NEW YORK CORPORATIONS
A.BAR STRATEGY
1.5 BASIC AREAS TESTED
a.FORMATION OR ORG. STAGE OF CORP.
b.ISSUANCE OF STOCK (SELLS OR TRADES OWN STOCK)
c.ACTION BY A DIRECTOR OR OFFICER; LIAB. OF DIRECTOR OR OFFICER
d.RTS. OF SHs
e.FUNDAMENTAL CORP. STAGES (CHANGING STATUS OF CORP.)
2.NY RARELY CROSSES OVER
I.PRE-INCORPORATION STAGE: FORMATION/ORGANIZATION OF CORP.
A.PLAYERS:
1.WHO ARE THEY:
a.Incorporators form corp. under NY state law.
b.Only need one incorporator (can have more).
c.Incoporator MUST be a natural person (cannot be another corp.), AND
d.Must be 18 yrs. of age at least
2.WHAT THEY DO:
a.Sign certif. of incorp.
b.Deliver to Sec. of State (in Albany)
c.Hold an organizational mtg. at which they may:
(1)Adopt the BY-LAWS of the corp., and
(2)Can choose initial directors of the corp.
3.At this stage, as incorporators, the players disappear.
a.BAR TIP: On exam, will have same human beings wearing diff. hats and multiple hats.
(1)ASK IN WHAT CAPACITY OR ROLE IS THE INDIV. PLAYING.
B.CERTIFICATE OF INCORP. (certif. or charter that creates the corp.)
1.PURP.: Serves as:
a.K b/n corp. and state of NY, AND
b.K b/n corp. and future SHs.
2.ISSUE IN CORPS.: Corp. is an ARTIFICIAL PERSON under NY law v. you and I as NATURAL PERSONS
a.NATURAL PERSONS: Can do anything in society unless stat. prohibiting conduct.
b.ARTIFICIAL PERSON: CAN DO NOTHING UNLESS AUTHORIZATION.
(1)Any time on NY Bar, you see a corp. doing anything, ask: IS THERE SOME AUTHORIZATION FOR THAT ACT?
(2)FIND AUTHORIZATION IN (real world: by-laws, certif., state law) STATE LAW OR FP ON BAR.
3.REQTS. OF CONTENTS IN CERTIF.: Must have:
a.The NAME OF THE CORP., AND NAME MUST INDICATE THE CORP. STATUS
(1)ie. must have INC., CORP. OR LTD. IN CERTIF.
(a)ABC, inc. or ABC corp. or ABC Ltd. (in full or abbreviated)
b.NAMES OF INCORPORATORS AND THEIR ADDRESSES
c.NAMES OF ANY REGISTERED AGENTS FOR THE RECEIPT OF SERVICE OF PROCESS
(1)MUST AT LEAST DESIG. THE SEC. OF STATE AS CORP.'S AGENT FOR RECEIPT OF SERVICE OF PROCESS.
(a)If want to sue corp. under NY state law, find agent in certif. and serve papers, OR can always serve the papers on the Sec. of State.
(2)Can also desig. someone to receive papers to be sued (OPTIONAL IN NY)
d.PURPOSE CLAUSE (VERY IMP.!!)
(1)Must state the purp. for setting up the corp.
(2)2 TYPES:
(a)GENERAL PURP. CLAUSE
i)"Incorporated to engage in all lawful activities"
(b)SPECIFIC PURP. CLAUSE
i)ie. "corp. created for the purp. of selling, renting, and repairing TVs"
ii)NY DOES NOT REQUIRE SPEC. PURP. CLAUSE > OPTION: MUST HAVE EITHER GEN. OR SPECIFIC.
iii)Bar never gives gen. purp. clause
iv)FP gives spec. clause and have corp. do something else (beyond the purp. clause)
v)ie. corp. w/bike purp. sells computers > STATE THAT SUCH AN ACT IS BEYOND SPEC. PURP. CLAUSE AND IS AN ULTRA VIRES ACT (DEF.: BEYOND THE PURP. CLAUSE).
