vote of the other partners, absent a provision in a partnership agreement. (Note: The other partners may have other avenues to continue the business without Kurt, such as offering to buy him out, but they cannot simply remove him as a partner by voting to do so.)

Consent required for becoming another member of the LLC

An LLC had 10 members, each with equal interests. One of the members wanted to include his brother in what he hoped would be a very profitable venture. He proposed adding his brother as a member of the LLC, and convinced six other members that his brother would be an asset to the LLC. All of these members signed a written consent form admitting the brother as a member.Was the brother's admission to the LLC valid? No, because every member of the LLC must consent to the admission of an additional member. A person can become a member of an existing LLC with the consent of all the members.

Withdrawal from a LLC

An LLC member may withdraw from the LLC by giving the LLC written notice of her withdrawal. Answer choice A is incorrect because, even though the LLC's Articles of Organization provide otherwise, a member may withdraw from the LLC at any time. Answer choice B is incorrect because, even though Lyla's withdrawal from the LLC is a wrongful dissociation because it is in violation of the Articles of Organization, she may nevertheless withdraw from the LLC immediately. (Note: As a wrongful dissociation, Lyla would be liable to the LLC and other LLC members for damages caused by her wrongful dissociation.) Answer choice D is incorrect because an LLC member has the right to withdraw from the LLC immediately, even though the LLC's Articles of Organization provide otherwise.

S-corporation requirements

An S corporation may not have more than one class of stock. Thus, an S corporation could not have both common and preferred stock. Moreover, each shareholder must consent to the S corporation election for a corporation to become an S corporation. Because only 60 percent of the shareholders consented in this case, the corporation could not become an S corporation. An S corporation may have up to 100 shareholders.

What level of duties does an officer owe to a corporation?

An officer owes the same duties to a corporation that a director owes, including the duty of loyalty. The duty of loyalty generally prohibits an officer from placing his own interests before those of the corporation. While there are some safe-harbor provisions, none apply here. Accepting a bonus for relinquishing the presidency is an example of an officer putting her own interests above those of the corporation, and is therefore a breach of duty.

Director's duty of loyalty of opportunity

As a director, Darla has a duty of loyalty to the corporation that requires that she first offer an opportunity presented in the marketplace to the corporation and only accept such an opportunity if the corporation rejects it. Answer choice A is incorrect. A director's duty of loyalty does not require that the director ignore a business opportunity by personally rejecting it and not offering it to the corporation. She is obligated to offer the opportunity to the corporation first, but is not barred from taking advantage of the opportunity if the corporation has no interest. Answer choice B is incorrect, asa director's duty of loyalty requires both disclosure and the offer of the opportunity first to the corporation before accepting the opportunity. Answer choice C is incorrect, as he director's duty of loyalty requires both disclosure and the offer of the opportunity to the director's corporation first, before accepting the opportunity.

Florida Corporation Merger

Corporation A, which has a single class of stock, is to be merged into Corporation B. Corporation B does not own a controlling interest in Corporation A. The board of directors of each corporation has approved the merger. The shareholders of Corporation A are required to approve of the merger by a simple majority of all outstanding shares entitled to vote. Florida law requires that the shareholders of a corporation to be merged into another corporation approve of the merger unless the surviving corporation owned at least 80 percent of the outstanding shares of each class of stock of the merged corporation immediately prior to the merger. Shareholder approval requires a majority of the shares entitled to vote for each class of stock entitled to vote, unless the articles of incorporation or the board of directors require a greater vote.

Director requirements

Director of a corporation must be a natural person, but that does not necessarily mean that the shareholders have to be natural persons.

Is there a preemptive right even if AOI says there is when additional common shares of the corporation are paid as compensation to the corporation's employees?

Even if a Florida corporation does provide preemptive rights in its Articles of Incorporation, there is no preemptive right with respect to any shares issued as compensation to directors, officers, agents, or employees of the corporation. Accordingly, neither the preferred shareholders nor the common shareholders of the corporation are entitled to preemptive rights with regard to the additional common shares of the corporation paid as compensation to the corporation's employees.

Essential law on merger of corporations

Florida law requires that the shareholders of a corporation to be merged into another corporation approve of the merger unless the surviving corporation owned at least 80 percent of the outstanding shares of each class of stock of the merged corporation immediately prior to the merger. Shareholder approval requires a majority of the shares entitled to vote for each class of stock entitled to vote, unless the articles of incorporation or the board of directors require a greater vote. Answer choice A is incorrect because even though the board of directors of the corporation to be merged has approved of a merger, the shareholders of that corporation generally must also approve of the merger. Answer choice B is incorrect because a merger must be approved by a majority of all outstanding shares entitled to vote, rather than only a majority of the shares that actually vote on this issue. Answer choice D is incorrect because a merger does not require the approval by a super-majority of the shareholders of the corporation to be merged.

