Chapter 28 Business Law

whats a property advantage of the corporate form of business?

makes it easier to hold property for long periods of time.

what are the three principal types of corporations

governmental (municipal), Nonprofit, for-profit

the stock of a stock of a close corporation is generally held by who?

a small group of people who know one another, who may all or some be involved in management

publicly held corporation

sells shares to people who often have little interest in it except as investors

benefit corporations

rather than focusing exclusively on creating profits for their shareholders, seek to create long-term value for a broader set of stakeholders (e.g., shareholders, employees, local communities)

promoters

people who have the idea and bring a corporation into being

what did the formation of general incorporation laws do?

made incorporation a right instead of a legislative privilege

steps governing the incorporation process

Preparing the articles of incorporation.

Signing and authenticating the articles by one or more of the incorporators.

Filing the articles with the secretary of state and paying all required fees.

Issuing the certificate of incorporation by the secretary of state.

Holding an initial organizational meeting.

Under MBCA, what four things must be included in articles of incorporation?

corp name, # of shares, address, name & address of each incorporator

what is the function of bylaws?

to establish rules for the conduct of the internal affairs of the corporation

ultra vires

A transaction that was beyond the corporation’s powers

how does the old MBCA define the time when incorporation occurs

holds that issuance of the certificate of incorporation is conclusive proof of incorporation in all challenges to the corporate status

what does a de jure corporation mean?

promoters substantially complied with all mandatory provisions.

what does a de facto corporation mean?

there was an honest attempt to comply with the mandatory provisions of the corporate statute, yet the attempt still failed in some material respect

what two requirements are needed for courts to pierce the veil?

There must be domination of the corporation by one or more of its shareholders AND The domination must result in an improper purpose.

what are four common traits of a close corporation?

The shareholders are few in number.

Shareholders usually live in the same geographic area and know one another and their skills.

All or most of the shareholders are active in the business.

There is no established market for the stock.

right of first refusal

either the corporation or its shareholders are given the right to buy shares offered for sale to an outsider willing to purchase them.

buy-and-sell agreement

shareholder or her estate is required to sell, and the corporation is obligated to purchase the shares at an agreed-upon price. way of guaranteeing a shareholder receives their portion of investment after death or retirement

consent restraint.

would-be seller must gain the permission of the corporation’s board of directors or shareholders for any sale of shares other than to the corporation or pro rata to present shareholders.

what are the 3 justifications for Involuntary Dissolution by an attorney general?

Failure to pay franchise tax.

Failure to pay corporation’s annual fee.

Failure to appoint or maintain a registered agent in the state.

3 justifications for Involuntary Dissolution by shareholder

Directors are in conflict and deadlock cannot be broken by shareholders and corporation faces ruin.

Directors are acting illegally or unfairly.

Misapplication or waste of corporate assets.