(3)LEGAL CONSEQ. OF ULTRA VIRES ACT:
(a)STILL A VALID K (if bike purp. co. sells computers)
i)On Bar, one of the parties will use ultra vires act to defend against perf. of the K.
ii)ULTRA VIRES UNDER NY LAW IS NOT A VALID DEFENSE.
a)K ENTERED INTO, EVEN THOUGH BEYOND PURP. CLAUSE, IS VALID, ENFORECEABLE, AND NEITHER PARTY MAY INVOKE ULTRA VIRES AS DEFENSE.
(b)BUT CORP. OFFICERS/DIRECTORS WHO AUTHORIZED IT WILL BE LIABLE > ULTRA VIRES ACT CREATES LIAB.
i)IF SELL COMPUTER AND MAKE MONEY, MONEY GOES TO CORP.
ii)IF LOSE $, DIRECTORS OF OFFICERS WHO APPROVED THE U-V ACT ARE PERSONALLY LIAB.
(c)IF SHs WANT TO STOP CORP. FROM ENGAGING IN U-V ACT:
i)Can ask ct. to enjoin corp. (INJUNCTIVE RELIEF) from doing U-V act.
e.CAPITAL STRUCTURE PROVISION (how corp. is capitalized, shares of stock, classes of stock)
(1)FP: Corp. authorized to issue 100,000 shares of common stock > corp. can but does not have to.
(a)AUTHORIZATION SHARES
(b)If corp. sells 40,000 shares > OUTSTANDING STOCK (STOCK ACTUALLY SOLD)
(2)CERTIF. CREATES AUTHORITY OR ABIL. OF CORP. TO SELL THE NUMBER OF SHARES NAMED IN THE CERTIF. (ie. 100,000 -- BUT DOES NOT HAVE TO SELL ALL THAT CERTIF. SPECIIFES.)
(a)CANNOT SELL MORE THAN CERTIF. ALLOWS UNLESS AMEND THE AUTHORIZATION IN THE CERIF.
(3)CLASSES OF STOCK:
(a)TYPES OF STOCK: (CAN HAVE DIFF. CLASSES OF STOCK W/I EACH TYPE)
i)COMMON
ii)PREFERRED
4.DELIVERY OF CERTIF.:
a.CERTIF. MUST BE "FILED": PHYSICALLY DELIVERED TO AND APPROVED BY THE SEC. OF STATE.
5.LEGAL CONSEQ. OF CERTIF. CONTENTS, DELIVERY, AND FILING:
a.2 EFFECTS:
(1)UPON A FILING BY THE SEC. OF STATE > THE CORP. BECOMES A LEGAL PERSON (ARTIFICIAL PERSON) W/A SEPARATE LEGAL IDENTITY.
(2)AT THAT PT. IN TIME, SHs HAVE LIMITED LIAB. -- THE PRUP. OF THE CORP. (**Imp.)
(a)SH LIAB. LTD. TO EXTENT OF THEIR CAPITAL CONTRIB. (AMT. OF MONEY INVESTED.)
(b)THERE ARE EXCEPTIONS (discussed infra).
b.START W/GENERAL PREMISE OF DE JURE AND DE FACTO CORPS.:
(1)DE JURE CORP.: We create a DE JURE (by rt. or by law) corp. that when filed, gives SHs ltd. liab.
(2)DE FACTO CORP.: CL CONCEPT BY WHICH A CORP. OR BUS. (OR BUS. THAT HAS ATTEMPTED TO INCORP. BUT HAS NOT FULLY COMPLIED W/STATE -- left critical element out of certif.), GF FAITH EFFORT TO INCORP., ACTS LIKE CORP., BUT IS NOT TECHNICALLY A DE JURE CORP.
(a)2 FEATURES:
i)It is a de facto corp.
ii)SHs still have ltd. liab.
