Shareholders
Shareholders are owners of corporation and do not manage corp
- generally just get annual meetings
- -if owns 10% or more can ask court for special meetings
- -must have written notice 10-60 days before meeting w/ time, place, purpose
- can vote by proxy (have someone vote their shares for them-no signed writing) or vote by voting agreement (which must be signed in writing)
Preemptive rights (right to keep one’s % share in the company and acquire promotional amounts of stock when the corp issues new stock for money) are not automatic
- need to be expressly granted in articles of incorporation or shareholder agreement
- no preemptive rights with respect to shares issued at compensation to directors, officers, etc
Shareholder Derivative Action
Shareholder can bring derivative action when the harm is to the corp rather than the shareholder personally. if the harm was due to a breach of duty that was owed to the shareholder personally he would file individual but.
-in derivative suit recovery runs in favor of corp
Proper Procedure SAD
1) plaintiff must be shareholder at time the act or omission complained of occurred, and he needs to continue to be a shareholder until the time of judgement;
2) he must have had the ability to fairly and adequately represent the interests of corp and;
3) shareholder must make a written demand upon the corp to take suitable action, and if he receives a rejection or waits 90 days he may file suit
Suit Dismissed if court finds that 1 of 4 stat delineated groups have made good faith determination after conducting reasonable investigation, and finding that the continuation of the derivative suit is not in best interest of corp, court ‘shall dismiss’ derivative suit
Directors and Officers
Directors manage corp and (like shareholders) act as a body by voting
- shareholders hire and fire directors
- cannot vote by proxy or agreement
- have absolute right to inspect records
- each director gets one vote at a meeting unless articles or bylaws say otherwise
Officers are agents that can act with actual or apparent authority and bind the corporation by acting in their individual capacity
-ex president, secretary, treasurer
Business Judgment Rule
Directors have duty to act reasonably and in good faith
Presumption:
- Absent any evidence of fraud, bad faith, or self-dealing, there is a presumption under the BJR that the decision in question was made by disinterested and independent directors on an informed basis and with a good faith belief that the decision serves the. best interests of the corp and its shareholders.
- -It is up to the plaintiff to overcome this presumption
Directors required to discharge their fiduciary duties to the corp:
1) in good faith,
2) with the care that an ordinary prudent person in a like position would exercise under similar circumstances, and
3) in a manner she reasonably believes to be in the best interests of the corp
Piecing the Corporate Veil
III
Instrumentality
Injustice
Injury
