Lecture 3 of 5: Agency, Partnership and Business Associations: Corporation Formation and Governance

Corporation Formation and Governance This document summarizes key points on corporation formation and governance. I. Corporation Formation Incorporation Process: File Articles of Incorporation with the state. Adopt Bylaws (internal rules). Hold Organizational Meeting to formalize operations. Corporate Formalities: Maintain formalities (meetings, records, etc.) to preserve limited liability. II. Piercing the Corporate Veil Courts can hold shareholders personally liable for corporate debts in cases of abuse or misconduct (ignoring formalities, undercapitalization, fraud). III. Shareholder Rights Shareholders have rights like voting, inspecting records, and filing derivative suits. Minority shareholders have protections against oppressive actions. IV. Director and Officer Duties Directors and officers owe duties of care and loyalty to the corporation. Business Judgment Rule protects them from liability for honest mistakes. Exculpation and indemnification provisions may limit their liability. V. Conclusion Understanding these principles is crucial for legal compliance and protecting stakeholder interests.