C.BY-LAWS OF CORP. (informal and internal)
1.DEF.:THEY ARE INTERNAL FORMAL DOCUMENTS COVERING PROCEDURES BY WHICH THE CORP. OPERATES.
(1)BY-LAWS NOT REQD. UNDER NY STATE LAW (JUST NEED TO FILE CERTIF. OF INCORP. W/SEC. OF STATE).
2.WHO ADOPTS THEM:
a.IN GENERAL: SHs
b.AT PRE-INCORP. STAGE: INCORPORATORS
c.UNDER CERTAIN CONDS.: BOARD OF DIRECTORS (B/D) MAY ADOPT SUBSEQ. BY-LAWS IF CERTIF. PERMIT IT OR IF THE BY-LAWS ADOPTED BY SHS PERMIT IT.
3.AMENDING BY-LAWS:
a.Any by-law may be amended or repealed by SHs, even if adopted by B/D.
b.B/D may amend or repeal ONLY IF authorized by certif. of incorp. OR by the by-laws.
D.HIERARCHY OF CORP. PARTICIPANTS:
1.IN THEORY:
a. AUTHORITY RESTS W/THE SHs. > They own the corp.
(1)B/D ANSWERABLE TO THE SHs
b.SHs DELEGATE AUTHORITY TO B/D.
c.B/D DELEGATES AUTHORITY TO THE OFFICERS.
d.OFFICERS HIRE THE EEs.
E.PRE-INCORPORATION CONTRACTS
1.DEF.: K ENTERED INTO ON BEHALF OF A CORP. THAT DOES NOT EXIST.
2.WHY DO THIS?:
a.Sometimes after deliver certif. to Sec. of State and wait for filing, might want to do some bus. (hire EE's, get office space, etc.) > ENTER PRE-INCORP. Ks
3.WHO:
a.PROMOTERS: PEOPLE WHO ACT ON BEHALF OF A CORP. NOT YET FORMED.
(1)THEY ENTER PRE-INCORP. Ks
(a)Smith may be promoter, incorporator, SH, etc. (wearing diff. hats).
(b)Ask in what capacity is Smith acting.
F.PRE-INCORPORATION LIABLITY:
1.GEN. RULE: PROMOTERS ARE PERSONALLY LIAB. ON THE PRE-INCORP. Ks.
2.WHO IS LIAB. WHEN HAVE DE JURE CORP.?:
a.ONLY THE PROMOTER (corp. not liab.)
b.CORP. ONLY BECOMES LIAB. WHEN IT ADOPTS THE PRE-INCORP. K.
(1)When it accepts the terms of the K.
(a)i.e. corp. votes to add its name to a lease that promote contracted for, or if corp. moves into the space.
c.PROMOTER IS STILL LIAB. (BOTH CORP. AND PROMOTER LIAB.)
3.PROMOTER IS NO LONGER LIAB WHEN HAVE NOVATION.
a.NOVATION:AGMT. SIGNED BY THE CORP. (BY OFFICER ON ITS BEHALF), BY PROMOTER, AND BY 3RD PARTY BY WHICH THEY AGREE THAT PROMOTER WILL NO LONGER BE LIAB. (JUST CORP. LIAB.) UNDER THE K.
G.SECRET PROFIT RULE
1.DEF.:
a.PROMOTER IS A FIDUCIARY (PROMOTER OWES DUTIES TO CORP. NOT YET FORMED)
b.PROMOTER MAY NOT MAKE A SECRET PROFIT FROM HIS OR HER DEALINGS FOR THE CORP.
(1)DUTY TO ACT ON BEHALF OF THE CORP., NOT ON OWN BEHALF W/THE CORP.
(a)ie. If promoter buys from or sells to corp. and makes secret profit in the process > LIAB.
2.MEASURING "PROFITS": under 1 of 2 circums.:
a.IF PROMOTER HAS SOLD PROP. TO CORP., WANT TO KNOW IF PROMOTER ACQUIRED THE PROP. BEFORE OR AFTER BECOMING PROMOTER.
