Portfolio 55-2nd: The Ohio Corporation: Legal Aspects of Organization and Operation

I. Introduction

II. Formation of an Ohio Corporation for Profit
A. Pre-Filing Considerations
1. Pre-incorporation rights and obligations of a corporation
a. Liability of a corporation for pre-incorporation contracts
b. Enforcement of pre-incorporation contracts
c. Summary
2. Corporate name
a. Choice and clearance
b. Reservation
c. Consent
d. Trade name registration
e. Additional considerations
f. Fictitious names
3. Specialized corporations
4. Financial considerations and fees
5. Corporate franchise taxes
B. Preparation of Filing Documents
1. Articles of incorporation
a. Form
b. Incorporators
c. Mandatory provisions
(1). Corporate name and office
(2). Corporate purpose
(3). Authorized capital stock
d. Optional provisions
(1). Preemptive rights
(2). Stated capital
(3). Shareholder voting
(4). Corporate repurchases of shares
(5). Place of shareholders’ meeting
(6). Board committees
(7). Cumulative voting in the election of directors
(8). Changing number of directors
(9). Appointment of a provisional director
(10). Close corporation agreements
(11). Control-share acquisitions
2. Appointment of a statutory agent
a. Qualifications
b. Subsequent changes
c. Resignation
d. Service of process
3. Execution and filing of documents
4. Filing checklist
C. Commencement of Legal Existence
D. Post-Incorporation Requirements
1. Receipt of stock subscriptions
2. First shareholders’ meeting
3. Adoption of the code of regulations
a. Vote required for adoption
b. Contents
4. First directors’ meeting
5. Close corporation agreements
E. Corporate Authority
1. Powers
2. Absolute powers—litigation, seal, and national defense
3. Indemnification
a. Nonderivative liability
b. Derivative liability
c. Mandatory indemnification and mandatory payment of defense costs
d. Standards of conduct—determination
e. Nonstatutory indemnification
f. Indemnification insurance and similar protection
4. Complementary powers to corporate purpose
5. Investments
6. Ultra vires
F. Amending the Articles
1. Types of amendments
2. Amendments by shareholders
3. Voting by classes
4. Amendments by incorporators
5. Amendments by directors
6. Amended articles
7. Formalities of execution and filing of amendments
8. Relief for dissenting shareholders

III. Corporate Finance
A. Corporate Shares
1. Issuance and sale of shares
2. Preemptive rights
3. Options to purchase shares
4. Poison pills
5. Sale of shares to corporate employees
6. Consideration for shares
a. Payment for shares and liability of shareholders therefor
b. Valuation of property or services
c. Enforcing payment for shares
7. Convertible shares
8. Redemption of shares
B. Share Certificates
1. Shareholder rights
2. Fractional shares
3. Share registrations
4. Suspension of shareholder rights
5. Uncertificated shares
6. Certificated shares—contents
7. Legends or restrictions on transfer
8. Transfer agents and registrars
9. Lost, stolen, or destroyed stock certificates
10. Recognition by the corporation of record ownership of shares or other securities
C. Corporate Bonds
1. Issuance
2. Conversion rights
3. Facsimile signatures on debt instruments
4. Usury
D. Corporate Capital
1. Accounting for organization and financing expenses
2. Stated capital
a. Allocation of stated capital
b. Convertible shares and convertible obligations
c. Changes in outstanding shares
d. Exchange of shares
e. Merger, consolidation, or reorganization
f. Increase in stated capital
g. Determination of stated capital
3. Reduction of stated capital
a. Redemption, purchase, or acquisition of shares
b. Release of share from subscription
c. Convertible shares
d. Amendment of the articles
e. Shareholder action to reduce stated capital
4. Surplus
a. Earned surplus
b. Capital surplus
(1). Contributions
(2). Unrealized appreciation
(3). Shares
c. Transfers from surplus
(1). Directors
(2). Shareholders
d. Carry forward of surplus
e. Surplus of dissolved wholly owned subsidiary
E. Share Dividends or Distributions
1. Express dividend or distribution rights
2. Declaration of and shareholders’ rights to dividends or distributions
3. Sources of payment and limitations on dividends or distributions
4. Unclaimed dividends or distributions
5. Unlawful loans, dividends, distributions of assets, and redemptions
F. Corporate Repurchase of Shares
G. Retirement of Shares
H. Corporate Records
1. Books, records of account, minutes, and shareholder records
2. Shareholders’ rights of inspection
3. Annual financial statement
4. False statements or entries; penalties

