BUL3130 Ch 23: Corporate Powers and Management

Ultra Vires Doctrine

A doctrine holding that certain legal consequences attached to an attempt by a corporation to carry out ask that are outside its lawful powers.

Indemnification

A method of protecting directors and officers whereby the corporation agrees to pay legal expenses incurred by the directors or officers.

Proxy

A method whereby a shareholder elects a representative, commonly another individual or a written document, through which the shareholder casts his vote at the annual meeting.

Fiduciary

A person to whom power is in trusted for the benefit of another. (A director is one example.)

Indirect interlock

A situation where directors of two different companies serve jointly on the board of a third company.

Direct interlock

A situation where one person sits on the Board of Directors of two different companies.

Voting trust

A trust created among shareholders where the shareholders elect a trust agreement, the provisions of which are effectuated by a voting trustee.

Voting agreement

An agreement made in advance among shareholders to vote in a particular manner. Also called shareholder agreement.

Implied powers

Corporate powers that extend beyond those powers explicitly defined as expressed powers.

Duty of good faith

Fiduciary duty to act honestly and avoid violations of corporate norms and business practices.

Duty of loyalty

Fiduciary obligation requiring loyalty of directors and officers to the corporation and its shareholders.

Duty of care

Fiduciary obligation upon directors and officers to act with care an ordinarily prudent person in a like position would exercise under similar circumstances.

Disinterested director

It director who has no interest in the distributed transaction.

Derivative action

Lawsuit brought on behalf of the corporation by a shareholder when the directors refuse to act.

Shareholder Quorum

Minimum number of shareholders needed to have a valid vote. Also, when a simple majority of the shareholders entitled to vote is sufficient to effectuate a meeting.

Expressed powers

Powers granted to a corporation through statute and it's articles of incorporation.

Business judgment rule

Presumption given by the courts to corporate directors that their actions were informed and done with good faith and with an honest belief that the actions were in the best interests of the corporation.

Cumulative voting

Shareholder voting method permitting the holder to distribute his total votes in any manner that he chooses - all for one candidate or several shares for different candidates.

Constituency statutes

Statues that permit corporate directors to take into account interests other than maximizing shareholder value.

Regular voting

The principle of one share, one vote. Also called statutory voting.

Preemptive rights

The rights of shareholders to protect dilution of their percentage of share ownership.