Black-letter propositions
- 01
The board manages business and acts through meetings with notice, quorum, and vote or unanimous written consent unless law permits otherwise.
- 02
Officers have authority from office, delegation, actual authority, and apparent authority.
- 03
Shareholders elect directors and vote on specified fundamental actions, with record dates, proxies, quorum, cumulative voting, and class rights as applicable.
- 04
Voting agreements are generally enforceable; voting trusts and shareholder-control agreements require statutory compliance.
- 05
Distributions require board authorization and cannot violate solvency tests; directors can face liability subject to reliance and defenses.
Use this attack sequence under time
Frame the issue
Identify decision and actor with authority.
Resolve the next checkpoint
Check articles, bylaws, agreement, and statutory default.
Resolve the next checkpoint
Verify notice, quorum, vote, proxy, and class requirements.
Finish the conclusion
For distribution, apply solvency and director protections.
Common wrong turns
- Individual directors ordinarily lack authority to bind the corporation merely by office.
- Board action without a meeting usually requires unanimity.
- A shareholder cannot use a proxy beyond statutory or contractual limits without checking irrevocability.
Worked example
Two of five directors meet without notice to the others and approve a major contract.
Unless waived or emergency rules apply, lack of proper notice and likely quorum invalidates board action.
Practice this topic
Directors, shareholders and meetings
Cornell describes a director as a person appointed or elected by shareholders to sit on the board, with authority to implement corporate policy and to act by voting on resolutions. Directors act as agents and trustees for the corporation and must act with care, loyalty and goodwill. A shareholder is a person who owns stock in a corporation.
A proxy is a person who represents a member at a shareholders' meeting under a legal document proving authority, and under Delaware law the corporation must take reasonable measures so the proxy holder has the same rights to participate, vote and hear proceedings. A quorum is the minimum number of members required for official action, usually set by bylaws or charter, and if none is specified a majority.
What NCBE's outline covers
NCBE lists shareholder meetings, annual meetings, notice and quorum, and voting: eligibility, cumulative voting, proxy voting, class voting, voting trusts and voting agreements. For directors it lists meetings, quorum and notice, action by written consent, committees and objections to actions. For officers it lists authority and liability on corporate obligations.
Financing topics include dividends and distributions, and redemptions and repurchases.
Directors as agents and trustees
Cornell says directors act as agents and trustees for the corporation and must act with care, loyalty and goodwill. A shareholder is simply a person who owns stock in a corporation. On a fact pattern, identify who is voting, in what capacity, at what meeting, and whether a quorum was present before deciding whether an action was valid.
Frequently asked questions
What is the controlling rule for board, officers, shareholder voting, and distributions?+
Corporate decisions require the correct actor and compliance with governing documents, notice, quorum, voting, and any shareholder or class approval.
How should I analyze board, officers, shareholder voting, and distributions on the bar exam?+
Identify decision and actor with authority. Check articles, bylaws, agreement, and statutory default. For distribution, apply solvency and director protections.
What is a director?+
A person appointed or elected by shareholders to sit on the board, with authority to implement corporate policy by voting on resolutions.
What is a proxy?+
A person who represents a member in the shareholders' meeting under a legal document proving authority, according to Cornell.
What is a quorum?+
The minimum number of members required to be present for a group to take official action, and if none is specified a majority.
What voting methods does NCBE list for shareholders?+
Eligibility, cumulative voting, proxy voting, class voting, voting trusts and shareholder voting agreements are all listed.
What board actions does NCBE list?+
Meetings with quorum and notice, action by written consent, action by committee and director objections to actions.