CORPORATIONS MNEMONICS

1) Courts will pierce the corporate veil for TWIST:

T – TEN largest shareholders of a NY corporation are personally liable for unpaid
wages, sick pay, and vacation pay, provided the corporation's stock is not sold on an
exchange
W – Corporate officers are criminally strictly liable if the corporation failed to obtain
WORKERS' compensation insurance and an employee is injured
I – ILLEGAL conduct by a shareholder
S – SALES taxes or corporate income taxes that are not paid result in personal
liability to a director or officer who is responsible for corporate finances
T – TORTIOUS conduct by shareholders or corporate officers renders them personally
liable

2) PVT. MCL2AW must be placed in the certificate of incorporation to be enforceable

against new shareholders who join the corporation:
P – PREEMPTIVE rights
V – If the VALUE of “no par” shares is to be fixed by shareholders, rather than
directors, then this shareholders’ right must be placed in the certificate of
incorporation
T – Stock TRANSFER restrictions (and these must also be placed on the shares of
stock)
M – MAXI-MAJORITY voting or quorum requirements which increase the BCL’s
voting or quorum provisions for a shareholder or directors’ meeting
C – CUMULATIVE voting by shareholders for the election of directors
L – Providing for a vote of LESS than 2/3 of the shares (for old corps) or less than a
majority of shares (for new corps) to voluntarily dissolve the corporation or to allow
less than 10% of the shares to call a shareholders’ meeting to discuss and vote on a
judicial dissolution
L – LIMITING personal liability of officers or directors (subject to BIG DR AL - #11)
A – An AGREEMENT by shareholders to act without a shareholders’ meeting, to vote
in a predetermined way, to limit or restrict the power of directors, or for direct
management by the shareholders
W –Allowing corporate dissolution at WILL or upon a specific event

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 3) Although the board of directors and officers manage the corporation on a day-to-day
basis, the following DAN’S PALM LAMP corporate decisions, once adopted by the
board, must also be approved by the shareholders:
D – Voluntary DISSOLUTION of a corporation
A – Selling, leasing, or exchanging substantially all of the corporation’s ASSETS, where
such liquidation is not done in the regular course of the corporation’s business
N –To amend the certificate of incorporation to change the corporate NAME
S – To bind the corporation as a SURETY for a director’s debt (See corporation’s loan to
a director below)
P – Amending the certificate of incorporation to create or abolish PREEMPTIVE rights
or cumulative voting; a simple majority vote is all that is required, but a dissenting
shareholder is entitled to appraisal rights
A – To amend the certificate of incorporation to ABOLISH or limit director liability for
negligence
L – A corporate LOAN to a director (or the corporation acting as a surety for a director’s
debt) requires shareholder approval, except in new corporations if the board has
adopted an overall general plan for making loans to directors, or the board of
directors votes that the loan (or the corporate guaranty to a director’s loan) would be
in the corporation's best interest
M –To provide for MAXI-MAJORITY voting or quorum requirements for shareholders
or directors
*L –A certificate of incorporation change in the LOCATION of the corporate office
*A –A certificate of incorporation change appointing a new AGENT to whom service of
process is mailed by the Secretary of State
*These last two changes (“L” and “A”) can be accomplished via a
majority vote of directors or a majority vote of shares
M –MERGER or consolidation with another corporation, limited partnership, or LLC
P – Amending the certificate of incorporation to change or enlarge the limited PURPOSE
of the corporation

4) To exercise appraisal rights, the shareholder must file an objection with the corporate
officials before the shareholder vote on a CAMP activity:
C – Abolishing CUMULATIVE voting
A – Selling, leasing, or exchanging substantially ALL of the corporation’s assets
M – MERGER or consolidation of the corporation
P – Abolishing PREEMPTIVE rights, redemptive rights, or other stock rights

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 5) For a closely-held or family-owned corporation, the court considers the three AIM
methods for valuing the stock of a minority interest:
A – Net ASSET value, after subtracting corporate liabilities, for corporations holding
substantial tangible or real property assets
I – The INVESTMENT value, in which the court looks at the earning power of the
corporate stock (i.e., price paid v. earnings made by dividends)
M – MARKET value for the stock, based upon what a willing buyer would offer to pay
in an arm’s length transaction for those shares of stock, which is frequently based on
sales of similar businesses

6) A proxy is revocable at the whim of a shareholder, unless it is an irrevocable PEACE

proxy, which is a proxy coupled with an interest: Essay #3 July 2010
P – PLEDGED shares for a loan
E – Person ENTITLED to the shares (buyer of the shares who owns them, but was not
the owner of record on the corporate books)
A – An AGREEMENT between shareholders to vote the shares in a particular way
(PVT. MCL2AW), and they execute an irrevocable proxy for that purpose
C – A CREDITOR of the corporation who has been given an irrevocable proxy for
extending new credit, or agreeing to continue credit to the corporation
E – An EMPLOYEE is given a proxy

7) Preemptive rights do not apply to a corporation issuing stock for AT&T CO:
A – Shares issued to ATTRACT or keep corporate employees
T – Shares sold by the corp within TWO YEARS after filing the certificate of
incorporation
T – TREASURY shares, which are shares previously owned by a corporate shareholder,
but which were purchased back by the corp and held in its treasury
C – Shares of stock issued by the corp for consideration other than CASH
O – Shares issued to affect an ORGANIC change, such as consolidation or merger

8) Interested directors benefit from 2 Fs: BCL § 713

F – A contract or transaction was FAIR and reasonable to the corporation when it was
approved by the board of directors
F – The director made a FULL disclosure of his or her interest in that transaction, and the
transaction was either submitted to the shareholders for approval or the board of
directors approved the transaction without counting the vote of the interested director
Δ Δ
Essay #3 July 2011 Essay #1 Feb. 2008

9) Judicial review of the actions of a board of directors is barred by the Business Judgment
Rule, as long as it falls within the GAP:
G – The board acted in GOOD faith
A – The board’s actions were within the scope of its AUTHORITY; AND
P – The activity was in furtherance of a lawful and legitimate corporate PURPOSE

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 10) Board of directors’ committees can’t take a V-CAB:
V – Fill VACANCIES on the board of directors or on any of its committees
C – Fix director COMPENSATION
A – AMEND, adopt, or repeal bylaws
B – BYPASS the board of directors and directly submit any DAN’S PALM LAMP
activity to the shareholders

11) A corporation may not eliminate director liability, or indemnify a director for liability, if
the director’s activities were conducted with BIG DR AL:
B – BAD faith conduct
I – INTENTIONAL misconduct, or a knowing violation of the law
G – Misconduct undertaken for personal GAIN (e.g., insider trading, or misappropriation
of a corporate opportunity)
D – Declaration of an improper DIVIDEND (b/c there was no surplus)
R – Improper REDEMPTION of corporate shares (b/c there was no surplus)
A – ASSETS distributed to shareholders without paying corporate creditors (const fraud)
L – Director fails to dissent to an improper LOAN to a fellow director

12) The BCL allows only 20% of minority shares in a closely-held corp to petition the
Supreme Ct for dissolution by showing that the majority is engaged in ID FLOW (must
allege one of these elements):
I – ILLEGAL conduct by those in control
D – DIVERSION of corporate assets to those in control Essay #3 Feb. 2012
F – FRAUDULENT conduct toward the minority Essay #5 July 2007
L – LOOTING corporate assets Essay #1 July 2004
O – OPPRESSIVE actions
W – WASTE of corporate assets

13) SECURED TRANSACTIONS A security interest can attach to three types of PIG
personal property:
P – Commercial PAPER
I – INTANGIBLE property
G – GOODS

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