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Washington Business Corporation Act
Defining Attributes of a Corporation
- -separate legal entity with perpetual life and centralized management
- may exist for any lawful purpose
BOD authorizes issuance of shares (unauthorized sales=void). Shares must be issued for sufficient consideration, as determined by BOD in good faith. Shares sold at same time must be sold for same price.
Payment of Dividends and Share Repurchases
Payment within BOD's discretion and cannot be compelled by shareholders unless able to prove BOD withheld lawful dividends in bad faith. Shareholders may not limit layments if, after payment, Corp can pay debts and assets exceed liabilities. Corp can buy back share under same criteria.
Promoter is a person who takes the initiative, directly or indirectly, in organizing or setting up a corporation.
A promoter who signs a contract on behalf of the corporation to be formed or in the process of formation can avoid personal liability on the contract only if the promoter affirmatively establishes that the other party to the contract knew that the corporation did not yet exist and that the other party specifically agreed to look solely to the corporation for performance once the corp came into existence.
Piercing the Corporate Veil
Where the corporate formalities have not been followed and the corporation has acted inequitably toward a 3rd party or the corporation was grossly undercapitalized at formation, that party may seek to pierce the corporate veil.
- -File AoI (incorporators names and addresses, corp name/address, classes and # of stock/shares, registered agent/office, number of directors)
- -Copy of AoI
- -Agent's Consent to Act
- -Existence begins at close of business on the day of proper filing.
Must be held within 120 days of filing of AoI. By end of meeting, corp must name directors and officers and adopt bylaws. May do other business, but not before issuing at least one share of stock. The intial report must then be delivered to SoS.
Principle Office Records
Mandatory records that must be kept at Principal Office. Shareholders may inspect as a matter of right. These records include current AoI, shareholder actions, financial statements (3 years), general written communications to shareholders, annual report.
Shareholders may inspect upon showing of proper purpose. Includes: all meeting and actions taken therein, actions outside meetings, appropriate accounting records, annual report.
Must happen at time and place specified in bylaws. Written notice required to shareholders of record between 10-60 days (20 if fundamental matter). Notice must include time, place, date.
May be called by BOD, shareholders of at least 10% of votes to be cast at meeting, court order if annual meeting not held.
Notice must include purpose/time/place/date. If fundamental matter, at least 20 days.
Action w/o Meeting
Valid if shareholders unanimous, or nearly so.
Shareholder Voting Requirements
- Director Election/Removal: plurality
- Article Amendments: 2/3
- Fundamental changes: 2/3
Shareholder inspection of books
Fundamental right that cannot be taken away. Corp may charge reasonable fee.
Right to acquire additional shares of corporation as issued to maintain same ownership percentage (anti-dilution rule).
Right to vote no on fundamental change and be bought out of shares for fair value.
Direct Actions in Litigation
Shareholder may use corp or officer, director, controlling shareholder to enforce personal claims. Recovery for benefit of shareholder.
Shareholder may sue officer, director, controlling shareholder in name of corp for harm to corp, provided that necessary demand first made on BOD. Recovery for benefit of corp.
Director General Powers
All corp powers vested in board as whole. May form/delegate committees.
Action at Board Meetings
- Regular or Special (2 day written or oral notice)
- Quorum required at entire meeting
- Majority rules
- Presume Yes vote if present. Dissent must be made on record and followed by written notice of dissent.
Board Action without Meeting
valid only if unanimous written consent
Duty of Care
Care an ordinarily prudent person would exercise in similar circumstances
Duty of Loyalty
Corp's interest must be placed above director's personal interest. Must avoid COI
Corporate Opportunity Doctrine
COI includes director taking for himself or diverting a business opportunity in same line of business corp is in.
Extent of Director Liability
Personal liability for losses suffered by corp as direct and proximate cause of breach of duty
Defenses to Director Liability
- Dissent from board action
- Absence from board meeting
- Ratification by unanimous shareholders
- Experts (good faith reliance on)
Business judgment rule
rebuttable presumption that directors act in conformance with duties
Officer Election & Removal
wholly in BOD discretion. No specific requirements, save there must be 1 charged with recordkeeping.
Officer duties and liabilites
same as directors
contract setting terms of merger must be approved by boards and shareholders of both companies.
must be approved by both boards and merged company's shareholders
Sale of Substanially all assets
must be approved by boards of buyer & seller, shareholders of seller.
Voluntary dissolution before shares issued
majority of promoters or initial directors may vote to dissolve and do so by delivering articles of dissolution to SoS
Voluntary dissolution after shares issued
Board recommends to shareholders. If approved by 2/3, articles delivered to SoS and corp begins winding down
Involuntary dissolution by SoS
- May be initiated by SoS for failure to pay fees, deliver reports when due, no registered agent, expiration of stated duration.
- requires 60 days to cure before adminstrative dissolution.
- 5 years to reinstate.
Involuntary Dissolution by Court Order
- By AG for fraud, absuse of legal authority
- By shareholder for deadlock, illegal activity, freeze-outs, waste, fraud
- By creditor if unpaid claim reduced to judgment