CORPORATIONS OUTLINE Furlow, Fall 2006
1) INTRODUCTION TO THE CORPORATE FORM
a) Basic Attributes of a Corporation
i) Independent, perpetual existence
ii) Amalgamates Capital
iii) Stockholders last in line to be paid
iv) Limited liability for owners and managers
v) Management is separated from ownership
b) Corporation is primarily made-up of three group
i) Shareholders/Stockholders
(1) Corporation is required to have stockholders (§6.01)
(a) A stockholder is the person in whose name shares are registered in the records of a corporation or the beneficial owner of shares to the extent of the rights granted by a nominee certificate on file with the corporation(§1.40(21))
(2) The Basics (§6.01, §6.02)
(a) Three Main Powers
(i) Invest capital
1. “Own the company” in theory
a. actually own an interest
(ii) Vote
1. At shareholders meetings for directors, approve certain fundamental transaction (merger, change in articles of incorporation, to close up shop), or to approve bylaws
a. Gives an indirect power to govern
(iii)Sue
1. company, board of directors, controlling stockholders (always the plaintiff)
(b) Risk
(i) Limited to the amount of investment
1. Generally, no personal liability (§6.22)
(c) Return on Investment
(i) Residual claimants
1. last inline for
a. dividends
b. distribution on dissolution
c. sale of stock
(3) Stockholder Voting Rights
(a) Various Types of Voting
(i) Straight Voting (§7.21 & §7.28)
1. entitled to one vote for each share owned at a shareholder’s meeting (§7.21)
a. default method
2. the directors that receive a plurality of the votes are elected to the board (§7.28(a))
(ii) Cumulative Voting (§7.28)
1. cumulative voting (§7.28(c)) is NOT allowed for election of directors UNLESS the Articles of Incorporation say so (§7.28(b))
(iii)Class Voting (§8.04)
1. Class voting is allowed if the Articles of Incorporation authorize a certain class of shares to elect the directors
(iv)Staggered/Classified Board (§8.06)
1. Articles of Incorporation can authorize a Staggered Board
(b) Stockholders vote at Meetings
(i) Annual meetings (mandatory) (§7.01)
1. Call the meeting
a. Time and place fixed in accordance with the bylaws (§7.01)
b. can be a fixed time and place (2nd Tuesday, 2nd month, in Bermuda) or by a particular person
c. Default: Principle place of business
2.
a. Election of directors
b. Any other business that is deemed to be in order by the chairman (§7.08)
6. Written Consent (§7.04)
a. Action commenced at a meeting must be evidenced by one or more written consents bearing (§7.04(a)
i. The date of signature
ii. Describing the action taken
iii. Signed by all the shareholders entitled to vote
iv. Delivered to the corporation for inclusion in the minutes or filing with the corporate records
b. Written consent can also be used to consent to the non-occurrence of an annual meeting as long as a quorum of shareholders give their written consent (overturnment of Hoschett v. TSI, no annual meeting called case, court held needed a meeting; DGCL §221(b) and §228)
7. Failure to hold a meeting
a. Required to hold it (§7.03)
i. Stockholder may sue
ii. Earlier of
iii. 6 months after end of fiscal year OR
iv. 15 months after last annual meeting
(ii) Special meeting (§7.02)
Power to call (§7.02)
