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Bar corportations > Corporate formation > Flashcards

Corporate formation Flashcards

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1
Q

who are promoters

A

persons acting on behalf of corp not yet formed

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2
Q

when does a corp become liable on a promoters pre-incorporation k

A

when the corp ADOPTS the contract by either

1) express board of directors resolution OR
2) implied adoption by knowledge of K AND acceptance of benefits

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3
Q

what is the only way a promoter gets off liability of pre-incorporation K’s

A

UNTIL A NOVATION

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4
Q

What is a novation

A

an agreement b/w the promoter, the corp and the other contracting party that the corp will replace the promoter under the K

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5
Q

who is liable if the promoter enters into a K and the corp is never formed?

A

promoter alone is personally liable on K

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6
Q

who is liable if the promoter enters a pre-incorp K and the corp merely adopts the K/

A

both promoter AND corp are liable of election of 3rd party.

- 3rd party gets to choose whom to sue

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7
Q

are promoters fiduciares to each other and the corp?

A

YES

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8
Q

since promoters are fiducaries to each other and the corp what CANNOT they do?

A

self deal and make secrete profits

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9
Q

what if a promoter acquires property b4 becoming a partner and resells property to corp?

A

the profit recoverable by corp. ONLY IF sold more than FAIR MARKET VALUE

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10
Q

what if a promoter acquires property AFTER becoming a promoter and resells the property to the corp??

A

any profit is recoverable by the corp

- Even if resale price was fair market value

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11
Q

who are subscribers

A

persons or entities who make written offers to buy stock from a not formed corp

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12
Q

when can a subscriber revoke a pre-incorp offer?

A

a pre-incor offer is irrevocable for 6 months!

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13
Q

who is an incorporator

A

merely signs and files the articles of incorp with the state

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14
Q

are there formatlities for making a corporation?

A

YES must file articles of incorporation with the state

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15
Q

what must be included in the articles of incorporation to be valid

A

1) authorized shares
2) purpose
3) agent
4) incorporators
5) name of corporation

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16
Q

what is authorized shares in articles of incorp?

A

MAX allowed number of shares the corp is authorized to issue

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17
Q

can the purpose in the articles be general and perpetual in duration (forever)

A

YES

ex: engage in all lawful activity in perpetuity

18
Q

what is ultra vires activity?

A

behind powers of the corp in the purpose statement in articles

19
Q

what happens if there is an ultra vires activity

A

1) state can enjoin the ultra vires activity

2) corp can sue its own directors and officers for any losses caused by ultra vires activity

20
Q

what needs to be included in articles of incorp for agent

A

name and address of registered office (attorney for corp)

21
Q

what needs to be included in corp name in articles of incorp>

A

name MUST contain some indication of corporate status (ex: incorp)

22
Q

does a corp HAVE to include their by-laws in the articles of incorp?

A

NO. the board has the power to adopt and amend the by-laws UNLESS the power EXCLUSIVELY to the shareholders

23
Q

what is the de facto corporation doctrine?

A

a business that fails to achieve (legal) corporate status nonetheless is treated as a corporation IF

1) the organizers made a good faith, color able attempt to comply with the corporate formalities and have
2) NO KNOWLEDGE of the lack of corporate status

24
Q

what is the legal significance of forming a corp?

A

1) corporation is a separate person

2) generally SHAREHOLDERS ARE NOT personally liable for the debts of corp

25
Q

generally are shareholders personally liable for the debts of corporation

A

NO. This is the principal of limited liability, which means that the shareholder is liable only to pay full consideration of her shares

26
Q

what is the X/C when a shareholder can be liable for personal debts of a corproation?

A

piercing the corproate veil

27
Q

what is piercing the corproate veil?

A

to avoid fraud or unfairness and hold shareholders personally liable for debts of corp

28
Q

what are the 2 ways to pierce the corporate veil?

A

1) alter ego: failure to observe sufficient corporate formalities; or
2) undercapitilization: failure to maintain sufficient funds to cover foreseeable liabilities

29
Q

what types of cases are most likely when courts will pierce the corporate veil>?

A

TORT cases

30
Q

are tort cases or contract cases most likely to be held when piercing the corporate veil

A

TORT cases

31
Q

what is the classic case where courts will pierce the corporate veil?

A

business doing inherently dangerous activity and having no INSURANCE

32
Q

what do foreign corp. must do?

A

if corp is incorp. outside of state that wishes to engage in regular intrastate business must qualify by filing a CERTIFICATE OF AUTHORITY with secutraty of state off that includes

1) APAIN
1) authorized shares
2) purpose
3) Agent
4) incorporator
5) name

33
Q

what is the acryonum for what 5 things need to be included for proper filing of articles of incorporation

A

APAIN

1) authorized shares
2) purpose
3) Agent
4) incorporator
5) name

34
Q

who is a corporate promoter

A

a person who procures commitments for capital and instrumentality on behalf of a corporation that will be formed in the future.

35
Q

as a GR are corporate promoters personally liable on all contracts

A

YES. even after the corporation is formed and even if the corporation also becomes liable on the contract by adopting it

36
Q

is a corporate promoter personally liable on the K, even if the corporation also becomes liable on the K by adopting it

A

YES

37
Q

what is the only time during contracting where a corporate promoter will NOT be liable on PRE-INCORPOARTION K

A

if the agreement b/w the parties EXPRESSLY INDICATES that the promoter is not to be bound.
- That K is considered to be an offer to the proposed corporation.

38
Q

generally is a corporation liable to K entered into before its creation

A

no

39
Q

x/c where corp is liable for pre existing k before creation

A

when it

1) expressly adopts it by board or
2) implied adopts it by knowledge of the K and accepting the benefits

40
Q

when is a corporation formed

A

when the articles of incorporation are filed in Secretary of states office.

41
Q

are persons who are acting on behalf of a corporation knowing that there was no incorporation liable for liabilities created by so acting

A

yes. 2 prerequisites to liability
1) action on behalf of the corporation and
2) knowledge that the corporation has not yet been formed

Bar corportations (5 decks)

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