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Ohio Corporations
Ohio Corp Bar Study
88
Law
Graduate
06/22/2009

Additional Law Flashcards

 


 

Cards

Term
What are the three general formation requirements for and Ohio Corporation?
Definition
  • People
  • Paper
  • Act
Term
Who can serve as an incorporator for an Ohio Corporation?
Definition
Any person (competent adult) or entity
Term
What does an incorporator do?
Definition
  • Execute and File the articles of Incorporation
  • Appoint statutory agent

May call a shareholder meeting

Term
What are the articles of incorporation?
Definition

They are a contract between the corporation and the shareholders.

 

May also be a contract between the corporation and the state.

Term
What is required for articles of incorporation in Ohio?
Definition

Corporate Name

 

Place of principal office (Must be in Ohio)

 

Information about stock

-Authorized stock

-# of shares per class

- Information on par value, voting rights, and preferences of each class

 

Initial stated capital

 

Term
What is required of a corporate name in Ohio?
Definition

Must be distinguishable from others authorized to do business in Ohio.

 

Must end in 'magic words' - Corp., Inc., or Co.

Term
What happens if there is no statement of duration of a corporate's duration?
Definition

Perpetual existence is presumed

 

REMEMBER

Ohio does not require a statement of duration

Term
What is the default statement of purpose for Ohio corporations?
Definition

"Engage in all lawful activity, after first obtaining necessary state agency approval"

 

REMEMBER

Ohio does not require a statement of purpose

Term
What does ultra vires mean?
Definition
Beyond the scope of the articles
Term
What are the reprecussions of an ultra vires activity?
Definition

1) The contract is still valid

 

2) Shareholders can seek an injunction

 

3) Responsible officers and directors are liable to the corporation for ultra vires lawsuits.

Term
What are the reprecussions of not raising initial stated capital?
Definition
Directors (or incorporators) are jointly liable for the shortfall.
Term
What is a statutory agent?
Definition
An official legal representative of the corporation (ie - can recieve service of process)
Term
What act is required for incorporation?
Definition
  • File articles w/ Ohio Secretary of State

 

  • Written appointment of statutory agent

 

  • Pay Filing Fee
Term
At what point is a de jure corporation formed?
Definition

When the secretary of state accepts the articles for filing (even if something is technically wrong with the articles)

 

Meeting of shareholders is held where directors are elected and initial regulations are adopted.

Term
What are the requirements for formation of a de facto corporation?
Definition
  • There is a relevant incorporation statute
  • The parties made a good faith, colorable attempt to comply with it;  AND
  • Some exercise of corporate privileges 

PARTIES MUST BE UNAWARE OF FAILURE TO FORM DE JURE CORPORATION

Term
What is a corporation by estoppel?
Definition
One dealing with a business as a corporation, treating it as a corporation may be estopped from denying the business's corporate status.
Term
If a corporations regulations conflict with the articles of incorporation, which controls?
Definition

The articles of incorporation

 

(Regs are merely internal)

Term
In regards to corporations, what is a promoter?
Definition
A promoter is a person acting on behalf of a corporation not yet formed.
Term
When is a corporation liable on pre-incorporation contracts?
Definition

When the corporation adopts the contract.

 

Express - Board of director action adopting the contract

 

Implied - If the corporation accepts a benefit of the contract

Term
For how long does a promoter remain liable on pre-incorporation contracts?
Definition
Until there has been a novation
Term
What is a novation?
Definition
An agreement of the promoter, the corporation, and the other contracting party that the corporation will replace the promoter under the contract.
Term
Does adoption of a pre-incorporation adoption relieve a promoter of liability?
Definition

Adoption makes the corporation liable too, but does not relieve the promoter.

 

Adoption does not equal novation.