IV. Corporate Governance
A. Shareholders’ Meetings
1. Annual meeting
2. Calling of and place of shareholders’ meetings
3. Notice of meeting
4. Waiver of notice
5. Dispensing with notice
6. Inspectors of election
7. Quorum
8. Action without a meeting
B. Shareholder Voting
1. Qualifications of voters
2. Record date
3. Voting by fiduciary or minor
4. Voting by corporations
5. Voting by proxy
6. Voting trusts
a. Creation
b. Irrevocable voting trusts
c. Trust agreement
d. Surrender of certificates
e. Voting trust certificates
7. Special voting requirements
8. Vote required for rescission
C. Directors
1. Number of directors, qualifications, provisional directors
a. Minimum number and fixing the number
b. Qualifications of directors
c. Provisional directors
(1). Appointment of provisional directors
(2). Duties of provisional directors
(3). Qualifications of provisional directors
2. Term and classification of directors
a. Term of directors
b. Classification of directors
3. Election of directors
4. Cumulative voting
5. Removal of directors and filling vacancies
6. Authority of directors
7. Directors’ bylaws
8. Directors’ reliance on corporate records
9. Directors’ compensation
10. Directors’ meetings
a. Call, place, and notice
b. Quorum
c. Telephonic meetings
d. Action without a meeting
11. Executive and other committees
12. Duties and liabilities of directors—business judgment rule
13. Director self-dealing
D. Officers

V. Corporate Reorganization
. Introductory Material
A. Judicial Reorganization
1. Plan of reorganization
2. Corporate authority
3. Certificate of reorganization
B. Sale of Entire Assets
1. Definition
2. Authorization required
3. Notice required
4. Abandonment
5. Dissenting shareholders
6. Limitation of actions
C. Merger or Consolidation Into an Ohio Corporation
1. Agreement of merger or consolidation
a. Mandatory provisions
b. Optional provisions
2. Authorizations required
a. Directors’ approval
b. Shareholders’ adoption
3. Notice required
4. Vote required
5. Abandonment and amendment
6. Foreign corporations
7. Noncorporate entities
8. Consummation
9. Dissenting shareholders
D. Merger or Consolidation Into a Foreign Corporation
1. Agreement of merger or consolidation
a. Mandatory provisions
b. Optional provisions
2. Authorizations required
3. Abandonment and amendment
4. Proper qualification or withdrawal of a foreign corporation
5. Consummation
6. Dissenting shareholders
E. Subsidiary Mergers
1. Subsidiary into parent corporation
2. Agreement of merger
3. Authorizations and notice required
4. Parent into subsidiary corporation
5. Agreement of merger
6. Authorizations and notice required
7. Consummation of subsidiary mergers
8. Dissenting shareholders
F. Legal Effect of a Merger or Consolidation
1. Separate existence ceases
2. Transfer of assets and liabilities
3. Preservation of creditors’ rights
4. Foreign corporations—license to do business
5. Statute of limitations and foreign law
G. Combination or a Majority-Share Acquisition
1. Definitions—combination and majority-share acquisition
2. Authorizations required
3. Notice required
4. Abandonment
5. Limitation of actions
6. Dissenting shareholders
H. Procedure for Relief to Dissenting Shareholders
1. Coverage
2. Qualifications
3. Written demand
4. Endorsement of legend on the share certificate
5. Fair cash value
6. Determination of fair cash value
7. Termination of dissenters’ rights
8. Suspension of shareholders’ rights
I. Control-Share Acquisitions
1. Introduction—constitutionality
2. The Ohio Control Share Acquisition Act—applicability
3. Control-share acquisition—definition
4. Compliance procedure and authorizations required
5. Notice of special meeting of shareholders
6. Shareholder authorization
J. Merger Moratorium Act
1. Introduction
2. Key definitions
3. Terms of the Merger Moratorium Act

VI. Dissolution
A. Voluntary Dissolution
1. Procedure
2. Authorizations required
3. Certificate of dissolution
4. Exhibits accompanying certificate of dissolution
5. Alternative procedure of submitting an affidavit in lieu of exhibits
6. Consummation
7. Public notice and written notice to creditors
8. Winding up—powers and duties of directors
9. Jurisdiction of court over winding up
10. Receiver for winding up affairs of the corporation
B. Judicial Dissolution
1. Procedure
2. Complaint for judicial dissolution
3. Power of the court
4. Final order of judicial dissolution
5. Consummation and effect
C. Provisional Director—Corporate Deadlock
1. Appointment
2. Duties
3. Qualifications

VII. Ohio Securities Act
A. Introduction
B. Securities Registration
C. Exemptions—Securities and Transactional
1. The bona-fide-owner exemption—no filing required 15
2. The institutional-investor exemption—no filing required 18
3. Section 3-O exemption—no filing required 22
4. Section 3-Q exemption—Form 3-Q must be filed 28
5. Section 3-W exemption—filing required 34
6. Section 3-X—filing required 42
7. Section 3-Y—filing required 46
8. Section 3-U exemption—no filing required 60
D. Exemptions—Reorganizations, Recapitalizations, and Refinancings
E. Registration of Securities
1. Registration by description
2. Registration by qualification
3. Registration by coordination
F. Dealer’s License Required; Salesmen
1. Definition of ‘dealer'
2. Dealers required to register with Securities and Exchange Commission
3. Dealer and salesman licensing
G. Civil Liabilities
H. Control Bids
1. Oversight by the Division of Securities
2. Prohibitions relating to control bids
3. Recapture of profits

VIII. Foreign Corporations
A. Definition and Application of Ohio Law
B. Licensure
C. Corporate Names—Exclusive Use
D. Designated Agents and Service of Process
E. Rights and Obligations of Foreign Corporations