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46 Cards in this Set
- Front
- Back
Forming the Corporation:
What are the three (3) requirements to form a valid corporation? |
People
Paper Act |
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Forming the Corporation:
"PAPER" The purpose of the Articles of Incorporation is really to create a contract between two (2) separate groups, these are? |
1. shareholders and the corporation, and
2. the State and the corporation |
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Forming the Corporation:
What are the (5) items that need to be listed in the Articles of Incorporation? |
1. name
2. Inc., Ltd., Co., or Corp. 3. name / address of incorporators, 4. address of the registered office, and 5. address of the registered agent. |
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Forming the Corporation:
Articles of Incorporation - What three (3) things must the description of the "Capital Structure" include? |
1. voting rules
2. number of authorized shares, and 3. types of stock |
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Forming the Corporation:
The "Act" Requirement - With whom must the "Articles" be filed? If accepted, what is this proof of? |
Secretary of State
- Proof of Valid Formation |
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Forming the Corporation:
The "People" Requirement - Who are the people? What are their two (2) most basic functions? |
- the "incorporators"
- 1) sign and file the articles, and, 2) call the first shareholder meeting. |
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What law governs Corporations in Indiana?
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IBCL
Indiana Business Corporations Law |
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Piercing the Corporate Veil:
P.U.F.F.I.C.A.P. |
P = Public or Closed?
U = Undercapitalized? F = Formalities of Corp. Disregarded? F = Fraudulent Misrepresentation? I = Identity of Officers, Directors, or Shareholders? C = Commingling of Funds A = Absence of Corporate Records? P = Payment of Individual Obligations? |
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Piercing the Corporate Veil:
When are the two (2) times that courts will overcome their reluctance to pierce the veil? |
1. Corporate form is completely ignored, or
2. Misuse constitutes Fraud or Promotes Injustice |
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Piercing the Corporate Veil:
What is the six (6) step approach to a "Piercing" Question? |
1. start with rule of Limited Liability,
2. courts are reluctant to pierce, 3. 2 situations when courts will pierce, 4. go through PUFFICAP, 5. say that it is a Balancing Test, and 6. make a conclusion |
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LLC's:
What law created the LLC option? |
Indiana Business Flexibility Act
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LLC's:
What are the two (2) major benefits of an LLC? |
1. Limited Liability (like corp.), and
2. Pass Through tax treatment (like partnership). |
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LLC's:
What are the five (5) formation requirements of an LLC? |
1. Articles of Organization,
2. Registered Agent, 3. Name Contains "LLC", 4. Operating Agreement, and 5. One or More Members |
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LLC's:
Who manages an LLC? |
- It is up to you.
- It must be but in the Articles of Organization. |
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LLC's:
What is the Liability situation for the LLC and its Members? |
LLC = vicariously liable under agency principles, and
Members = Limited Liability for all obligations (except own torts). |
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S-Corp:
How is an S-Corp taxed? What is the benefit of this type of taxation? |
- tax is "passed through" to shareholders.
benefit of "pass through" = no double taxation (like corp). |
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S-Corp:
What are the five (5) Qualifications a corporation must have to choose S-Corp status? |
1. 100 shareholders or less,
2. all must be natural persons, 3. all must be U.S. residents, 4. all must consent, and 5. can only be one (1) class of stock. |
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Corporate Fiduciary Duties:
What are the three (3) ways to breach the "Duty of Loyalty"? |
1. Interested Director Transaction (director does business with the corp).
2. Competing Ventures 3. "Usurping" Corporate Opportunity. |
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Corporate Fiduciary Duties:
Who has the "Burden of Proof" in an action alleging a breach in the "Duty of Loyalty"? |
The Defendant.
(usually the director) |
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Corporate Fiduciary Duties:
What are the four (4) duties under the "Duty of Care"? [aka "business judgment rule"] |
1. "REASONABLE and PRUDENT DECISIONS",
2. decisions in the corp.'s "BEST INTERESTS", 3. to act in "GOOD FAITH", and 4. to "INVESTIGATE" before acting. |
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Corporate Fiduciary Duties:
When will a Director be held liable for failing in one of his "Duties of Care"? |
- When the failure amounts to...
Willful Misconduct or Recklessness. |
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Corporate Fiduciary Duties:
Who has the burden of proof in proving a breach of the "Duty of Care" or the "Business Judgment Rule"? |
Burden is on the Plaintiff.
- usually the person bringing the action against the Director |
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Dissenter's Rights:
When do you use "dissenter's rights"? |
- when you object to a "fundamental change" in the corporation.
