Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

Corporate Law > Corporate Formation > Flashcards

Corporate Formation Flashcards

You may prefer our related Brainscape-certified flashcards:
Civil Procedure 1L flashcards MBE flashcards MPRE flashcards
1
Q

What is a promoter?

A

A person acting on behalf of a corporation not yet formed.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

Corporation’s liability on a promoter’s pre-incorporation contract

A
  • The corporation becomes liable on a promoter’s pre-incorporation contract when:
    • The corporation is formed and adopts the contract by either:
      • express board of directors resolution, or
      • implied adoption through knowledge of the contract, plus acceptance of its benefits.
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

Novation Definition and Rule

A
  • Definition: An agreement between the promoter, the corporation, and the other contracting party that the corporation will replace the promoter with the other contracting party.
  • Rule: The promoter remains liable on pre-incorporation contracts until there has been a novation.
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

Who is liable if the promoter enters into a contract, and the corporation is never formed?

A

The promoter alone is liable personally.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

Who is liable if the promoter enters a pre-incorporation contraction, and the corporation merely adopts the contract?

A

Both the corporation and the promoter are liable at the election of the third party.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

Promoter fiduciary status

A

Promoters are fiduciaries of each other and the corporation.

Promoters cannot make a secret profit on their dealings with the corporation.

(i.e. sale to corporation of promoter’s own property for profit without disclosure to the corporation)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

Promoter Sale of Property to Corporation Rules

A
  • If a promoter acquires property before becoming a promoter and sells the property to the corporation at a profit
    • profit is recoverable by the corporation only if it is sold for more than fair market value.
  • If a promoter acquires property after becoming a promoter and sells the property to the corporation at a profit
    • all profit is recoverable by the corporation even if the resale price is less than fair market value.
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

Who is a subscriber?

A

A person or entity who makes a written offer to buy stock from a corporation not yet formed.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

A pre-incorporation offer to buy stock is irrevocable for…

A

6 months.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

flexibility of absolute formation requirements

A

There is no flexibility.

You MUST form a corporation this way.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

The articles of incorporation MUST include:

A
  1. Authorized shares
  2. Preferences
  3. Agent
  4. Incorporators
  5. Name of Corporation

(APAIN)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

What are authorized shares?

A

The maximum number of shares the corp is authorized to issue.

A corporation can always issue or sell less shares. But they must not issue or sell more than the authorized number of shares without amending the articles.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

Preferences Definition and Rule

A

Definition:

  • The rights and priorities assigned to each kind of stock.

Rule:

  • The articles of incorporation must describe the preferences.
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

What is a registered agent?

A

The corporation’s official legal representative.

i.e. the person you send lawsuit complaint to. Articles must also include agent’s address.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

Who are the incorporators?

A

Persons who sign and file the articles of incorporation with the VA state corporation commission.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

Corporation name requirement

A

The name must contain some indication of corporate status.

e.g. [Name] corporation, incorporated, inc. or corp., etc…

17
Q

Can I form a corporation with the name Bubba’s Bountiful Biscuits?

A

No, name must contain some indication of corporate status.

18
Q

Bylaws Rules

A

Bylaws do need not need to be in the articles.

But, the corporation must adopt them.

19
Q

Adoption and amendment of the bylaws

A
  • The board has the power to adopt and amend the bylaws
    • unless the articles give the power to the shareholders.
20
Q

Doing business with an improperly formed corporation

A

It is illegal to do business as a corporation unless properly formed

21
Q

Legal status of a corporation

A

A corporation is a separate legal person.

22
Q

What is the principle of limited liability?

A

Generally, shareholders are not personally liable for debts/obligations/contracts/torts of a corporation.

The shareholder is liable only for the price of her stock.

23
Q

The cardinal rule is limited liability of stockholders.

The exception to the cardinal rule is called…

A

Piercing the corproate veil

24
Q

The court will, in equity, pierce the corporate veil in order to:

A
  • Avoid fraud or unfairness, and
  • to render a shareholder liable to a third-party victim of a tort or contract breach.
25
Q

When will a Virgnia court allow for veil piercing?

A
  1. Alter ego
  2. Undercapitalization
26
Q

What is the definition of “alter ego”?

A

A controlling shareholder will fail to observe sufficient corporate formalities

i.e. treat the corp as its alter ego.

27
Q

What is undercapitalization?

A
  • The corporation fails to maintain sufficient capital to satisfy foreseeable liabilities
  • Not enough money to capitalize foreseeable liabilities
    • Keep in mind the corporation’s insurance, minimal capital, and dangerous nature of the business
28
Q

Types of claims where corporate veil is more likely to be pierced

A

Courts are generally more willing to pierce the corporate veil for a tort claim than for a contract claim.

29
Q

What is a foreign corporation?

A

A corporation incorporated outside of Virginia.

30
Q

Foreign business qualification rule

A
  • Foreign corporations transacting business in Virgnia must “qualify”
    • Definition of “transacting business”
      • The regular course of intrastate (not interstate) business activity.
    • How a foreign business qualifies
      • By getting a certificate of authority from the state corporationc ommission that requires the corporation to provide the same information required in a domestic corporation’s articles of incorporation.
31
Q

What happens if a foreign corporation transacts business without qualifying?

A
  1. The corporation could get a modest fine
  2. The corporation is not allowed to initiate a lawsuit in Virginia state court.
    1. However, they can still be sued and file a counterclaim.

Corporate Law (8 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions