Board of Directors
What does the board of directors do?
May a director recieve compensation for serving as a director?
Yes
What must be present for a directors acts at a meeting to be valid?
A quorum must be present at the meeting
What two duties do a director owe a corporation? How does a director discharge such duty?
A duty of care and a duty of loyalty.
- by acting in good faith and in a manner the director reasonably believes to be in the best interest of the corporation
What are the two kinds of stock, a corporation must have
Both = common stock
Stock having preference over other stock in regards to distribution is referred to as preferred stock.
How does a Director get selected?
Shareholders elect directors at an annual shareholder meeting and be elected by straight or cumulative voting and by one or more classes of stock.
When can a regular meeting allowed to be held? Must notice be given?
May be held without notice of the date, time, place, or purpose of the meeting.
What constitutes a quorum?
Unless spoken to by the articles or bylaws, a majority of directors in office constitutes a quorum at the time that the vote is taken
What is the business judgment rule?
The business judgment rule is a rebuttable presumption that a director reasonably believed that his actions were in the corporation's best interest. A court generally will not interfere with the business judgment of a director without showing fraud, illegality, or conflict of interest.
Who or what authorizes stock?
The corporation or Articles
How long does a director serves? What is the exception? When does their term expire?
A director serves for a one-year term except a director may serve for longer than one year if the terms are staggered.
- expires at the first annual meeting after the directors election.
When can a special meeting allowed to be held? Must notice be given? What is not required in the notice?
A director is entitled to two days' notice of the date, time, and place of a special meeting. The purpose of the meeting is not required.
What is a voting agreement and is it enforceable?
An agreement between directors as to how to vote is unenforceable
How can one overcome the business judgment rule?
by showing the director:
-did not act in good faith
- was not informed to the extent that the director reasonably believed necessary
- failed to timely investigate a matter of significant material concern
What is a stock subscription? Is it revocable?
Prior to incorporation, persons may subscribe to purchase stock from the corporation when it comes into existence
A pre-incorporation subscription is irrevocable for six months from the date of subscription but can be revoked if all subscribers agree to it.
Who, Why and How can a Director be removed?
Shareholders have the inherent power to remove a director
Directors may only be removed for cause based on substantial grounds, such as a breach of a fiduciary duty, fraud, or criminal conduct.
A directive may be removed only at a meeting called for the purpose of removing the director and the meeting notice must state that removal is at least one of the purposes of the meeting
Can a director waive notice, if so, how?
- any time by signed written waiver
- attending the meeting and not promptly objecting to lack of notice
May director vote by proxy?
No
How does a director breach the duty of loyalty?
by placing their own interest before those of the corporation
What is a distribution?
What is the right to inspect? Can a director seek a court order to enforce this right?
A director is entitled to inspect and copy corporate books, records, and other documents for any purpose related to the performance of his duty to his director.
- Yes
May a BOD act without holding a meeting?
Yes, by unanimous written consent
What does upsurping a corporate opportunity mean?
A director violates his duty of loyalty by taking a corporate opportunity rather than first offering the opportunity to the corporation
What is a the safe harbor rule? And what are the safe harbor rules
A BOD conflicts of interest transaction may still be protected if:
- disclosure of all material facts to BOD or shareholders
approval by a majority of BOD or shareholders without conflicting interests
AND fairness of the transaction to the corp at the time of commencement.
Who has the power to authorize distribution? When can a shareholder compel the BOD to authorize a distribution?
BOD
When the BOD acts in bad faith and abuses its discretion by refusing to declare a distribution.