corporate formation

Question 1

promoters

Answer 1

persons acting on behalf of corporation not yet formed

Question 2

when does corporation become liable on promoter’s contract

Answer 2

when corp adopts contract by express board resolution or by implied ratification through knowledge and acceptance of benefits

Question 3

promoter liability on pre-incorporation contracts

Answer 3

promoter remains liable on pre-incorporation contracts until there has been novation (agreement that corporation will replace promoter). if corporation is never formed, promoter alone is liable. if corp merely adopts contract, corp and promoter are liable

Question 4

promoter acquires property before becoming promoter and sells to corporation

Answer 4

profit is only recoverable if sold for more than fair market value

Question 5

promoter acquires property after becoming promoter and sells to corporation

Answer 5

all profit is recoverable

Question 6

subscribers

Answer 6

persons or entities who make written offers to buy stock from corporation not yet formed

Question 7

subscriber offer revocabiliity

Answer 7

offers cannot be revoked for 6 months

Question 8

incorporators

Answer 8

people who sign and file articles of incorporation with state corporation commission

Question 9

articles of incorporation must include

Answer 9

authorized shares (maximum numbers corp can issue)

preferences (rights/priorities assigned to different classes of stock)

agent - registered agent and address of registered office

incorporators

name of corporation (must include indicia of corporate status)

Question 10

bylaws

Answer 10

need not be in articles but corporation must adopt bylaws. board has power to adopt and amend bylaws unless articles give power to the shareholders

Question 11

piercing corporate veil

Answer 11

court will pierce to hold shareholders liable to avoid fraud or unfairness.

grounds:

alter ego (failure to observe formalities)

undercapitalization (failure to maintain sufficient capital to satisfy foreseeable liabilities

Question 12

foreign corporations transacting business in Virginia

Answer 12

corporation incorporated outside virginia
transacting business = regular course of intrastate business activity

qualify by getting certificate of authority from SCC requiring same info as articles

consequences of corp transacting business w/o qualifying is small fine and cannot initiate law suit in Virginia