What must corporations furnish to shareholders annually?

Florida requires all corporations to furnish its shareholders with financial statement annually. Answer choice B is incorrect because the corporation's classification as a privately held company would not relieve it of its obligation to furnish shareholders with the financial statement. Answer choice C is incorrect because the number of shareholders is irrelevant to this obligation. Answer choice D is incorrect because the corporation must supply this information to shareholders regardless of the extent of its assets.

Derivative Action Standing Requirements

For a shareholder to be able to file a derivative action, that shareholder must be a shareholder at the time of the act or omission that gives rise to the suit and must continue to be a shareholder during the pendency of the suit.

Which of the following is/are true? I. Directors may enter into an enforceable voting agreement among themselves. II. A director who is present at a board meeting may be liable for action taken by the board even if the director does not vote in favor of the action. III. When a vote is taken during a board meeting, a director must be present at that time in order to be counted for quorum purposes.

II and III only. A director who is present at a board meeting may be liable for action taken by the board even if the director does not vote in favor of the action, unless the director manifests his dissent. In addition, unlike a shareholder, who is counted as present for quorum purposes with regard to any action taken at the meeting if he is present for any purpose, a director must be present at the time a vote is taken during a board meeting in order to be counted for quorum purposes with respect to the action for which the vote is taken. A director is expected to exercise independent judgment.

Grounds for involuntary dissolution of corporation in florida

In Florida, what is not an appropriate time for a shareholder to pursue the involuntary dissolution of a corporation? When the directors refuse to make distributions what is an appropriate time? When the corporation's corporate assets are being misapplied or wasted, causing material injury to the corporation, or when the directors are acting illegally, oppressively, or fraudulently, of when the shareholders are deadlocked in voting power and have failed to elect successors to the directors whose terms have expired.

Predecessor corporation liabilities

In general, a corporation that acquires the assets of another corporation is not liable for torts of the predecessor corporation, unless the transferee corporation assumes such liabilities. Here, not only did Live Oak not assume the liabilities, Live Oak specifically disclaimed them.

Proxy agreement duration

Proxy agreements are valid for 11 months, unless otherwise specified.

True S-Corporation Statements

Shareholders in an S corporation must be either United States citizens or resident aliens. S corporations may have no more than 100 shareholders. S corporations may have no more than one class of stock.

Shareholder Management Agreements

Shareholders may enter management agreements, altering the way in which a corporation is managed even if the agreement is inconsistent with statutory provisions. Such agreements can involve the transfer of both beneficial and legal ownership to the trustee, as well as elimination of or restriction on the board of directors, exercise or division of voting power, and other matters of corporate powers and management. Both voting trusts and voting pools need to be in writing. Voting pools are not limited to 10 years. Voting pools have no time limit. Shareholders transfer only their legal ownership of their stocks to a transferee, and they retain the beneficial ownership.

Altering Bylaws to change the annual stockholder meeting location

Since the place of annual stockholders meeting is fixed by the bylaws, the bylaws must be changed. One method by which the bylaws can be changed is by a majority vote of the board of directors. The shareholders must be given timely notice of the place of a shareholders' meeting. Answer choice A is incorrect. While the shareholders must be given timely notice of the annual shareholders' meeting, such notice does not operate to change the bylaws, which specify the location of the annual shareholders' meeting. Answer choice B is incorrect. The president lacks the power to change the bylaws. They can be changed only by a majority vote of either the board of directors or the shareholders.

Profit test ini partnership

The key test applied to ascertain whether a business arrangement is a partnership is whether there is a sharing of the profits from the business. Here, the arrangement functions as a nonprofit entity, so Janet and Jessica do not share profits and thus have not formed a partnership.

P'ship loophole liability for a LP after conversion from P'ship

Thomas could recover against Michael because he is the general partner. In addition, Thomas could recover against Manuel because a general partner who becomes a limited partner as a consequence of a conversion is liable for any obligation incurred by the limited partnership within 90 days after the conversion becomes effective if the other party to the transaction reasonably believes at the time of the transaction that the limited partner is a general partner

Foreign corporation to Florida jurisdictional rules

To do business in Florida, a foreign corporation is required to register with Florida and obtain a certificate of authority from the department. Failure to do so prevents the foreign corporation from suing, but not from being sued in state courts until registered. A number of actions, such as a holding board meetings, maintaining bank accounts, and selling through independent contractors, do not constitute doing business within a state. Because XYZ only maintained bank accounts in Florida, it has not sufficiently done business with the state so as to warrant Florida having jurisdiction over it.