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Dissenter's Rights:
What "Right" are you seeking by dissent? What does that get you? |
- "Right of Appraisal"
- The right to force the corporation to buy back your shares at a fair value. |
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Dissenter's Rights:
What actions by the corporation trigger "dissenter's rights"? [S.M.E.A.R.] |
S = Sale of all or most of corporate assets
M = Merger or consolidation E = Exchange of shares A = Acquisition R = Resolution in articles or bylaws giving you that right. |
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Dissenter's Rights:
What must you "have" and "do" to be a "dissenter"? When do you never have dissenter's rights? |
- must have the right to vote
- must abstain or vote against - when the corp. is "publicly traded" |
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Dissenter's Rights:
In the Right to Appraisal, how and when is "Fair Value" determined? |
Fair Value = value of the shares immediately "before" the event occurs.
(or, highest price paid in acquisition). |
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Shareholder Derivative Suits:
Who must be named as a Defendant in a Derivative suit? |
- The Corporation
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Shareholder Derivative Suits:
What is a Shareholder Derivative Suit? (4) pieces |
1. shareholders,
2. together, 3. suing, 4. to enforce a claim the corporation could have filed itself. |
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Shareholder Derivative Suits:
What are the three (3) main "policy reasons" for shareholder derivative actions? |
1. to avoid numerous lawsuits,
2. to protect and compensate shareholders, and 3. to protect creditors. |
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Shareholder Derivative Suits:
Four (4) Requirements for a Derivative Suit? [A.T.V.D.] |
A = ADEQUATE REPRESENTATION(of shareholder interest)
T = TIME (owned stock at time claim arose) V = VERIFIED COMPLAINT D = DEMAND (first must demand that corp. sue for themselves). |
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What is the "American Rule"?
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If it is a "closed corporation"...
Shareholders can file a "direct suit" against it. |
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When will the "American Rule" NOT be allowed?
(3) instances |
1. expose to MULTIPLE LAWSUITS
2. materially PREJUDICE CREDITORS, or 3. cause UNFAIR DISTRIBUTION among parties. |
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Corporate Opportunity Doctrine:
What is "Corporate Opportunity" |
- anything "necessary" to the corporation, or
- anything in the corporation's "line of business" |
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Corporate Opportunity Doctrine:
What are the two (2) conditions that would need to be satisfied before a fiduciary of the corporation could take a business opportunity for themselves resulting in personal profit? |
1. outside the "line of business" and
2. corporation is "unable" or "unwilling" to take it. |
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Corporate Opportunity Doctrine:
What is not a good defense to a breach of the corporate opportunity doctrine? |
financial inability of the corp.
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Business Judgment Rule:
What are the three (3) big parts of the Business Judgment Rule? |
1. Good Faith
2. Best Interests 3. Liability |
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Business Judgment Rule:
Good Faith Requirement - What is the "standard of care" under the good faith requirement of the Business Judgment Rule? |
Reasonably Prudent Person
(in same or similar circumstances) |
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Business Judgment Rule:
Under the "Best Interests" requirement, how must the fiduciary act? |
In the corporations "best interests"!
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Business Judgment Rule:
Under the "Liability" part of the Business Judgment Rule... What are the two (2) types of acts that will expose the fiduciary to liability? |
1. Willful Misconduct, and
2. Recklessness |
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Business Judgment Rule:
Under the "Best Interests" Part of the Business Judgment Rule... Whose or what interests must the fiduciary keep in mind? |
effect on...
Shareholders, Employees, Customers, Suppliers, Community around them, etc... |
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Right of Shareholder to Inspect Records:
Records which MUST be delivered upon request? [A.B.C.D.E.F.S.] |
A = ARTICLES OF INCORPORATION
B = BYLAWS C = COMMUNICATIONS TO SHAREHOLDERS D = DIRECTORS' NAMES AND ADDRESS E = EVERY "MINUTE" FROM LAST 3 YEARS F = FINANCIAL STATEMENTS FROM LAST 3 YEARS S = SECRETARY OF STATE'S BI-ANNUAL REPORT |
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Right of Shareholder to Inspect Records:
Records to be delivered if in "Good Faith" and with "Proper Purpose"? [A.B.C.D.S] |
A = ACCOUNTING RECORDS
B = BANK SHAREHOLDER MINUTES C = COMMITTEE RECORDS D = DIRECTOR MINUTES S = SHAREHOLDER LIST |
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Right of Shareholder to Inspect Records:
Where Must the Records be Kept? ABCDEFS? ABCDS? |
ABCDEFS? = in Principal Office
ABCDS? = in a Reasonable Place |
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Right of Shareholder to Inspect Records:
What is a "Proper Purpose" for Requesting ABCDS? |
Proper = evaluation for estate tax purposes,
Improper = any "competitive" purpose (like trade secrets). |
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Right of Shareholder to Inspect Records:
What is the remedy for corporate failure to produce records to shareholder for inspection? |
Court order for inspection, and
Attorney's Fees! |