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Del. Code tit. 8, § 342; 18 Am. Jur. 2d § 39 Attributes of a close corporation (2018); “Closely Held Corporation,” Quimbee Key Terms, available at https://www.quimbee.com/keyterms/closely-held-corporation (last visited May 30, 2018).
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1What is a close corporation?
What is a close corporation?2Do shareholders in a close or closely held corporation have a fiduciary responsibility to one another?
Do shareholders in a close or closely held corporation have a fiduciary responsibility to one another?3Can closely held corporations take a variety of forms?
Can closely held corporations take a variety of forms?4May directors who are the sole stockholders in a close corporation enter agreements setting their own salaries?
May directors who are the sole stockholders in a close corporation enter agreements setting their own salaries?5What three requirements must a valid share-transfer restriction meet under the Model Business Corporation Act (MBCA)?
What three requirements must a valid share-transfer restriction meet under the Model Business Corporation Act (MBCA)?6By what devices may a corporation create a restriction on a shareholder’s ability to transfer shares of that corporation?
By what devices may a corporation create a restriction on a shareholder’s ability to transfer shares of that corporation?7What constitutes a valid purpose for a share-transfer restriction?
What constitutes a valid purpose for a share-transfer restriction?8In what four ways may a corporation limit its shareholders’ ability to transfer shares?
In what four ways may a corporation limit its shareholders’ ability to transfer shares?9A corporation’s articles of incorporation had a share-transfer restriction that prohibited all sales of the corporation’s shares to individuals who...
A corporation’s articles of incorporation had a share-transfer restriction that prohibited all sales of the corporation’s shares to individuals who worked for or were affiliated with any bank. The board of directors adopted the restriction to limit speculative trading, and all shareholders approved the restriction. The restriction was noted on each share certificate. A shareholder received an attractive offer to sell some shares to an executive at a local bank. The shareholder argued the share-transfer restriction was not enforceable because its limitation was invalid.Is the share-transfer restriction’s prohibition valid?10What is the test for whether a share-transfer restriction was properly noticed?
What is the test for whether a share-transfer restriction was properly noticed?11A corporation’s articles of incorporation had a share-transfer restriction. Under this restriction, if a shareholder wished to sell shares, the sha...
A corporation’s articles of incorporation had a share-transfer restriction. Under this restriction, if a shareholder wished to sell shares, the shareholder must first offer to let the corporation buy the shares. All shareholders knew about and voted to approve the restriction. The restriction did not appear on the share certificate or in an information statement; it only appeared in corporation’s the articles of incorporation. One of the corporation’s original shareholders was approached by a buyer interested in buying some shares at a premium price. However, the corporation wanted to exercise its right-of-first-refusal in the share-transfer restriction to block the sale to the new buyer. The original shareholder argued that the share-transfer restriction was not enforceable because it had not been properly noticed.Was the share-transfer restriction properly noticed?12A corporation issued shares only to accredited investors. This gave the corporation a helpful exemption under federal securities laws. The corporat...
A corporation issued shares only to accredited investors. This gave the corporation a helpful exemption under federal securities laws. The corporation’s articles of incorporation included a share-transfer restriction that prohibited all sales of the corporation’s shares to individuals who did not qualify as accredited investors. The restriction was noted on each share certificate. Any shareholder who wanted to sell the corporation’s shares was obligated to sell—and the corporation was obligated to buy—the shares pursuant to a formula set forth in the articles of incorporation. One of the corporation’s shareholders wanted to sell 100 shares to an individual who was willing to pay a significant premium for the shares but did not qualify as an accredited investor.May the corporation invoke the share-transfer restriction to block the sale?13Generally, does a share-transfer restriction apply retroactively to shares issued before the restriction’s adoption?
Generally, does a share-transfer restriction apply retroactively to shares issued before the restriction’s adoption?14May shareholders enter into agreements allocating control in a manner inconsistent with the MBCA?
May shareholders enter into agreements allocating control in a manner inconsistent with the MBCA?15May shareholders enter a control agreement that purports to eliminate all standards of conduct for directors?
May shareholders enter a control agreement that purports to eliminate all standards of conduct for directors?16What requirements must a shareholder agreement meet if it allocates corporate control in a manner inconsistent with the MBCA?
