2. Pre-Incorporation (RMBCA)

Question 1

What fiduciary duties do promoter owe Corporation?

Answer 1

Loyalty (Fair disclosure)

1) Disclose all material facts
2) Approved by independent Board
3) NO fraud misrep/failure to disclose

Care (good faith)

Question 2

Is a promoter liable to TPs?

Answer 2

Before + After incorporation (joint + several liability with Corporation) (RMBCA)

Question 3

How can promoters avoid liability to TPs?

Answer 3

Novation (express/implied)

- Agreement between Promoter + Corporation + TP

Question 4

Is a corporation liable to TPs?

Answer 4

Express adoption (by directors)
- Knowledge of material facts

Implied adoption (by employees)
- Knowledge of material facts + Acceptance of benefits

Question 5

Can employees subscribe to Corporation’s shares?

Answer 5

RMBCA

• Long period of stock subscription (at least 6 months)
• NO broker commission fee

Question 6

How can stock subscriptions be revoked?

Answer 6

Subscription grant provides revocation

Unanimous vote by subscribers to revocation