piercing the corporate veil - 3 situations
holding shareholders personally liable by disregarding the corporation entity.
- corp formalities are not followed
- insufficient capitalization to cover liabilities
- to avoid fraud
debt securities
where the corp has borrowed $ from outside investors and promised to repay them.
equity securities (shares)
gives shareholders an ownership interest in the issuing corp.
direct action - shareholder suit
shareholder sues officer/director for breach of fiduciary duty.
corporation by estoppel
if you have been dealing with an entity as if it was a corporation, you will be estopped from denying its existence.
de facto corporation
if person was unaware there was no invalid incorporation, not personally liable if he made a good faith attempt including a statute under which entity could have validly incorporated, colorable compliance with the statute and good faith attempt to comply, and conduct of business in corporate name and exercise of corporate privileges; applies in K and tort
de jure corporation (2)
basically, a corporation that is created properly with the law. must file with sec of state, which includes name of corporation adn # of shares that corp is authorized to issue.
stock subscription agreement
promises to buy stock are irrevocable for 6 months unless otherwise provided. payment should be made on demand by the board.
consideration for stock
any tangible or intangible benefit to the corp is sufficient.
can also accept promises.
shareholder record date
if you were a shareholder on this date, then you can vote in the meeting.
quorum
majority of outstanding shares are entitled to vote unless bylaws say otherwise. you can’t break quorum by withdrawing from the meeting.
personal liability of a director
not personally liable for action taken/not taken.
CAN BE personally liable for intentionally inflicted harm on corp or SH, unlawful distributions, intentional violations of crim law, benefits that he received that he’s not entiteld to
Fiduciary duties of a director
- duty of loyalty
- duty of care
- duty to disclose
duty of care
must do duties:
- in good faith
- with teh care that an ordinarily prudent personal in like position would exercise
- in a manner that the director REASONABLY believes is in the best interest of hte corp.
defense to duty of care challenge (3)
director can rely on info, opinions, reports, if they are prepared and presented by:
- corporate officers/employees that the director reasonably believes is reliable/competent;
- legal counsel, accountants, or other people that the director reasonably believes is within his professional competence,
- committee of hte board of which D is not a member, if D reasonably believes the committee merits confidence.
duty to disclose
must disclose material info to other board members
duty of loyalty
self dealing, corporate opportunity doctrine, insider trading
self dealing
director or a related person
- is a party ot the transaction
- has a beneficial interest in it in a way that would be reasonably exepcted to influence the D’s judgment if she was to vote on the trans,
- is a
