2) Formation

Question 1

promoter

Answer 1

ppl who are planning to form a corporation but haven’t yet. take prelim steps

Question 2

promoter as agent of contemplated corporation

Answer 2

is NOT!

corp doesn’t exist yet, so can’t be the principal to an agency rship

Question 3

promoters binding future corporation

Answer 3

can’t

Question 4

rship btwn promotors (and result)

Answer 4

mutual agency, partnership-type.

RESULT: their ks are binding on each other, joint + several

Question 5

personal liability of promotors for k

Answer 5

when promoter enters k on behalf of not-yet-existing company

they ARE (usu) personally liable, regardless of whether say ‘obo corp’

Question 6

personal liability of promotors for k: exceptions

Answer 6

NOT liable if:
1) preincorporation k specifically says promotor not liable
OR
2) circs demonstrate that other party agreed to look only to corp. for performance

Question 7

so now the corp exists – is it liable for pre-incorp ks from promoters?

Answer 7

No, UNLESS
1) adoption
2) novation
(it didn’t exist so couldn’t ex. ratify)

Question 8

new-existing corp: adoption: def

Answer 8

1) express: board passes resolution
2) implied: corp accepts or acks the benefits of the k

CANT RATIFY, only adopt (bc agency)

Question 9

new-existing corp: novation: def

Answer 9

ALL: 1) promoter, 2) the other party to the k, and 3) corp. agree to the substitution of corp. as party to k in place of promoter

Question 10

new-existing corp: adoption: result re. promoter liability

Answer 10

yes still personal liability for promoter, corp. liable too

NOTE: promoter is entitled to indemnification from the corp.

Question 11

new-existing corp: novation: result re promoter liability

Answer 11

no more liability for promoter

Question 12

becoming a corp: stages

Answer 12

1) incorporation

2) organization

Question 13

incorporation: reqs

Answer 13

1) proper articles of incorporated

2) executed + filed w SOS (dnn to be by promoters), inc fee

Question 14

properly executed arts of incorp must include

Answer 14

1) signatures of directors if named, or incorporators
2) name of co
3) applicable statement of purpose
4) name/address of agent SOP
5) address of corp
6) number of shares of each class can issue

Question 15

name of corp: reqs

Answer 15

1) not taken

2) NO req to say “corp” etc (excepc close corps)

Question 16

statement of purpose

Answer 16

usu: “any lawful activity”
only need to be more specific if: law/accounting/banking/trust co/insurance

CAN make it limited if you want

Question 17

ultra vires

Answer 17

corp can’t do k or activity beyond scope of powers.

Question 18

ultra vires: applicability

Answer 18

not very applicable bc usu powers are broad. AND bc in CA, can’t be raised as defense against 3rd party

Question 19

effective date of incorporation

Answer 19

date of filing by SOS, not date submitted.

SOS filing is usu conclusive proof that properly incorporated

Question 20

organizing corp: steps

Answer 20

1) name directors (if not already)
2) appoint officers
3) bylaws
(3+2 can be done by either incorporators or directors)

Question 21

organizing corp: effect of failing to do so

Answer 21

shareholders might have personal liability for corp debt/obligations (pierced veil)

Question 22

de facto corp

Answer 22

you thought you were a corp but weren’t – rare today bc SOS certificate is conclusive evidence of incorp

Question 23

corp by estoppel: exs

Answer 23

misfile articles of incorp
misname your corp on a doc
etc

Question 24

corporation by estoppel: def

Answer 24

• -k dispute btwn 3rd party and entity believed to be a corp
• -court can estop EITHER from alleging that it wasn’t really a corp/isn’t liable
• -if would unjustly expose corp to liability or deny relief to 3rd party
• -if equity demands (justice)

Question 25

corporation by estoppel + tort

Answer 25

nope just for ks (bc other party hasn’t dealt w them like a corp)