Term
How does a foreign corporation qualify to transact business in Ohio?
Definition
  • Get a license from the Secretary of State

{Apply by giving information from articles and a statement of good standing from home state}

 

  • Appoint a designate agent in Ohio for service of process
  • Must pay prescribed fees
Term
What is issuance of stock?
Definition
When a corporation sells or trades its own stock.
Term
In regards to stock, what is a subscription?
Definition
A written offer to buy stock
Term
What forms of consideration are permitted when a corporation issues stock?
Definition
  • People
  • Money (cash of equivalant)
  • Property of any description
  • Services ALREADY performed
Term
What are prohibited forms of consideration?
Definition
  • Promissory Notes
  • Future Services
  • Act
Term
In terms of stock, what does par mean?
Definition
Minimum issuance price
Term
Is par stock required?
Definition
No
Term
If no par is set, how is stock price determined?
Definition
By the board
Term
What is treasury stock?
Definition
Stock that was previously issued and has been reacquired by the corporation.
Term
In regards to stock, who sets the value of property or services?
Definition
The board (the Board's valuation is conclusive unless there is clear and convincing evidence that false valuation was made knowingly)
Term
Who may be liable for issuing par stock for less than par value?
Definition
Directors or the person who bought the stock.
Term
In terms of stock, what are pre-emptive rights?
Definition
The right of an existing shareholder of common stock to maintain her % of ownership by buying stock (for money) whenever there is a new issuance of common stock.
Term
What are the minimum number of directors statutorily required?
Definition
  • People
  • If one shareholder - at least one
  • If two shareholders - at least two
  • If three shareholders - at least three
Term
On what basis can shareholders vote to remove directors?
Definition
With or without cause
Term
Who selects the person who fills a vacancy on a Board of Directors?
Definition
Majority vote of remaining directors, unless the articles or regulations provide otherwise or the shareholders have elected to remove the member (then shareholders must elect the replacement)
Term
How may a board of directors take an action?
Definition
  • People
  • 1) Unanimous written consent to act without a meeting
  • 2) A meeting that satisfies quorum and voting requirements
Term
What notice is required for a board meeting?
Definition
At least two day notice and include time and place.
Term
What amount of votes are required to approve a resolution at a board meeting?
Definition
If a quorum (majority of all directors) is present, a majority of votes present.
Term
What two things may a board committee not do?
Definition
  • People
  • Fill a board vacancy
  • Amend regulations
Term
What is the duty of care for a director?
Definition
A director must act in good faith with the reasonable belief that their acts are in the corporations best interest and must exercise the skill and care that an ordinary prudent person would use in a like position.
Term
When is a director liable for nonfeasance?
Definition
When his breach caused a loss to the corporation.
Term
What is the business judgment rule?
Definition
A management decision will not be second guessed if it was made in good faith, was informed, and had a rational basis.
Term
When is a board or director liable for misfeasance?
Definition
When they violate the business judgment rule (prudent people do their homework).
Term
When may an interested director be allowed to conduct transactions with the business?
Definition
  • People
  • it was fair to the corporation when entered
  • Their interest and the relevant facts were disclosed or known and the deal was approved by either a majority of the disinterested directors OR a majority of the disinterested shares
Term
What is a corporate opportunity?
Definition
  • People
  • Something the company has an interest or expectancy in OR
  • Something in the company's general business line
Term
What approval process is required is required for a board member to take a business opportunity (USURP)?
Definition
  • People
  • Must tell the board
  • Wait for the board to reject the opportunity
  • Vote in favor of having the corporation accept it
Term
What is the remedy if a director has usurped a business opportunity?
Definition
Must sell the opportunity at his cost or if it was sold at a profit, the corporation gets the profits.
Term
In what way can a director dissent in a meeting?
Definition
  • People
  • In writing in the corporate records
  • 1) In the minutes
  • 2) In writing to the corporate secretary at the meeting
  • In writing to the corporate secretary w/in a reasonable time after the meeting
Term
What officers are required in Ohio?
Definition
President, secretary, and treasurer
Term
How are officers selected?
Definition
The board of directors select and remove officers. They also set compensation.
Term
When is a corporation barred from indemnifying a director or officer?
Definition
When she is held liable to the corporation for negligence or misconduct in performing a duty to the corporation.
Term
When MUST a corporation indemnify an officer or director?
Definition
To the extent they were successful in defending a suit.
Term
When is indemnification permissive?
Definition
