Summary: (4) Tx Business Associations

Read the summary and the most important questions on (4) TX Business Associations

• Corporations

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• Steps in creating a de jure (legal corp)

  1. At least 1 organizer 
  2. Certificate of Formation 
  3. Filing certificate 
  4. Organizational Meeting 

• Certificate of Formation. - Mandatory Provisions

  1. Name of the corporation ("company," "incorporated" or some other indication that it is a corporation). 
  2. Number, names, and addresses of initial directors 
  3. Name and address of corporate agent 
  4. Name and address of each organizer (at least one required).
  5. the purpose for which the corp is formed ("any lawful purpose)
  6. Duration of corp (if not perpetual) 
  7. Corp's capital stock structure and shareholder's rights 

• Capital Structure + Shareholder voting Rights

  The CoF must state the # of authorized shares and their par value (or statement that shares are w/o par value).

• Certification of Formation = Filing with Secretary of State

  
  Organizers must deliver the CoF to the secretary of state. Upon receipt, SoS files the certificate and issues an acknowledgement of receipt. Once filed, the CoF constitutes prima facie evidence of the facts stated in the certificate and the corporation's existence generally begins. 

• Share Transfer Restrictions - General Requirements (3)

  Share transfer restrictions are valid if: 
  

  • (1) they do not unreasonably restraint/prohibit transferability;
  •  (2) the existence of restrictions conspicuously disclosed by notation on stock certificate; and 
  • (3) restrictions are set forth in the certification of formation, bylaws, or a shareholder's agreement. 
    

• Enforcing share transfer restrictions against 3rd parties

  A restriction is effective against a 3P only the restriction (A) was known by the 3P or (B) is conspicuously noted in the certificate .

• "Subscription Agreements" (offer to buy shares from a corporation)

  A subscription agreement is a continuing offer that does not become an enforceable K until it is accepted by the corporation. 
  

  • Corporation to be Formed: A preformation subscription is irrevocable for 6 months, unless (a) otherwise provided or (b) all subscribers consent to revocation of the subscription. 
  • Existing Corporation: Subscriptions may be revoked at any time prior to acceptance. 

• Board of Directors - General Powers

  Directors are never liable for merely bad business judgment. Courts will not interfere with director's management of a corporation absent fraud or illegal conduct.

• Director's (BoD) Meeting: 2 Types

  1. Regular Meeting
  2. Special Meeting 

• Director's Meetings: Quorum

  A majority of the board constitutes a quorum, unless a higher number is provided for in the certificate or bylaws. Must be present when vote is taken. If initially there is a quorum, but then some directors leave, the quorum is lost.