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Corporations - Coggle Diagram
Corporations
FUNDAMENTAL CORPORATE CHANGE: Use a two-step approach if an essay present a fundamental corporate change. FIrst, define when a fundamental corporate change is attempted: sale of all or substantially all of the corporation's assets, mergers, or acquisitions. Second, go through every step to be sure all procedures were followed:
Notice of special meeting is sent to shareholders. This notice has specific requirements 1) written 2) states place, date, hour, and purpose of meeting 3) No less than 10 and no more than 60 days prior to the meeting 4) notice can be waived.
Approval by a majority of all shares entitled to vote and by a majority of each voting group adversely affected by the change
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Possibility of dissenting shareholders' right of appraisal - shareholder who objects to the action is entitled to an appraisal and payment for the shareholder's stock.
Dissenting shareholder must file a written objection to the proposed action before the shareholders' vote.
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If corporation and dissenter fail to agree as to the value of the stock, the court makes a determination of value.
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FORMATION: first, look to see if there i a promoter liability issue. Promoters act on behalf of the corporation prior to its formation. Them, understand what is required to form a corporation, which includes understanding the difference between a de facto corporation and a de jure corporation. Formation issues can include:
Promoters are personally liable as the corporation's agent on pre-incorporation contracts entered on the corporation's behalf.
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Personal liability continues until a novation - the corporation adopts the contract and all parties agree that the promoter will be discharged from the contract. If the corporation is never formed, the promoter remains solely liable.
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Corporation is not liable on any pre-incorporation agreements unless it assumes liability by its own act after the articles of incorporation are filed. Can be express or implied.
DEFECTIVE INCORPORATION
DE FACTO CORPORATION: insufficient statutory compliance. Corporation still formed if 1) good faith, colorable attempt to comply and 2) corporate principals, in good faith, acted as if they were a corporation
CORPORATION BY ESTOPPEL: 1) creditor who has always dealt with the principals as if they were a corporation is estopped from later alleging that the corporation is defective. 2) D who has held himself out as a corporation cannot avoid liability by claiming there is no corporation.
DE JURE CORPORATION: organized in compliance with the statute but failed to comply with a statutory provision
PROMOTER LIABILITY: Promoter is a person who causes a corporation to be formed, organized, and financed. Usually they become shareholders, officers, and directors of the new corporation.
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COMMENCEMENT: corporate entity begins at the filing of the articles of incorporation with the Secretary of State's office.
ISSUANCE OF STOCK: Every corporation must authorize and issue at least one class of common stock and may authorize one or more classes of preferred stock.
Shareholder's PREEMPTIVE RIGHTS: right of existing shareholder to acquire unissued shares sin the corporation in proportion to their holdings of the original shares when the corporation seeks to issue additional stock 1) NOT AUTOMOATIC 2) MUST IN ARITICLES OF INCORPORATION
DIVIDENDS: a distribution by a corporation to its shareholders of cash or property of the corporation. 1) shareholder has no inherent right to be paid a dividend. 2) board of directors has discretion to decide whether and when to declare a dividend.
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VOTING: Unless the articles of incorporation state otherwise, each share is entitled to one vote.
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DIRECTORS/OFFICERS/SHAREHOLDERS RIGHTS AND RESPONSIBILITIES: 3 types of people are involved in corporations. Individuals can be directors, officers, or shareholders. An individual could be all three.
DIRECTORS
Directors' meetings: held on a regular basis as set forth in the articles of incorporation or corporate by-laws. A special meeting requires reasonable notice.
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Directors are protected from liability by the BUSINESS JUDGEMENT RULE: a rebuttable presumption that directors are honest, well-meaning, and acting through informed decisions.
INDEMNIFICATION: Corporation must indemnify a director who was successful in the defense of any proceeding to which the director was a party as a result of being a director.
Directors manage the corporation. Remember to treat the corporation as its own entity - it is a separate legal person from the directors and shareholders.
ULTRA VIRES: Board of directors is not permitted to undertake action that is beyond the corporation's authority. Corporation cannot be obliged to undertake a contract or activity that is beyond the scope of its powers.
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SHAREHOLDERS
VOTING AGREEMENTS: Contracts to ensure shareholder.ws will vote in concert with regard to issues designated by the .agreement: often used to ensure election of certain directors.
MEETINGS:
SPECIAL: requires written notice stating the place, date, hour, and purpose of the meeting. Notice is typically no less than 10 and no more than 6. 0 days prior to the meeting and may be waived in writing or by attending the meeting.
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VOTING TRUSTS: Involves the transfer of legal title to a trustee who votes the shares according to the trust terms
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SHAREHOLDER DERIVATIVE SUIT: shareholder sues on behalf of the corporation to redress a wrong when the corporation failes to enforce its right 1) must be a shareholder at the time of the transaction 2) must make a demand upon the corporation unless futile.
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Majority shareholders owe fiduciary duty to refrain from exercising control to obtain a benefit not shared proportionately with minority shareholders.
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