When it is shown that the actor acted in good faith and with the reasonable belief that her actions were in the company's best interest.
Term
What are the characteristics of a close corporation?
Definition
Few shareholders AND the stock is not publicly traded
Term
When can shareholders in a close corporation eliminate the board and take over management?
Definition
  • People
  • Put it in the articles
  • Put it in the regulations
  • Written agreement put in the corporate minutes
Term
What must be conspicuously noted on a stock certificate?
Definition
That a corporation is a close corporation.
Term
In what kinds of corporations may the corporate veil be pierced?
Definition
Only close corporations.
Term
How is piercing the corporate veil pierced in order to hold shareholders personally liable?
Definition
  • The shareholder must have abused the privilege of incorporating
  • AND fairness must require holding them liable
Term
What are the two classic fact patterns that allow PCV?
Definition
Alter ego AND undercapitalization (though undercap alone may not be enough in Ohio)
Term
What is a derivative suit?
Definition
When a shareholder sues to enforce a claim of the corporation. (Always ask if the corp could have brought the suit)
Term
What are the requirements for a shareholder to bring a derivative suit?
Definition
  • Stock Ownership
  • Shareholder must represent the interests of the shareholders
  • Must make written demand that directors bring a suit (Unless demand would be futile)
Term
What is the general rule of who can vote in a shareholder situation?
Definition
The record shareholder as of record date has the right to vote.
Term
What is a proxy?
Definition
  • A writing
  • Signed by the record shareholder
  • directed to the secretary of the corporation
  • authorizing another to vote the shares
Term
When is a proxy irrevocable?
Definition
When the proxy is coupled with an interest.
Term
What are the time limits on voting agreements?
Definition
Ten year maximum; renewable terms of 10 years or shorter.
Term
What are the requirements for a voting trust?
Definition
  • Written trust agreement controlling how the shares will be voted
  • Copy to corporation
  • Transfer legal title of shares to voting trustee
  • original shareholders receive trust certificates and retain all shareholder rights except for voting and except for inspection of corporate records
Term
What is required for a voting agreement (pooling)?
Definition
A contract
Term
What types of shareholders meetings exist?
Definition
Annual meeting: To elect directors REQUIRED and a special meeting
Term
How are special shareholder meetings called?
Definition
  • By the board or chairperson
  • the president
  • the holders of at least 25 percent of voting shares
  • some else as provised in the articles or regulations
Term
What is required in a special shareholder meeting notice?
Definition
  • 7 to 60 days before the meeting
  • When
  • Where
  • Why (you can't do anything else at the meeting)
Term
How does a shareholder waive the notice requirement?
Definition
  • Express - in writing and signed any time
  • Implied - attend the meeting w/o objection at the outset
Term
What is quorum in Ohio?
Definition
The number of shares present.
Term
What is a proper purpose for inspection of records?
Definition
One related to your interest as a shareholder.
Term
What are distributions?
Definition
Payments to shareholders - may be dividends, repurchase shareholders stock, or to redeem stock
Term
What are the different types of stock?
Definition
  • Common
  • Preferred (Pay First)
  • Participating (Pay again)
  • Cumulative (add them up)
Term
What funds may be used for distribution?
Definition
  • Earned surplus
  • Stated Capital
  • Earned capital
Term
When can a corporation NOT make a distribution?
Definition
When the distribution if it is insolvent or would make the company insolvent.
Term
What is a shareholders right of appraisal?
Definition
The right of a shareholder to force the corporation to buy her shares at fair value.
Term
How may a corporations articles be amended?
Definition
  • Board of directors action and notice to shareholders
  • 2/3rds shares approval
  • If approved, amended articles filed with Sec. of State
Term
What is required for a merger or consolidation?
Definition
Board of directs (of both corps) and notice to all shareholders.
Term
What is a short form merger?
Definition
90% or more owned subsidiary mergers into a parent company, no shareholder vote at all.
Term
How may a corporation be voluntarily dissolved?
Definition
  • Approval by 2/3rds of the shares entitled to vote
  • Board of directors action if severe financial trouble
  • File certificate of dissolution and give notice to creditors
Term
How may a corporation be involuntarily dissolved?
Definition
  • Court order in quo warranto action
  • Common pleas in the county of the principal office
Term
What is winding up of a corporation?
Definition
  • Gather all assets
  • Covert to cash
  • Pay creditors
  • Distribute remainder to shareholders
Term
What is federal securities law 10b5?
Definition
Prohibits fraud and misrepresentation (or nondisclosure) in connection with the purchase or sale of any security.
Term
What is federal securities law 16b?
Definition
Provides for the recover by the corporation of profits gained by certain insiders from buying and selling the company's stock. Applies to big corporations.
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