Where law ends, tyranny begins. -- William Pitt


PREMIUM LEGAL RESOURCES LEGAL FORMS ASK A LAWYER

[Note: focused on Ohio, but much is generally valid]

I. BASIC CORPORATE CONCEPTS

A. Definition: artificial being created by law, composed of individuals who subsist as body politic under special denomination w/ capacity of perpetual succession & act w/in scope of character as natural person.
-> OHIO: legal entity; sue/be sued own name

B. Advantages & Disadvantages of Corporate Form
1. Advantages
Ease capital; share transferability; perpetual life; ltd liab., potent'l tax savings; centralized mgmt; law/regs to guide action
2. Disadvantages
organztn & admtv costs; formalities; potent'l double taxation (profits & dividends)
To stop TAX disadv.: (a) Sub S Corp. - eliminates corp level, 35 or less s/holdrs, 1 class stock, not part chain; (b) don't declare dividends - stock value but accum. earngs tax; (c) s/holdr e/ee salaries instead of div. (deductible too)

C. Corporate Rights & S/holdr Rights Compared
1. Corp has all corp. propty & rights; creditors can look to corporate propty only (even if 1-man corp.)
2. S/holdrs stock get a) rt to div. if declared b) rt to vote c) rt on liqtn (STOPPING BUS.) to remaining assets; pers. creditors can't reach corporate assets

D. Parent & Subsidiary Corp. (parent if has controlling # shares)
-> Treated as separate corps if: 1) distinct finan'l units & subsid. sufft assets normal opertns; 2) separate books & trans.; 3) separate mtgs (even if dir. same); 4) not held to public as 1
-> If 1 fails: parent liable on agency or alter-ego theory

E. Disregarding Corporate Entity: Piercing Corporate Veil
1. N.Y. Test: ignoring corp. formalities (bk accts, mtgs) BUT undercapitalztn alone NOT enough
-> Corp. ID not different from s/holdrs so lose ltd liab
2. Calif. Test: ignore formalities or undercapitalzed for normal operations (FAIRNESS TEST)
OHIO: Calif. "fairness" Juris.
-> a) easier to pierce tort than K; b) easier to pierce parent than human s/holdrs; c) "Entity" theory NOT piercing but treats # difft corptns of same s/holdrs as 1 b/c disregarded formalities bet./among corptns

F. Const'l Safeguards Imposed on Corptn
"Citizen" for diversity of Inc. state & prin. place bus.; NOT "citizen" for P&I Clause of Constn

II. FORMING OHIO CORPORATION

A. Corporate Formation Timetable: 1) reserve name(optnl); 2) draft & file Art. signed by Incorporator; 3) Inc. takes stock subscriptns; 4) s/holdrs meet & adopt regs, elect dir.; 5) 1st Dir. mtg

B. Types of Stock
1. Par Value: min. price original issuance set in Art.; must pay in cash/other propty; min. $ pool to satisfy creditors so subscriber liable if didn't pay full amt
2. No-Par Value: sold for any fit price Bd determines
-> any changes from norm for stock must be in Art.

C. Corporate Accts
1. Stated Capital: par x # issued & outstanding; no-par Bd set $ amt per share to go in; can't declare dividends from this
2. Capital Surplus: amt pd over par
3. Earned Surplus: $ from bus. activity
-> Can use reas. acctg prac. & prin. for accts/fin'l statements; if revalue assets for apprectn in capital surplus can use for dividends & can use in earned surplus to eliminate deficit

D. Articles of Incorporation
1. Must have: a) NAME must end Company Co. Corporation Corp. Incorporation Inc. & NOT Limited Ltd; b) Principal Office; c) Purpose; d) Authorized # & par(if any) of shares & any specifics on stock; e) INITIAL STATED CAPITAL (if par) & so must sell subscriptns for X# of authozed shares sufft to raise that much & if don't/can't sell it incorporate & dir. liable for shortfall (UNSATISFIED CORPORATE CREDITOR?: 1) dir. & inc. liable for stated cap. shortfall or 2) S/holdrs pers. if didn't pay par or pierce corporate veil, 2 methods)

E. Signing the Articles (really anyone/thing can sign)

F. Apptmt of Statutory Agent: must accompany Articles; service

G. Bringing the Corp. into Legal Existence: file Art. + Stat. Agent cert. + filing fee

H. Articles vs. Regulations: Art. goven s/holdr fundamental rts, duties, liab. w/ the corp. Regs govern internal govt of corp.