(1)MEASURE OF PROFIT FOR PROP. ACQUIRED BEFORE BECOMING PROMOTER: IF PROMOTE ACQUIRED THE PROP. BEFORE BECOMING PROMOTER, MEASURE PROFIT AS PRICE PAID BY CORP. MINUS FMV AT TIME OF SALE.
(2)MEASURE OF PROFIT FOR AFTER-ACQUIRED PROP.: PRICE PAID BY CORP. MINUS THE PRICE PAID BY THE PROMOTER.
(a)FP: Promoter buys prop. for 100k. FMV is 500k. Promoter decides to sell to corp. for less than FMV (300k). 300k -200k = 100k of profit.
(b)Even though promoter sold prop. to corp. for less than it was worth > still viol. Secret Profit Rule.
(c)Bar will usu. have profit.
3.PROFITS MUST BE SECRET (UNAPPROVED BY B/D) (Not a prohib. against making any profit.)
a.IF PROMOTER DISCLOSES ALL THE DETAILS OF THE PROFIT TO B/D, AND B/D APPROVES IT > PROMOTER NOT LIAB. > NO VIOL.
H.FOREIGN CORP.
1.DEF.: A CORP. INCORP. IN A JURIS. OTHER THAN NY.
a.ie. Corps. incorp. in Delaware, NJ, etc.
2.RULE: FOR FOREIGN CORP. TO TRANSACT BUS. IN NY, IT MUST QUALIFY TO DO BUS IN NY STATE.
a.REQTS. FOR "QUALIFYING TO DO BUS.": FOR. CORP. MUST REGISTER W/NEW YORK STATE SEC. OF STATE.: REQTS.:
(1)Must make application to Sec.;
(2)Must include in applic. a copy of its articles of incorp.; AND
(3)Must desig. the NY Sec. of State as its agent for the receipt or service of process.
(a)To sue for. corp., just serve NY Sec. of State
3.EFFECT OF FAILURE TO QUALIFY:
a.FOR. CORP. CAN STILL DO BUS. IN NY W/O QUALIFYING.
b.BUT LEGAL CONSEQ.: FOR. CORP. CANNOT UTILIZE NY STATE CTS. UNTIL IT QUALIFIES.
(1)CANNOT SUE IN NY STATE CT. BUT CAN BE SUED.
II.ISSUANCE OF STOCK
A.DEF.: ONLY WHEN CORP. SELLING OR TRADING ITS OWN SHARES.
1.If ABC inc. sells 100 shares of its stock and you buy it > ISSUANCE OF STOCK. If you sell it to those to someone else > NOT ISSUANCE.
B.SUBSCRIPTION AGMTS.:
1.DEF.: Ks ENTERED INTO TO BUY SHARES OF STOCK IN CORP. (WRITTEN OFFER TO BUY STOCK IN CORP.).
2.SUBSCRIBERS ENTER INTO SUBSCRIPTION AGMTS.
a.Usu. occur during pre-incorp. stage.
b.But can have after creation of corp.
3.IRREVOCABLE FOR PERIOD OF 3 MOS.
a.X signs agmt. to buy 100 shares at stock at $50/share > CANNOT REVOKE W/I FIRST 3 MONTHS.
b.EXCEPTION: IF ALL OTHER SUBSCRIBERS OR THE CORP. ALLOW REVOCATION.
4.REMEDY IF SUBSCRIBER REVOKES ILLEGALLY:
a.FP:Subscription agmt. for 100 shares of stock, $50/share ($5,000). Suppose subscriber gave $2k as down payment and then decided to breach > CORP. CAN KEEP THE 2k AND THEN SELL THE STOCK AND KEEP THE PROFIT (ie. Sells the stock for $4k.) > Buyer loses down payment and does not get any stock b/c of his breach.
b.STEPS OF REMEDY:
(1)CORP. MUST MAKE WRITTEN DEMAND UPON SUBSCRIBER, AND
(2)MUST GIVE SUBSCRIBER 30 DAYS TO CURE THE BREACH.
