pierceb's version from 2015-07-24 18:44



Question Answer
What are the good characteristics of a corporation?(1) LIMITED LIABILITY for owners; (2) centralized management; and (3) FREE TRANSFERABILITY of ownership.
What act governs corporations in NC?Business Corporation Act (BCA)
What is a corporation?A legal entity having a specific life, enumerated powers and liabilities and certain constitutional right.
What is a CLOSED CORPORATIONS?A corporation that has (1) a limited number of shareholders, (2) a limited or no MARKET for its shares; and (3) is DIRECTLY MANAGED by its controlling shareholders.



Question Answer
What is a CLOSED CORPORATIONS?A corporation that has (1) a limited number of shareholders, (2) a limited or no MARKET for its shares; and (3) is DIRECTLY MANAGED by its controlling shareholders.
As a general rule, do SHAREHOLDERS owe a fiduciary duty to the corporation or fellow shareholders?As a general rule, no. UNLESS, however, they are a "controlling shareholder." NC recognizes the principle that controlling shareholders owe a fiduciary duty to minority shareholders.
What must a shareholder do to bring a derivative claim?(1) must have STANDING (owned shares when claims arose or became shareholder by OPERATION OF LAW from someone who was a shareholder at that time and (2) make a "UNIVERSAL WRITTEN DEMAND" to the BOD to bring suit and WIAT 90 DAYS.
What are the Public Corporation requirements to bring a derivative suit?(1) Plaintiff owned stock for at LEAST 1-YEAR; (2) suit brought within 2-YEARS of transaction complained of; and (3) plaintiff POSTS BOND.
Stock Transfer Restrictions: Are restrictions on stock transfer enforceable?Yes! Share transfer restrictions are expressly permitted in North Carolina law. The restriction must be placed in ARTICLE, BYLAWS, OR THE SHAREHOLDER AGREEMENT. These restrictions are "STRICTLY CONSTRUED" and enforceable on a transferee who has "knowledge."
Stock Transfer Restrictions: What is the 3-pong test for an enforceable stock transfer restriction?Restriction must have (i) a REASONABLE PURPOSE; (ii) CONSPICUOUSLY STATED on certificate; and (iii) not UNCONSCIONABLE.
Stock Transfer Restriction: What are examples of a reasonable purpose?(1) right of first refusal; (2) restriction on selling shares to a particular party; or a right of the corporation to approve the sale.
What is "piercing the corporate veil"?an equitable remedy. Used to hold a DOMINANT SHAREHOLDER liable for debts owed by her corporation.
What is "enterprise liability"?A theory used to hold one corporation liable for debts owed by a second affiliated corporation.
What are the elements for "piercing the corporation veil"?Plaintiff must show that: (1) defendant COMPLETELY DOMINATED the corporation; (2) defendant USED HIS POSITION to commit a wrong or to do an unjust act; and (3) the act PROXIMATELY CAUSED plaintiff's injury. Same elements for instrumentality doctrine.
What is the INSTRUMENTALITY DOCTRINE applies to?Applied in NC to both piercing the corporate veil and enterprise liability.
What is the INSTRUMENTALITY DOCTRINE?North Carolina courts will pierce the corporate veil of the debtor corporation is found to be the MERE INSTRUMENTALITY of a DOMINANT SHAREHOLDER or of an AFFILIATED CORPORATION. (Defendant used the corporation as a TOOL
What factors do courts look at to determine whether elements of piercing the corporate veil or enterprise liability (instrumentality) doctrine have been meet?(1) undercapitalization (not enough money to pay liabilities); lack of resepct for corporate formailites; and the use of the corporate entity to avoid existing personal obligations (ie., to perpetuate fraud)
What are "appraisal rights"?A shareholder OPPOSED to the change MAY have the right to COMPEL the corporation to buy back his shares for their FAIR VALUE.



Question Answer
What is dissolution?the termination of the corporate existence.
What is the procedure for dissolution?(1) File ARTICLES OF DISSOLUTION (can be revoked with 120 DAYS) and (2) WINDING UP
What is winding up?(i) Notifying ALL creditors of dissolution and collecting ALL assets; (ii) discharging obligations; and (iii) distributing remainder to shareholders.
Voluntary v. Involuntary Dissolution(1) VOLUNTARY: approved by ABSOLUTE majority of shareholder and (2) INVOLUNTARY: (i) on petition of the attorney general; (ii) unsatisfied judgment creditor, or (iii) a shareholder who shows DEADLOCK, WASTE, OR "REASONABLY NECESSARY" TO PROTECT HER RIGHTS.
Where does a shareholder seek judicial dissolution?Superior court in each county
2 elements for judicial dissolution(1) directors and shareholders are DEADLOCKED and (2) the corporation is threatened with IRREPARABLE INJURY or its business can no longer be conducted to the advantage of shareholders.

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