III. DE JURE (legal rt) v. DE FACTO (in fact) CORPORATIONS

A. De Jure: validly filed Art. w/ SOS

B. De Facto: if find, 3P can't seek to avoid Ks or get pers. liab. (usually atty forgot to file) REQUIREMENTS:
1) valid law could inc. under 2) good faith attempt to organize corp. 3) in colorable compliance w/ statute 4) some use of corporate powers

IV. PROMOTERS (NOT agent/trustee b/c NO CORP. YET) Stands in fiduciary relationship to corp., other promoters, present & future s/holdrs; causes affmt duty to disclose trans. made on behalf of corp.

A. Secret Profits: can't take pers. once intend to do bus.; corp. can sue when exists UNLESS (1) promotors fully told kn int. persons & indep. bd & got no objectns; (2) s/holdrs ratified promoter's acts; (3) s/holdrs fully told & no objtn; (4) only prospectv s/holdrs were the promoters

B. Liability on Pre-Inc. Agreements
1. Promoter Liability (signs e/mt K for mgr or locatn lease)
a. Signs INDIVIDUALLY, pers. liable
b. Signs CORPORATE CAP. (Corp. by me):
(1) MAJ: promotor liable (agent non-existent principal concept; saying prin. when not is like fraud)
(2) MIN (OHIO Rule) NOT liable if fully disclosed corp. not yet exist (not true K but contin'g offer to the to be formed corp) c. K itself says promoter not liable
2. Corporation Liability: requires affirmtv act to adopt to be liable (1) express adoption (2) accepted benefits w/ most s/holdrs knowledge of terms -> Best to just adopt by resolution; NOT ratifying b/c that requires existence disclosed prin. when K made
-> Even when accepts, promoter STILL LIABLE, unless K exonerated or "contin'g offer" (creditor stiffed if cont'g offer & corp. doesn't accept)
-> Corp. been found liable by adoption, assgnmt, 3P bene'y, estoppel, alter ego, cont'g offer, quan meruit

C. Liability of Corp. for Promoter Services
-> Not tech. liable unless promises to pay; cts give recovery on quasi-K principles of unjust enrichment for serv. done

D. CORPORATE Remedies for Promoter's Breach of Fiduciary Duty -> Can (1) rescind trans. & restore status quo; (2) keep asset & seek promoter's secret profit; (3) keep asset & recover damages at law; (4) recover securities promoter gave to complete trans. or damages for same

E. 3P Remedies Against Promoter
-> If falsely says actg for existing corp., 3P sues for fraud/ deceit, breach of W of authority (agency) or Fed Sec Acts

V. SUBSCRIPTIONS TO STOCK IN THE CORPORATION
-> Become s/holder by subscribing b/4 or after inc. (PRIMARY MKT) or buying from s/holder (SECONDARY MKT)

A. Pre-Incorporation Subscriptions
1. Not s/holdr til corp. formed & offer accepted; then MUST pay subscriber K even if corp becomes insolvent
-> OHIO: once enough subscriptns for min. startg state capital, subscriber liable for unpd subscriptn even if entire authrtzn wasn't subscribed
2. Subscription asset of corp (dir/offrs no power to cancel)
3. If subscribed from fraud inducemt can rescind unless prejudices creditors/other subscribers