(3)IF SUBSCRIBER DOES NOT CURE, CORP. CAN KEEP THE PARTIAL PYMT. (ie. down pymt. of $2K), SELL THE SHARES (THE SHARES IT HAD SET ASIDE FOR THE BUYER) AND KEEP THE PROFIT FROM THE SALE.
(a)EXCEPTION:
i)IF SUBSCRIBER ON DEFAULTING HAS PAID 50% OR MORE OF THE SUBSCRIPTION PRICE, THEN AFTER CORP. MAKES DEMAND TO CURE (AND SUBSCRIBER DOES NOT CURE), CORP. MUST SELL THE SHARES, AND GIVE ANY SURPLUS IT RECEIVES TO THE DEFAULTING SUBSCRIBER.
a)FP: Subscription agmt. for 100 shares of stock, $50/share ($5,000). Suppose subscriber gave $2500 (50% of subscription price, then defaults > corp. makes demand for cure > subscriber does not cure > CORP. MUST SELL THE STOCK > GETS $4000 > CORP. WAS ENTITLED TO GET $5000 (INSTEAD GOT $6500) > CORP. MUST RETURN THE $1500 SURPLUS TO SUBSCRIBER.
C.CONSIDERATION:
1.When corp. issues stock, what must corp. get in return? CONSID.
2.FORM OF CONSID. THAT CORP. MUST GET:
a.CASH (MONEY OR EQUIV. -- ie. check), PROP. OR SVS., BUT NOT FUTURE PYMT. (PROMISE TO PAY) OR FUTURE SVS.
3.AMT. OF CONSID. THAT CORP. MUST GET:
a.FOR CASH:
(1)PAR (PAR VALUE) STOCK: The min. consid. that a corp. can receive in exchange for its issuance of stock.
(a)FP: If corp. issues 10,000 shares of $3 par value stock, MUST GET AT LEAST $30,000 (MIN. CONSID.) Could get $10 million (NO MAX. CONSID.).
(2)NO PAR VALUE STOCK: Stock that has NO MIN. CONSID. (PRICE) UPON ITS ISSUANCE.
(a)FP: Corp. can issue 10,000 shares of no par stock > can do so for $12,000 or $10 million.
(3)TREASURY STOCK: STOCK AUTHORIZED IN CERTIF., SUBSEQUENTLY ISSUED BY THE CORP., AND THEN REACQUIRED BY THE CORP.
(a)NO MIN. CONSID.
i)FP: Corp. sold 10,000 shares of $3 par value TREASURY STOCK > NO MIN. CONSID. (even though par value stock)
b.FOR PROP.: (corp. can issue stock in exchange for prop., IF:)
(1)FMV OF PROP. EQUALS OR EXCEEDS PAR VALUE.
(a)FP: If issue of 10,000 shares of $3 par stock for $22,000 > $8k deficiency
(2)WATERED STOCK (DISCOUNT STOCK): STOCK ISSUED FOR LESS THAN PAR VALUE.
(a)THE DIFF. B/N WHAT SHOULD HAVE GOTTEN AND WHAT DID GET IS CALLED "AMT. OF THE WATER" (AMT. OF THE DISCOUNT).
(3)BAR ISSUE: WHO WILL BE LIAB. FOR THE WATER (THE DEFICIENCY)? > 3 GROUPS:
(a)THE DIRECTORS WHO AUTHORIZED THE ISSUE OF WATER STOCK ARE PERSONALLY LIAB. FOR THE AMT. OF THE WATER (DEFICIENCY).
i)DIRS. LIAB. FOR U-V ACT AND AUTHORIZING WATER STOCK.
(b)SH TO WHOM WATER STOCK IS ISSUED IS ALSO PERSONALLY LIAB. FOR THE DEFICIENCY.
i)THIS IS FIRST EXCEPTION TO GEN. RULE THAT WHEN CORP., SHs NOT PERSONALLY LIAB.
ii)If SH sells the water stock to 3rd party, is 3rd party also liab.? (ie. sells the shares for 17k)
iii)NO.
