Key Terms
Quorum
Minimum number of shareholders (usually a majority) required to be present to conduct a vote.
Proxy
A person authorized to vote on another shareholder's stock shares.
Purpose
Prevents dilution of existing ownership.
Timeframe
Must be exercised within 30 to 60 days of being offered. Remaining shares are then offered to the public.
Most common use
Shareholders suing officers or directors for not acting in the corporation's best interest.
CORPORATE OPPORTUNITY DOCTRINE
Officers and directors cannot take personal advantage of a business opportunity that properly belongs to the corporation
What it protects
Unsuccessful or unprofitable decisions, as long as they were made in good faith, with due care, and within their authori
What courts evaluate
THE PROCESS, not the result.
Example
A state limits individual liquor license holdings. A person cannot form multiple corporations to get around that limit.
Process after deciding to dissolve
1. File a statement of intent to dissolve 2.
Revocation
The statement of intent to dissolve can be revoked if shareholders change their minds — until the state issues the final
Director
Person appointed or elected to sit on the board that manages corporate business and supervises officers.
Board of Directors
The collective body of directors; manages the corporation and elects officers.
Officer
Person responsible for daily corporate operations; elected by the board.
Preemptive Right
Shareholder's privilege to buy newly issued stock before public offering; in proportion to current holdings.