B. Avoiding Revocation of Subscription Offer (b/c induced others)
1. MAJ: offer to buy shares in corp. not yet formed can be w/drawn anytime b/4 accepted
2. Can be IRREVOCABLE (a) by express K provision (b) case law (c) statute
-> Case law at common law said if subscriptn says is a K among the subscribers to pay corp. when formed, sufft considtn for K liab. & corp. can sue as 3P creditor bene'y

C. Liab. of S/holders for Unpd Subscriptions
-> OHIO: S/holdr liab. for unpd subsptn or par if issued below; (but BFP unpd shares not liable); credtr can enforce
-> Pd for by cash, propty, ACTUAL serv. rendered, but not prom. note or promise of future serv.

D. Liab. of S/holdr to Creditrs for Shortfall on Par Value Stock Must pay stated par; if doesn't no K liab. to corp. but may be liable to corporate creditors (1) Watered Stock - consideration overstated & actually worth less than par; (2) Discount Stock - STATED discount under par; (3) Bonus Stock - given away
1. Valuation of Property or Services Given
a. MAJ: if Bd in GOOD FAITH BUS. J valued propty at par, RECEIVER watered not liab. if actually worth par
b. MIN: (true value rule) must be worth par period
-> OHIO: Presumed that value set by BD, INC. OR S/HOLDRS is conclusive when value challenged unless can show by clear & convincg evid. was intent'lly & knowingly overvalued
2. EXCEPTION TO DISCOUNT STOCK: if going bus. w/ stock selling on open mkt at discount, can sell below par; rec'r not liab

VI. AUTHORITY OF A CORPORATION

A. OHIO Authority: (1) sue & be sued; (2) take propty by gift devise bequest; (3) donate for public welfare/charity/science/ educ.; (4) indemnify offr/dir/employee for lawsuit exp. in course/scope duties unless neglig. in performance; (5) to accomplish purposes in Art. by property or K trans., formg/acquiring other corps, incurring indebtedness; (6) any authority by law (any purpose for which natural persons can act) or w/in purposes if stated; (7) invest $ if not a controlling int. in corp inconsistent w/ purposes

B. Ultra Vires Trans. (CORP, not e/ee, act beyond its authority)
1. OLD VIEW void b/c no power to do such act (creditrs stiff)
2. Today most found NOT ultra vires b/c:
a. Broad purpose/powers clause in statutes & Art. ref.
b. Doctrine of Implied Powers (liberally applied)
c. Ltmns on who can raise ultra-vires
3. OHIO only allow to assert if:
a. by state in suit against corp.
b. by or on behalf of corp. against dir, offr or s/holdr
(derivative suit)
c. by s/holder as s/holdr or on behalf holders of class shares
against corp., dir, offr, s/holdrs
d. actions for alleged overissue of shares
4. Effect if Found to be Ultra Vires (either if no statute or if met
statute requirements):
(1) K fully performed both sides, NOT VOIDABLE
(2) Completely unperformed, IS VOIDABLE (3) Part Performed (usually by corp. & creditor doesn't want to pay) - MAJ say 1 who fully performed gets benefit of bargain; MIN only quasi-K recovery
(3P v. CORP: refer to statute, implied powers, benefit of bargain v. quasi-K. S/HOLDERS v. CORP for loser deal, corp. formed for X & dir. doing Y: refer to statute but meets (c) exception BUT may defend by saying not ultra vires b/c implied powers)

VII. PURCHASE OF OWN SHARES BY CORP. (treasury stock)
-> Can purchase own shares if out of surplus & doesn't impair interests of creditors/other s/holdrs
-> Repurch. must also not make corp. insolvent (liab. + stated capital > assets)
-> OHIO corp. can do so when: (1) art. authorize & don't prohibit (2) to collect/compromise a debt (3) subscriber not fully pd in compromise (4) for e/ee stock options plans (5) corp. spec. reserved rts when sold to s/holdr (6) Art. provide repurch. on s/holdr demand or event (7) to avoid fractional shares (8) dissenting s/holdr (9) when 2/3 of ANY class s/holdrs authorize (even if nonvoting shares) or +- 2/3 but not less than MAJ