(c)SUBSEQ. PURCHASER IS PERSONALLY LIAB. ONLY IF THE SUBSEQ. PURCH. HAD KNOWLEDGE (NOTICE) THAT RECEIVING WATER STOCK.
i)SH WHO SOLD IS STILL LIAB. > LIAB. MEASURED BY THE AMT. OF THE WATER (8k)
ii)Even though X SH lost money, still liab. for the original water (8k) b/c bought for less than par value and will always remain liab. for it.
D.PREEMPTIVE RTS. (Bar loves this)
a.DEF.:MEANS BY WHICH WE PROTECT MINORITY SHs WHO WISH TO MAINTAIN THEIR PERCENTAGE INTEREST IN THE CORP.
(1)FP: Corp. formed. X has 60% (maj. SH) and Y has 40%. X decides to issue mores stock and buy it to dilute minority SH's stock and percentage share of the corp.
(2)GENERALLY, IF CERTIF. ALLOWS, MAJ. SH CAN ISSUE MORE STOCK, BUY IT, AND DILUTE MINORITY INTEREST UNLESS:
i)MINORITY SH HAS PREEMPTIVE RTS.
(3)UNDER PREEMPTIVE RTS., MIN. SH HAS RT. TO BUY UP TO HIS PERCENTAGE INTEREST OF A NEW ISSUANCE OF STOCK.
(a)FP: Min. SH owns 1000 shares and there are 5000 shares outstanding. Maj. SH decides to issue an add'l 3000 shares > if preemptive rts., min. SH has rt. to purch 600 shares of the issuance. (MUST DO ALL THE MATH ON THE BAR.)
b.SCOPE:CORP. ONLY GIVES RT. TO BUY UP TO MIN. SH's PERCENTAGE (SH MUST STILL GIVE CONSID.).
(1)MIN. SH DOES NOT HAVE TO BUY FULL SHARE OR ANY SHARE.
c.WHEN DO MIN. SHs HAVE PREEMPTIVE RTS.:
(1)THEY ATTACH TO ALL STOCK THAT HAS UNLTD. DIVIDEND RTS. OR THE RT. TO ELECT DIRECTORS.
(a)Effectively, this means COMMON STOCK.
i)Bar need only tell you that corp. selling common stock > silent facts that still raise preemptive rts. issue.
(2)ONLY WAY UNDER NY LAW THAT WILL NOT HAVE PREEMPTIVE RTS. IS IF THE CERTIF. (READ: FP) SAYS NO SUCH RTS.
(a)BAR TIP: Bar will never take away issues in FP > hence, preemptive rts. always an issue if common stock involved.
d.EXCEPTIONS:
(1)MINORITY SH HAS NO PREEMPTIVE RTS. IF CORP. ASKS FOR CONSIDERATION OTHER THAN CASH: ie. PROP.
(2)NO PREEMPTIVE RTS. IF CORP. ISSUING TREASURY STOCK.
(3)NO PREEMPTIVE RTS. IF COPR. ISSUING STOCK DURING THE FIRST 2 YRS. OF CORP.'S EXISTENCE AND THE AUTHORIZATION TO DO SO WAS CONTAINED IN THE ORIGINAL CERTIF.
III.DIRECTORS AND OFFICERS OF THE CORP. (Bar tests more on directors.)
A.OFFICERS:
1.Run corp. on day-today basis; accountable to B/D.
2.Hire EEs.
B.BOARD OF DIRECTORS: like a legislature.
1.Indiv. dir. by herself lacks authority > only has authority as board.
2.GENERALLY: MIN. OF 3 DIRECTORS (MEMBERS OF THE B/D).
a.IN CLOSELY HELD CORP. (CLOSED CORP. -- NOT PUBLICLY TRADED AND HAS LTD. # OF SHs):
(1)CAN HAVE FEWER THAN 3 DIRECTORS IF HAVE FEWER THAN 3 SHs.
