Corp - Organization of Corporations Flashcards
What are the three formation requirements?
(1) People - Must have an incorporator
(2) Papers - Two documents must be field - Articles of Organization and Supplemental Form
(3) Act - Must deliver forms to Mass. State Secretary and Pay Required Fee. [Filing is conclusive proof of formation.]
What does an incorporator do?
(1) Execute the articles and the supplemental form
(2) Deliver them to the state secretary.
Incorporator can be a corporation.
What three things must be in the article of organization?(
(1) Corporate Name - Must include Corp., Co., Inc., Ltd.
(2) Name and Address of Each Incorporator
(3) Information Regarding Stock
- Amount of authorized stock
- Number of shares per class or series
- Voting rights, preferences and limitations of each class or series.
What three things must be in the supplemental form?
(1) Name of the initial registered agent and address of registered office. (For service of process - Office must be in MA)
(2) Name and addresses of initial directors, president, treasurer, and secretary.
(3) Dates for initial fiscal year.
Supplemental form is not art of the articles.
Must there be a statement of corporate purpose and what happens if there is a statement?
No, do not need to state a corporate purpose.
If corp. goes beyond the stated purpose:
(1) Ultre Vires contracts (beyond the scope) are valid
(2) SH can seek an injunction
(3) Responsible managers are liable to the corporation for ultre vires activities.
What must the BOD accomplish at the initial organizational meeting?
(1) Adopt any bylaws
(2) Elect the President/Treasurer/Secretary
(3) Transact appropriate business
Incorporator can also hold meeting to elect directors
What is the purpose of an S Corp. and who can form one?
You form an S corp. to avoid taxation at the entity level. [Avoid double taxation.]
An S Corp. has 100 or fewer shareholders, all shareholders must be U.S. citizens or residents, must only be one class of stock and not publicly traded.
How is liability affected if business fails to form a de jure (valid) corporation?
Forms a partnership and all the partners are liable for corporate debts.
What two doctrines allow “proprietors” to avoid personal liability when they fail to form a de jure corporation?
(1) De Facto Corporation
(2) Corporation by estoppel.
ONLY AVAILABLE IF PERSON IS UNAWARE OF THE FAILURE TO FORM A DE JURE CORPORATION.
What are the three requirements for a de facto corporation?
(1) There is a relevant incorporation statute. (Here - MBCA)
(2) Parties made a good faith, colorable attempt to comply with it;
(3) They are acting like there is a corporation.
If applicable, business is treated as a corporation for all purposes except in an action by the state.
Statute: It’s apparently alive.
What is required for corporation by estoppel?
One who treats a business as a corporation may be estopped from denying that it is a corporation.
Only applies in Contract, but not tort cases. [Narrower than DFC]
Status: It’s alive!
When is a corporation liable for a pre-incorporation contract? [Two Ways to Adopt]
A corporation is not liable on pre-incorporation contracts until it adopts the contract.
Express - Board Action
Implied - Corporation accepts a benefit of the contract.
What is the liability for a promoter on pre-incorporation contacts?
Unless the contract says otherwise, promoter remains liable on pre-incorporation contracts until there is a novation.
Novation - Agreement of the promoter, the corporation, and the other contracting part that the corporation will replace the promoter under the contract.
What is the secret profit rule?
A promoter cannot make a secret profit on her dealings with the corporation.
Only liable if its a SECRET!
Run tests depending on when promoter acquired property to determine if there is a profit.
What is the test for secret profits when the promoter acquire the property before becoming promoter?
Profit equals price paid by the corporation minus fair market value.