VIII. BOARD OF DIRECTORS

A. General Concepts: only act as part of bd at proper mtg (OHIO can act by unanimous written consent). MAJ physically at mtg to act - no proxy

B. Typical Business Affairs Over Which Bd Has Control Non-organic DAY TO DAY stuff: (1) dividend decisions (2) financing (3) labor, products, expansion (4) delegating authority offrs & e/ees (5) offr select/removal
-> fiduciary relatnship to corp & s/holdrs; s/holdr vote can't sterilze bd, can only elect or remove dir
1. Organic Stuff NO control over (S/HOLDERS MUST APPROVE):
a. changing capital stock
b. amending charter
c. moving place of business
d. dissolving corp. or sale substanlly all assets
e. electing & removing directors

C. Removal of Directors
1. OLD LAW needed cause to remove b/4 term up (corporate due process); now Maj of VOTING s/holdrs can remove w/o cause b/4 term ends (no reason so no process due). Unexpired term vacancies filled by bd

D. Number of Directors: can't be less than 3, unless only 1 or 2 s/holders

E. Quorum for Directors Mtg: need MAJ of authorized # dir. for mtg, unless Art./reg otherwise & then MAJ VOTE OF THOSE PRESENT to effectuate action

F. Election of Directors and Cumulative Voting
-> Cum voting can be eliminated by amendment to Art. 90 day after corptn formed; must give 48 hr notice b/4 mtg; can classify dir. in Ohio for staggered terms
-> Dir. run at large; Non-cumulative 51% elects entire bd; Cum = # shares x # dir. electing; Cumulative can pool votes
-> Look to see if w/ minority s/holdrs pooled altogether, maj. can still defeat. Requires: 1/#dir be'g elected+1 + 1=shares to WIN

IX. OFFICERS: implement Bd policies; hired/fired by Dir. at will (w/o cause); If e/mt K not entitled to office, only $; Chair of Bd only offr who MUST BE a dir.

X. ABILITY TO BIND THE CORPORATION
1. S/holdr resolution authorizing?: Corp. bound & MUST HAVE if ORGANIC trans.
2. Board Resolution Authorizing?: Corp. bound if not organic, valid action(quorum), offr doing is 1 designated in resolution
3. Officer Signing/Acting?: Corp. bound if:
a. express power from s/holdr or bd (non-organic trans.) resolution or regulation
b. apparent authority binds corp. (usual & regular; this kind of co. in this kind of location, this kind of situation)
(EXAMPLE: Is corptn bound if VP signs if sale substnly all assets?)

XI. DUTIES AND LIABILITIES OF DIRECTORS

A. Duty of Care: basic exercise good bus. J in mgmt & control corp affairs. Must act in good faith, manner reas. believes in best int. of corp., w/ care, skill & diligence of ordinary prudent person under circum. & position
1. In determining best interests can consider: (a) s/holdr interests (b) e/ees, suppliers, creditors & customrs (c) state/nation economy (d) community/society (e) value of cont'd existence
2. Not only consider this to see if reas. justified duty of care, but must also show clear & convincg evid. acted w/ DELIBERATE INTENT or RECKLESS DISREGARD for corporate best interests (intent'l disregard of board standard)
3. DISSENTING dir. not liable for co-dir. unless assisted or neglig. in not discoverg the misconduct & acting to prevent