(a)ie. If 2 shs, can have as few as 2 directors.
b.USU. HAVE ODD NUMBER TO AVOID TIE VOTES.
3.WHO ELECTS:
a.GEN. RULE: SHs CHOOSE THE DIRECTORS IN A CORP.
(1)EXCEPTION:AT PRE-INCORP. STAGE, INCORPORATORS MAY CHOOSE THE INITIAL DIRECTORS.
(2)THEREAFTER, UPON THE FORMATION OF THE CORP., THE SHs CHOOSE.
4.TERMS: (very flexible)
a.CAN STAGGER THE TERMS.
b.CAN ASSIGN DIFF. TERMS TO DIFF. CLASSES OF DIRECTORS.
5.WHO REMOVES DIRECTORS:
a.SHs CAN ALWAYS REMOVE DIRS.:
(1)FOR CAUSE. (ie. director stealing from corp.)
(2)W/O CAUSE IF AUTHORIZED BY THE CERTIF. OF INCORP. OR BY-LAWS (want to put someone else there).
b.B/D CAN REMOVE DIRECTOR, BUT ONLY FOR CAUSE AND ONLY IF AUTHORIZED TO DO SO BY THE CERTIF. OF INCORP. OR THE BY-LAWS.
6.MEETINGS:
a.GEN. DEF.: THEY GET TOGETHER AND HOLD MEETINGS.
(1)EXCEPTION:
(a)IF ALL DIRECTORS UNANIMOUSLY CONSENT IN WRITING TO ACT W/O A MTG., THEN CAN HAVE AN ACTION BY THE B/D W/O A MTG.
i)ie. If open checking acct., bank requires resolution signed by B/D. CORP. CAN FAX LETTER TO MEMBERS OF B/D, THEY SIGN IT (CONSENT IN LIEU OF MTG.).
ii)IF ONE DIRECTOR REFUSES, B/D MUST MEET.
b.TYPES OF MEETINGS:
(1)SPECIAL MTGS.: NOTICE OF MTG. MUST BE SENT OUT.
(a)W/o proper notice, any action taken by B/D is invalid.
(b)BUT lack of notice can be waived (if indiv. director who did not receive notice does not protest -- ie. attend mtg. w/o protesting lack of notice).
c.QUORUM (REQUISITE # OF MEMBERS ATTENDING) REQD. TO TAKE ACTION:
(1)GEN. RULE:NEED MAJORITY OF B/D AS IF FULLY CONSTITUTED (AS IF THERE WERE NO VACANCIES).
(a)FP: If have 9 person B/D, and one resigns and another dies > must STILL have 5 members attending to make quorum.
(2)ONLY CERTIF. CAN PROVIDE FOR HIGHER QUORUM.
(3)CERTIF. OR BYLAWS CAN LOWER THE QUORUM, BUT CANNOT REDUCE BELOW 1/3 OF ALL MEMBERS OF A FULLY CONSTITUTED B/D.
d.WHAT VOTE SUFF. TO PASS RESOLUTION:
(1)MAJORITY OF THE DIRECTORS PRESENT (NOT MAJORITY OF THE DIRECTORS VOTING).
(a)FP: 9 member B/D and have 7 in attendance. If only 4 directors vote, all 4 voting must vote in favor for resolution to pass.
7.ROLE OF THE DIRECTORS:
a.GEN. RULE: IMMEDIATE AUTHORITY FOR RUNNING THE BUS. RESTS W/ B/D.
b.2 EXCEPTIONS:
(1)B/D CAN DELEGATE AUTHORITY TO A COMMITTEE OF THE B/D.
(a)COMMITTEE WILL HAVE CERTAIN AUTHORITY OF THE B/D.
(b)AT LEAST THREE DIRECTORS FROM B/D MUST SERVE ON COMM.