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In a CHC, when there are 6 SHs, they are all directors and officers; when they make an ORAL agreement to create a supermajority clause (for example that 90% of votes are required in all decisions), but do not put it in the cert of incorporation, is this valid when they act on it but DO NOT put it in the cert of incorporation? Under what theory valid or not? Thanks a LOT.

WTF is a CHC? I think it's not valid because it is not in writing, period. If they act on it whatever was done is void unless there is some third party that relied on it (equitable considerations). Source: made it all up

mvp99 wrote:WTF is a CHC? I think it's not valid because it is not in writing, period. If they act on it whatever was done is void unless there is some third party that relied on it (equitable considerations). Source: made it all up

CHC- Closely Held Corp lol

be sure to write that in your exam if the prof doesn't use that abbreviation..

I stand by what I said until someone with actual knowledge provides a rebuttal

mvp99 wrote:be sure to write that in your exam if the prof doesn't use that abbreviation..

I stand by what I said until someone with actual knowledge provides a rebuttal

What if the agreement was in writing but not in the cert of incorporation?

then it's a contract

Anyone else?

going just off bar review notes, and corporations isn't my strongest subject, but..

i don't think you'd need a supermajority clause in the certificate of incorporation. to put it another way, if the supermajority clause isn't in the CoI, that doesn't make the SMC per se invalid. it could be in the bylaws, no?


a CoI really needs to be a barebones document that's filed with the state. depending on the state of incorporation, all that is really required is the names and addresses, corporate purpose and duration, and capital stock information. if the certificate of incorporation doesn't say anything about the supermajority clause or other voting requirements that deviate from the statutory default rule, then the default rule for shareholder voting is presumed. the 6 shareholders can amend the bylaws or the CoI to require a supermajority vote, but if they specifically included voting provisions in the CoI, then it cannot be overridden vis-a-vis the bylaws. they would have to amend the certificate of incorporation (which may come into play if, at the time of incorporation, the certificate said unanimous vote to amend certificate, but only 4/6 to amend bylaws).

A CHC has the added element of ensuring that the supermajority clause isn't being used to "squeeze out" one of the partners. since the shareholders of a CHC has the duty of utmost good faith to one another, the supermajority cannot be using their votes to intentionally frustrate the reasonable expectations of the minority. the reasonable expectations of a shareholder in a CHC are traditionally:
-return on investment;
-employment;
-voice in management.
So if the supermajority tend to frustrate these expectations, I don't think it will be per se invalid, but they'd need to offer a justification.

Sounds like the issue is more of whether or not it could be considered a valid shareholder agreement. MBCA outlines what is required for a valid agreement. I want to say its section 7.23. And yeah, doesn't need to be in the articles.