B. Duty of Loyalty: fiduciary relationship w/ corp to act in good faith & loyalty in dealings w/ corp
1. Ks Between Director & his Corporation
(when direct K indiv. or guy is dir of 2 corps K'g) a. K is OK if:
(1) fully disclosed relationshp to bd & disinterest MAJ of valid quorum approved (interstd count in quorum)
(2) fully disclose to s/holdrs who then approve or
(3) transaction is FAIR TO CORP
b. (3) evaluated by Ct & ct can even disallow even if approved under (1) or (2) if incredibly unfair (will say waste of corporate assets or something)
2. Corporate Business Opportunity
a. Is it a corporate oppty?
(1) Interest or Expectancy Test: corp. seeking or has developed (time+$) this type oppty (favors dir)
(2) Line of Business Test: same type bus. normally engaged in by corp., EVEN IF NOT ACTIVE AT THIS TIME (favors corp.)
(3) Fairness Test: (MAJ) how you heard of oppty (pers. cir. & friend)
b. If corp oppty & taken w/o telling, constv trust imposed
c. If corp. declines: (1) b/c illegal dir can take; (2) if b/c finan. some yes/MOST no; (3) if b/c bus. decision dir must have voted in favor
3. Dealings in Corporate Stock
Trend to EXPAND loyalty obligation of dir. to MAJ & CONTROLLING S/HOLDERS
-> Maj. owe fiduciary obligatn to Min. s/holders; can't use control to effect fraud on minority
-> If Min. challenge trans. effected by Maj, fiduciary duty violated if:
a. maj. siphoned off finan'l benefit to selves and
b. min. denied partn in the finan'l benefit and
c. no real business purpose exists for the trans.
-> EXAMPLE: 4 s/holdrs own bar; 3 fire 1 (fire w/o reason is loss of fin'l benefit), give .01 for shares/no div.

XII. INSIDER TRADING (Fraud in Purch./Sale of Securities)

A. Common Law: MAJ: dir/offr no fiduciary relationship to s/holdrs & no duty to disclose unless active misconduct (fraud theory)

B. Federal Corporation Law (10b-5)
Unlawful for any person, directly or indirectly, by use of any means or instrumentality of interstate commerce, the mails, or nat'l securities exchange:
(1) to employ any device, scheme or artifice to defraud
(2) to make any untrue statement of material fact or omit to state a material fact necessary to make statements made, in light of circum. made, not misleading, or
(3) engage in any act, practice, or course of bus. which operates or would operate as a fraud or deceit on any person in connection w/ buy or sale of any security
-> WIDE APPLICABILITY; any time stock involved it applies (just may not be violated)
1. Juris Requirement: instrumentlty interstate commerce, mails, nat'l exchange
2. Trading Defendants
a. Types of Violation:
(1) affirmtv misreptn (usually face to face)
(2) nondisclose/silence (face to face or anonymous mkt)
b. Elements of 10b-5 Action:
(1) Materiality: substn'l likelihood info, to reas. investor, would alter total mix info available
(2) Duty to Disclose (if silent): usually D corp's agent, fiduciary, confidant or person of trust (not printer)
(3) Scienter: conduct inten'l or willful designed to deceive
(4) Actual Trade: P must do oppos. trade same security
(5) Reliance: (a) nondisclosure presumed; (b) affmtv misrep P must prove; (c) mkt trans omission presumed if P traded during same time period (day) as D insiders
(6) Damages: Value at time D traded vs. value at full disclose = profit. Profit tripled (treble damages)
c. Insiders can trade once fully disclosed
d. TIPPEE: can't trade on tip if tipper breached duty & tippee knows or should know it
3. Non-Trading Defendants: (press release liab.)
-> D engages in scheme to defraud by assertns in manner reas. calculated to influence investing public (usually corp./indiv. press release)
-> must be ACTUAL purchaser or seller; no duty to disclose b/c silence isn't basis of action

C. Fed Corp. Law - 16(b) (Big Corptn Liability)
1. Applies to corp w/ shares nat'l exch. or $5m assets + 500 or more s/holdrs
2. People Who Must Disgorge Swing Profits
a. Owned 10% more of shares at both time of buy & sale
b. Offr/Dir at either time of buy or sale
-> If 1 of these, ABSOLUTELY BARRED from 6 mo. reverse trade (strict liability; no pers. tragedies)
3. Suit by corp. or derivative (if corp. refuses/not diligent) for profit realized but w/in 2 yrs of when was realized
4. PURPOSE: prevent unfair use of info that might be obtained by reason of relationship to corp

