Key Terms
Directors
Appointed or elected; manage business and supervise officers.
Board of Directors
Collective term for all directors; state law requires at least one. Officers: responsible for daily operations; titles i
Constitutional protections granted to corporations
Equal protection, political contributions, certain religious grounds for refusing employee health plans. Corporations do
Quorum
Minimum number of shareholders (usually a majority) required to conduct business and vote. Bylaws define quorum if state
Proxy
A person authorized to vote on another shareholder's behalf when that shareholder cannot attend.
Common stock
One vote per share owned. Preferred stock: typically NO voting rights; compensated with higher dividends or dividend pre
Definition
Two or more corporations dissolve and a NEW corporation is created. Result: both/all original corporations cease to exis
Deadline
Must be exercised within 30 to 60 days of being offered. After the window closes, the corporation may sell remaining sha
Most common target
Officers or directors not acting in the corporation's best interest.
What does NOT justify a derivative suit
General dissatisfaction with management. What HAS succeeded: proven misconduct or fraud by a director or officer.
Common loyalty issues
Contracts with the corporation, loans to the corporation, personal use of corporate opportunities.
Corporate Opportunity Doctrine
Officers and directors cannot take personal advantage of a business opportunity that properly belongs to the corporation
Standard
Act with the care an ordinary prudent person would take in a similar situation. Equivalent to: a duty not to be negligen
Example
If an individual can only hold one liquor license, forming multiple corporations to obtain more is not permitted under t
Default rule
Shareholders are NOT personally liable for corporate actions; liability is limited to their investment. Three exceptions