Corporation 1-15 Flashcards
When does a Corporation’s existence begin?
On the date the Articles of Incorporation are properlyfiled with the Secretary of State (unless a delayed date is specified).
*An earlier date CANNOT be specified.
Priority: Medium
What must the Articles of Incorporation contain?
They must contain:
The corporate name;
The number of shares the corporation is authorized to issue;
The address of the corporation’s initial registered office and the name of its initial registered agent; AND
The name and address of each incorporator.
Priority: Medium
What is a de jurecorporation, and when is it formed?
It is a legally formed corporation, and is formed when the Articles of Incorporation are filed with the Secretary of State.
Priority: Medium
Can a corporation that is NOT a de jure corporation enter into contracts?
No.
In such an instance, personal liability of the owners/promoters will result (unless De Facto Corporation or Corporation by Estoppel applies.)
Priority: Medium
When does a de factocorporation arise?
When the entity:
Made a good faith attempt to incorporate;
Is otherwise eligible to incorporate; AND
Took some action indicating that it considered itself a corporation.
Priority: Medium
Who may assert the de facto
corporation doctrine?
Only a person who was unaware that the corporation was not properly formed.
Priority: Medium
What is the doctrine of Corporation by Estoppel,
and who does it apply to?
When any person/entity treated a business as a corp, they may be estopped from denying that the business is a corporation (even if a valid corp. was NOT formed)
It applies to both:
3rd parties that treated the business as a corp; AND
An entity that held itself out as a corporation and benefited from that claim.
Priority: Medium
What is a Promoter?
A person who acts on behalf of a corporation that has not yet been formed.
Priority: HIGH
When does a Promoter have personal liability, and what are the TWO exceptions to this?
Upon entering any pre-incorporation contracts, EVEN IF the corporation subsequently adopts the contract.
Two exceptions are:
There is a subsequent novation; OR
The contract explicitly provides that the promoter has no personal liability on the contract.
Priority: HIGH
When is a Corporation liable on pre-incorporationcontracts entered into by a Promoter?
When the corporation expressly or impliedly adopts the contract post-incorporation.
Expressly = through board resolution.
Impliedly = corp. knows the material terms and accepts/retains the benefits.
Priority: HIGH
When are a Corporation’s activities deemed
ultra vires?
When a corporation’s activities are outside of the scope of the stated corporate purpose.
Priority: Low
Ultra Vires acts under:
Common Law
vs.
RMBCA
Common Law = deemed void and unenforceable.
RMBCA = generally valid and enforceable (those who approved the transaction can be held personally liable).
Priority: Low
A court will Pierce the Corporate Veil, and hold the shareholders personally liable in what situations?
The corporation is acting as the alter egoof the shareholders (little or no separation between the shareholder and corporation);
Where the shareholders failed to follow corporate formalities;
The corporation was inadequately capitalized at its inception to cover debts/liabilities; OR
To prevent fraud.
*Even if a court doesn’t pierce the veil, a person is ALWAYS liable for their own torts.
Priority: HIGH
What do shareholders in a Close-Corporation owe the other shareholders?
The duty of loyalty and good faith, and will be liable for any damages resulting from a breach of these duties.
Priority: HIGH
What is watered stock?
Stock that is issued at a price that is greater than its actual market value.
Priority: Low