XIII. SHAREHOLDER RIGHTS AND VOTING

A. General Concepts: S/holdrs can only act at reg. mtg (OHIO unanimous written consent)
-> Must have annual mtg; special s/holdrs mtgs can be called by dir., Pres. or usually 25% s/holdrs (ltd to items in mtg notice); quorum is maj. of authorized & issued record s/holdrs entitled to vote

B. Voting by Proxy (designate someone vote your shares)
1. Proxy is special form of agency; must be in writing; valid 11 mo. unless says otherwise & valid if giver dies unless corp. notified b/4 vote taken
2. Proxy is REVOCABLE unless appt coupled w/ financial interest in the shares (shares to bank for loan security)

C. Voting Agreements: s/holdrs pool shares & K'lly bind themselves to vote in certain way (keep physical shares)
1. Some states say if agreement for valid purpose (getting control of corp. is valid purpose) then IRREVOCABLE by statute (NOT OHIO) and specifically enforced
2. W/O statute, proxies w/in the agreement are REVOCABLE -> Can't then demand specific perf., only $ damages

D. Voting Trusts: agreement in writing where s/holdrs transfer title of shares to trustee & get cert. of benef'l ownership
1. Valid if for proper purpose; trustee owner on books & gets to vote the shares (less chance of rebelling)
2. OHIO: requires writing, not longer 10 yrs unless voting rights are couple w/ an interest in the shares (maj. can vote to extend); copy must be filed with corp.
3. PROBLEMS: agreement public & don't like giving up title (FACT SCENARIO WILL BE GROUP DIFFUSE OWNERS; CORP IN CHAOS & THEY WANT CONTROL - TALK VOTING TRUST OR VOTING AGREEMENT)

E. Dividends
1. Can be in cash, property or stock
2. OHIO: Can pay from earned surplus or capital surplus from unrealized appreciation of assets
-> Can declare if corp. not made insolvent
-> Creditor or s/holder can seek to enjoin wrongful paymt
3. Right to a Dividend: board discretion alone; can't require; remedy is to remove dir. w/o cause (only EXCEPTION is extreme abuse of discretion Dodge case)
4. Revocation of STOCK Dividends: revocable anytime b/4 issued since s/holdrs keeping same %, just more units
5. Unlawful Loans, Dividends & Distribution of Assets
a. Can't pay dividend if class no rt to it or will make insolvent or reas. to believe will make insolvent
b. LIABILITY:
-> S/holder who knowingly gets dividend that's unlawful or contrary to Art. must repay
-> Director approving paymt contrary to law/Art. pers. liable UNLESS good faith reliance on fin'l statemts based on sound acctg & bus. practice
c. LOANS: In Ohio can now make loans to dir. if MAJ of disinterested voted in favor & in best int. of corp.
6. Pre-Emptive Rights: rt to maintain current ownership % w/ new issue; must pay Bd's price; have unless Art. say don't
a. Pre-emptive Rights Don't Apply if:
(1) treasury shares (2) share dividend (3) shares issued for non- monetary consideration (4) issued for convertible shares (5) exercise of e/ee options s/holdrs approved (6) if pre-emptv rts released by 2/3 vote of those entitled to the right (or can restore w/ 2/3 vote)
7. Inspection of Corporate Books & Records
-> S/holdr inspection right if reas. time & related to his interest as s/holdr
-> Can inspect art., regs, books & records of acct, min. & records of s/holdrs & voting trusts (can ask for s/holdr list & corp. must comply unless shows improper or unreas.) -> Director has ABSOLUTE RT to inspect

XIV. STOCK (pers. property - vote, div., distbtn of assets)

A. Treasury Stock: issued then reacquired (then dormant). If resold NOT s/to pre-emptive rts & can be sold < par

B. Common Stock: voting, dividend, liquidation (NOT bankty)

C. Preferred Stock: (1) monetary rts specifically stated, dividend set & may be cumulative to com. payout if declared (presumed cum. if not stated) & may be participating (splits balance of $ w/ common after pd, presumed non-p unless stated); (2) Liquidatn preference can be set; (3) No vote usually unless dividend payment missed
-> 5% preferred w/ $100 value means gets $5 dividend
-> S/holdrs can amend Art. to rid accrued undeclared cum. div.