What requirements must a shareholder agreement meet if it allocates corporate control in a manner inconsistent with the MBCA?17Under what circumstances may a shareholder agreement be amended by fewer than all shareholders?
Under what circumstances may a shareholder agreement be amended by fewer than all shareholders?18What type of notice must a closely held corporation provide of a shareholder agreement that permits the shareholders to allocate corporate control ...
What type of notice must a closely held corporation provide of a shareholder agreement that permits the shareholders to allocate corporate control in a manner not otherwise permitted by the MBCA?19If a shareholder purchases shares subject to a shareholder agreement that allocates control in a manner inconsistent with the MBCA without knowledg...
If a shareholder purchases shares subject to a shareholder agreement that allocates control in a manner inconsistent with the MBCA without knowledge of the agreement, does that render the shareholder agreement invalid?20In general, is a person who inherits shares subject to a shareholder agreement bound to the shareholder agreement?
In general, is a person who inherits shares subject to a shareholder agreement bound to the shareholder agreement?21Is a shareholder agreement that allocates corporate control in a manner not permitted by the MBCA binding on the state, creditors, and third parties?
Is a shareholder agreement that allocates corporate control in a manner not permitted by the MBCA binding on the state, creditors, and third parties?22How long does a shareholder agreement that allocates corporate control in a manner inconsistent with the MBCA last?
How long does a shareholder agreement that allocates corporate control in a manner inconsistent with the MBCA last?23May two or more shareholders enter into a voting agreement to exert control in a closely held corporation?
May two or more shareholders enter into a voting agreement to exert control in a closely held corporation?24May a closely held corporation exercise control by specifying qualifications for board directors in bylaws or articles of incorporation?
May a closely held corporation exercise control by specifying qualifications for board directors in bylaws or articles of incorporation?25May a close corporation exercise control by fixing the size of its board of directors?
May a close corporation exercise control by fixing the size of its board of directors?26May a closely held corporation place a neutral director on a board in an attempt to avoid deadlock?
May a closely held corporation place a neutral director on a board in an attempt to avoid deadlock?27In general, if a close corporation’s directors or shareholders are deadlocked, may a shareholder seek to dissolve the corporation?
In general, if a close corporation’s directors or shareholders are deadlocked, may a shareholder seek to dissolve the corporation?28Under what circumstances may a shareholder seek judicial dissolution due to deadlock under the MBCA?
Under what circumstances may a shareholder seek judicial dissolution due to deadlock under the MBCA?29Under the MBCA, may a closely held corporation purchase a complaining shareholder’s shares to resolve a dissolution proceeding?
Under the MBCA, may a closely held corporation purchase a complaining shareholder’s shares to resolve a dissolution proceeding?30Under the MBCA, may shareholders of a close corporation purchase a complaining shareholder’s shares to resolve a dissolution proceeding?
Under the MBCA, may shareholders of a close corporation purchase a complaining shareholder’s shares to resolve a dissolution proceeding?31If neither the corporation nor another shareholder elects to purchase a complaining shareholder’s shares, may a court appoint a receiver or guardian?
If neither the corporation nor another shareholder elects to purchase a complaining shareholder’s shares, may a court appoint a receiver or guardian?32If the parties electing to purchase a complaining shareholder’s shares in a dissolution proceeding cannot agree on the fair value of the shares, ma...
If the parties electing to purchase a complaining shareholder’s shares in a dissolution proceeding cannot agree on the fair value of the shares, may the court determine the fair value?33Does a dissolution proceeding end once a corporation or one or more shareholders have elected to purchase the complaining shareholder’s shares?
Does a dissolution proceeding end once a corporation or one or more shareholders have elected to purchase the complaining shareholder’s shares?34May a closely held corporation use a buy/sell agreement to control who may own shares in the corporation?
May a closely held corporation use a buy/sell agreement to control who may own shares in the corporation?35May the management of a closely held corporation refuse to purchase a departing shareholder’s shares even if the corporation has entered a buy/sell...
May the management of a closely held corporation refuse to purchase a departing shareholder’s shares even if the corporation has entered a buy/sell agreement that obligates it to repurchase?