Agency
What are the five major types of principals?
How is an LP formed?
LP = filing certificate of limited partnership with state
How is an LLP formed?
LLP = filing statement of qualification with state
What are the two major duties a director has to a corporation? Provide a basic rule statement for each.
1. Duty of care - directors have a duty to act with the care that a person in a like position would reasonably believe is appropriate under the circumstances.
2. Duty of loyalty - directors must act in a manner that the director reasonably believes is in the best interests of the corporation.
When must a corporation give notice of a meeting?
No less than 10 days and no more than 60 days before the meeting date.
What are the rights of an agent?
Right to receive compensation, right to have the principal not interfere with the agent's work, right to indemnification and reimbursement, right to work in a safe environment
What are the ABCs of agency law?
assent, benefit, control
In a general partnership, what vote is required for ordinary partnership business? For special partnership business?
ordinary = majority
special = unanimous
What types of corporate records does a shareholder have a right to inspect and copy without the need to articulate a purpose?
1. current AOI and bylaws; 2. written communications to shareholders generally within previous 3 years; 3. minutes of all meetings, and records of all actions taken without a meeting, of the shareholders; 4. list of names and business addresses of current directors and officers; and 5. most recent annual report to state
How can you distinguish actual and apparent authority?
actual authority = principal communicates to agent
apparent authority = principal communicates to third party
What duties does a subagent owe a principal?
duty of loyalty
What is the two-step process for terminating a partnership?
dissolution + winding up
When a person makes an unsuccessful effort to comply with the incorporation requirements, that person may be able to escape liability under which two doctrines? Explain what the doctrines are.
1. de facto corporation (abolished in RMBCA but ripe) = owner made good faith effort to comply with incorporation and operates business as a corporation without knowing the requirements have not been met
2. corporation by estoppel (limited to contractual agreements) = a person who deals with an entity as if it were a corporation is estopped from denying its existence
What is a derivative action? Who has standing and who gets the recovery?
A derivative action is a shareholder suing on behalf of the corporation for a harm suffered by the corporation. Shareholder must have been a shareholder at the time the action is filed and must continue to be a shareholder throughout litigation. Shareholder must also have been a shareholder at the time of the act or omission giving rise to the suit and must fairly and adequately represent corporation's interests. Recovery goes to the corporation.
How does death of the principal affect the agent's authority?
common law = agent's power terminates at death of principal
modern = principal's death does not terminate agent's authority until the agent has notice of the death
When is a partner entitled to remuneration for her services?
when the partner renders services in winding up the business or when existing partners agree to pay
creditors (including partners), then to partners
Who has authority to bind an LLC in a member-managed LLC? In a manager-managed LLC?
member-managed LLC = members have broad authority to bind the LLC
manager-managed LLC = members do not have authority to bind the LLC; rather, matters relating to activities of the company are decided exclusively by the managers
1. disclosure of all material facts to, and approval by, a majority of the BOD without a conflict; 2. disclosure of all material facts to, and approval by, a majority of the votes entitled to be cast by shareholders without a conflict; 3. fairness of the transaction to the corporation at the time of commencement
When may a third party recover against an agent in a contractual dealing?
when the agent agreed to be party to the contract; when the identity of the principal is undisclosed; when the agent acts tortiously; when the agent acts outside the scope of their authority and the principal does not accept the benefit of the action
if the partnership does not dissolve and wind up, the wrongfully dissociated partner is not entitled to payment until completion of the term, unless the partner can prove to the court that earlier payment would not cause undue hardship on the partnership
What partnership obligations is a dissociated partner liable for?
pre-dissociation obligations and post-dissociation obligations that the partner binds the partnership to as an agent (but liability is limited to transactions entered into within 2 years of dissociation)
List 6 ways the business judgment rule can be overcome.
1. director did not act in good faith; 2. director was not reasonably informed before making decision; 3. director did not show objectivity or independence in decision making process; 4. sustained systemic failure to oversee corporate affairs; 5. failure to timely investigate matter of significant material concern after being alerted to it; 6. director received a financial benefit he was not entitled to or otherwise breached his duties
What are the 8 factors considered in a veil piercing context?
1. undercapitalization at the time of formation; 2. disregard of corporate formalities; 3. intermingling of corporate and personal assets; 4. use of corporate assets for personal purposes; 5. self-dealing with the corporation; 6. siphoning corporate funds or stripping corporate assets; 7. use of the corporate form to avoid existing statutory requirements or other legal obligations; 8. wrongful, misleading, or fraudulent dealings with a corporate creditor