XV. SHAREHOLDER ACTIONS

A. Derivative Suits v. Direct Action:
1. Derivative Suit: essentially class action brought in rt of corp. by s/holdr (corp. joined as D b/c failed to sue own rt)
a. S/holdr can sue people in or out of corp. who've wronged it & corp. has failed to take action directly
b. EXAMPLES: (1) recover damages from ultra vires act (2) stop dir/offr/controlling s/holdr from breachg fiduciary duty to corp (3) recover damages/secret profits for breach of duty to corp like mismgmt or misapproprtn corporate assets/opptys (4) recover improper dividends (5) stop or recover from outsiders for wrong done to corp.
2. Direct Action Suit: suit for s/holdr own rts as s/holdr (indiv. or class action w/ each claim Juris min)
a. EXAMPLES: (1) right to inspect (2) compel paymt lawfully declared dividends (3) protect pre-emptv rts (4) enforce rt to vote (5) compel dissolution (6) sue for breach of s/holdr agreement
3. Requirements for Derivative Suit:
a. Verified complaint alleging
b. P s/holder at time of trans. complaining of & at time of litigation
c. Efforts P made to get directors to act or why didn't
d. That P fairly and adequately represents interested of s/holdrs similarly situated
-> Can't dismiss/settle w/o ct approval & s/holdr notice

XVI. APPRAISAL AND BUY-OUT REMEDY OF DISSENTING S/HOLDRS -> Generally when MAJ wants certain corporate trans. that are a fundamental change in corporate venture, statute provides way for dissenter to get out

A. Types of Transactions Giving Rise to Appraisal Right
-> If trans. lawful & properly authorized (otherwise can enjoin trans. or sue wrongdoers), and it's a:
1. sale or disposition of all/substanlly all assets
2. amendmts substanlly changing corporate purposes
3. spec. trans. adversely affecting dissenter's share class
4. statutory consolidation
5. statutory merger (under certain condtns)

B. Dissenting S/holdr must be: (1) 1 entitled to notice of mtg to act on the trans.; (2) owner of record date corp. set for those entitled to mtg notice; (3) didn't vote in favor

C. Procedural Steps to Effect Appraisal &p; Buy-Out
1. S/holdr must file written demand w/ corp.:
a. by/on 10th day after vote authorzg or w/in 20 days after sending notice of merger
b. containg s/holdr name&address, # & class shares & amt per share claims is fair cash value
2. Corp. can request cert. to put assertn of appraisal rt on them; s/holdr must comply w/in 15 days of request mailing
3. Corp. can accept or counter
4. If no agreement, corp. or dissenter petitions Common Pleas
5. Master appt'd who hires appraiser who determines fair cash value; master evaluation binding

D. Merger & Consolidation
1. Merger: 1 or more corp. absorbed into another
2. Consolidation: 2 or more corptns combine to form new 1
3. Both are better than sale of assets b/c (a) don't have to dissolve & wind up and (b) debts/obligatns transferred to the continuing or new corp

XVII. DISSOLUTION

A. Voluntary Dissolution
1. Corp adjudged bankrupt or gen'l assignmt for credtr benefit
2. Leave of ct when receiver has been apptd in gen'l credtr suit or in any suit to wind up affairs
3. All assets sold at judicial sale
4. Art. cancelled for no annual franchise or excise taxes
5. Period corporate existence has ended
6. 2/3 s/holdrs (or what Art. require) approve Resolutn dissolving -> 1-5 Bd adopts resolution of dissolution & sells all assets; 6 Bd though no resolution still sells assets; s/holdrs don't sell the assets

