Chpater 35 Managment Strucutre of Corporations

shareholder meetings

shareholders may exercise their voting rights at both annual and special shareholder meetings

quorum

minimum number necessary to be present at a meeting to transact business

Election of directors

the shareholders elect the board at the annual meeting of the corporation

Straight voting

directors are elected by a plurality of votes

Cumulative voting

entitles shareholders to multiply the number of votes they are entitled to cast by the number of directors for whom they are entitled to vote and to cast the product for a single candidate or to distribute the product among two or more candidates

Removal of directors

the shareholders may by majority vote remove directors with or without cause, subject to cumulative voting rights

Approval of fundamental changes

shareholder approval is required for amendments to the articles of incorporation, most acquisitions, and dissolution

proxy

authorization to vote another’s shares at a shareholder meeting

voting trust

transfer of corporate shares’ voting rights to a trustee

Shareholder voting agreements

used to provide shareholders with greater control over the election and removal of directors and other matters

Right to inspect books and records

if the demand is made in good faith and for a proper purpose

direct suit

brought by a shareholder or a class of shareholders against the corporation based upon the ownership of shares

derivative suit

brought by a shareholder on behalf of the corporation to enforce a right belonging to the corporation

Shareholder’s right to dissent

a shareholder has the right to dissent from certain corporate actions that require shareholder approval

Fundamental changes

the directors have the power to make, amend, or repeal the bylaws, unless this power is exclusively reserved to the shareholders

dividends

directors declare the amount and type of dividends

Exercise of directors’ functions

directors have the power to bind the corporation only when acting as a board

Action taken without a meeting

permitted if a consent in writing is signed by all of the directors

Delegation of board powers

committees may be appointed to perform some but not all of the board’s functions

Directors’ inspection rights

directors have the right to inspect corporate books and records

Role of officers

officers are agents of the corporation

Actual express authority

arises from the incorporation statute, the articles of incorporation, the bylaws, and resolutions of the directors

actual implied authority

authority to do what is reasonably necessary to perform actual authority

Apparent authority

acts of the corporation that lead a third party to believe reasonably and in good faith that an officer has the required authority

ratification

a corporation may ratify the unauthorized acts of its officers

Duty of obedience

must act within respective authority

Duty of diligence

must exercise ordinary care and prudence

business judgment rule

precludes imposing liability on directors and officers for honest mistakes in judgment if they act with due care, in good faith, and in a manner reasonably believed to be in the best interests of the corporation

Duty of loyalty

requires undeviating loyalty to the corporation

indemnify

a corporation may indemnify a director or officer for liability incurred if he acted in good faith and was not adjudged negligent or liable for misconduct

Liability limitation statutes

many states authorize corporations—with shareholder approval—to limit or eliminate the liability of directors for some breaches of duty