What two decisions require consent of all partners?

Two things require the consent of all partners: Any matter falling outside the ordinary course of the partnership's business and Amending the partnership agreement. (Any & Amen)

Quorum and procedure of electing directors to a board where there are vacancies on the board

Where there is a vacancy on the board of directors of a corporation, the remaining directors may fill the vacancy. Unless the articles of incorporation or the bylaws provide otherwise, a majority of the number of directors prescribed in the articles or the bylaws constitutes a quorum. Once a quorum is present at a board meeting, the directors may generally act on the basis of a majority vote of the directors who are present at the meeting. Here, since the board is comprised of seven members, four must be present for a quorum to exist. At this meeting, there were five directors present; therefore, a quorum existed. Since three of the five directors voted for the two new directors, the selection of these new directors was proper.

Piercing the corporate veil

Which of the following activities is, by itself, least likely to sufficiently justify piercing the corporate veil? Failing to respect the corporate entity. While failing to respect the corporate entity can be considered in deciding whether to pierce the corporate veil, it is insufficient by itself. The failure must also adversely affect a third party's ability to recover from the corporation. However, any one of the following factors may be so compelling in a particular case as to convince the court to find the shareholders personally liable. Making substantial capital contributions in the form of loans to gain bankruptcy protection. Using the corporate form to avoid legal obligations. Self-dealing with the corporation.

Requirements of a Florida Corporation's AOI

While the articles must include certain terms, optional provisions, such as the par value of the shares issued, may be included. Answer choice A is incorrect because the articles must include the aggregate number of authorized shares. Answer choice B is incorrect because the articles of incorporation must include the name and address of the corporation's registered agent. Answer choice C is incorrect because the articles of incorporation must include the address of the corporation's principal office.

An S corporation properly adopted bylaws providing that any shareholder wanting to transfer shares must obtain the corporation's consent prior to the transfer. Despite being aware of this restriction, Sam, a shareholder of the corporation, sold his shares to Otto without obtaining consent. Otto was unaware of the restriction, and the stock certificates did not note this restriction. Without seeking the corporation's consent, Otto gave the shares to Teresa, a nonresident alien, who was aware of the transfer restriction. Since Teresa's ownership of stock would result in the termination of S corporation status, the corporation seeks to void the transfer to Teresa.C

Yes, because Teresa was aware of the restriction when she acquired the shares. A restriction on the transfer of stock can be enforceable against a transferee who takes the stock with knowledge of the restriction. Answer choice B is incorrect because, although a restriction on the transfer of stock can be enforceable against a holder of stock with knowledge of the restriction, the restriction is not enforceable against a transferee who takes the stock without knowledge of the restriction. Answer choice C is incorrect. Although placement of a notation regarding a transfer restriction on a stock certificate ensures that the transferee is deemed to have knowledge of the restriction, the failure to do so does not render the restriction unenforceable against a transferee who has knowledge of the restriction by other means.

Which of the following may be varied or waived in the operating agreement of a limited liability company (LLC)?

a. The statutory provisions governing registered agents b. The duty of loyalty owed to the LLC by its members and managers c. The obligations of a member who did not sign the operating agreement d. The right of a member to seek a judicial dissolution of the LLC Answer choice B is correct. The duty of loyalty owed to the LLC by its members and managers may be waived in the LLC's operating agreement. Answer choices A, C, and D are incorrect as all of those items are statutorily required and may not be waived in the LLC's operating agreement.

Pre-conversion to LP liability

general partner who becomes a limited partner as a consequence of a conversion remains liable for any obligation incurred by the partnership before the conversion. The conversion does not occur until the filing of the conversion paperwork with the state, so the conversion here did not take place until February 1. Because the obligation occurred on January 15 (before the conversion), all general partners would be liable for the obligation incurred on behalf of the partnership prior to conversion. The partnership would also remain liable itself.

Limits on partnership by estoppel

while purported partners may be liable for the obligations of the partnership, in order to be personally liable, a third party must have been aware of and depended on the "holding out." Because Pete was unaware that the partners held Dwight out as a partner on their letterhead, Dwight cannot be personally liable for partnership obligations.