B. Judicial Dissolution
1. S.Ct. or Ct. App. order to wind up corporate affairs for misuse or nonuse of corporate powers
2. Common Pleas order to dissolve after s/holdrs entitled to dissolve voluntarily establish:
a. Art. were cancelled or corporate existence period up & dissolution necessary to protect s/holdrs
b. corp. insolvent/unstable & necessary to dissolve to protect creditors, or
c. corporate objectvs have failed, been abandoned or are impracticable to accomplish
3. By Common Pleas order if bet. MAJ & 2/3 (if 2/3 could voluntarily dissolve) show beneficial to s/holdrs to dissolve
4. By Common Pleas order after either 1/2 Dir. or s/holdrs 1/2 of voting power show dir. even #, hopelessly deadlocked in mgmt of corptn & s/holdrs can't break deadlock so dissolutn only answer OR dir. uneven # but s/holdrs hopelessly deadlocked in electg directors (DISSOLUTION HERE CANNOT BE DENIED JUST B/C CORP. SOLVENT OR PROFITABLE)
5. By Common Pleas order after prosecutor shows corp. organized and used to further criminal purposes

XVIII. OHIO CLOSE CORPTN STATUTE - 1701.591

A. General Provisions
-> Can ignore corporate formalities/run like partnership
Requirements by Statute:
1. Every s/holder (voting or not) MUST assent to the agreement
2. Agreement must be written or in Art. or Regs
3. SHALL have statement governed by ORC 1701.591

B. Informality Provisions
-> Agreement can waive any aspect internal affairs of corp. or s/holdr relations, including:
(1) bus. mgmt (2) rt of 1 s/holdr to dissolve at will or specified event (3) voting agreements (4) persons dir/offrs (5) authority to execute instruments (6) offr/employee e/mt condtns (7) dividend declar./paymt or profit division (8) restrictg or eliminating Bd or giving part power to s/holdrs (9) giving absolute inspection rt (10) terms to issue/sell shares (11) arbitration if deadlock

C. Statutory "Untouchables"
1. Par Value Shortfall Liability of s/holdrs
2. Stated Capital in Art. (Inc. & Dir. liab. for shortfall)
3. Surplus & Dividends (can't pay dividends from)
4. Purchase of treasury shares
5. Must have share certificates
6. Rt to inspect books, acct recds, min. & s/holdr records
7. Must have annual finan'l statemt & annual mtg
8. Duty of Care/Prudent Person standard of care for dir
9. Unlawful loans, dividends, distributions of assets

D. Restrictions on Qualifying Corporations
1. Existence of agreement must be noted CONSPICUOUSLY on face or back of every cert. for shares of corp.
-> If done, transferees are parties to agreement; if no notice & transferee doesn't consent w/in 30 days after agreement provided, transferee not s/to agreement AND entire agreemt over b/c no unanimity EXCEPT provisions normally valid
2. Agreemt becomes invalid if shares listed on nat'l exch. or regularly quoted in over-the-counter mkt
3. If becomes invalid, officers must file cert. notifying of reason & amending Art.; if don't w/in 30 days s/holdr can

E. Miscellaneous Provisions
1. Statute says Agreement is NOT invalid b/c: (1) emulates a partnership (2) provides for non-traditnl corporate mgmt form (3) interferes w/ director authority & discretion
2. If Agreement makes no board, s/holdrs are deemed directors and have all the liabilities of directors
3. Under statute, s/holdrs can still have other voting trusts or agreements
4. Can't use the fact no corporate formalities against them to "pierce the corporate veil"
5. Agreement can be enforced by injunction, spec. perf. or what ct thinks best (including voting agreements then)
(Q: SAYS UNANIMOUS S/HOLDRS TALK CLOSE; IF <100 VOTG TRUST/AGREEMT)

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