Corporation

Question 1

What is a promoter?

Answer 1

A person who procures commitments for capital and instrumentalities on behalf of the corporation that will be formed in the future; promoters are personally liable

Question 2

What is the exception to promoters personal liability?

Answer 2

They will not be liable on a preincorporation contract if the agreement expressly indicates that the promoter is not to be bound.

Question 3

Are corporations liable to a contract entered into by a promoter?

Answer 3

No

Question 4

What is the exception to corporation liability for a promoters contract?`

Answer 4

The corporation can become liable if it adopts the promoters contract.

Question 5

2 types of adoption:

Answer 5

1. Express

2. Implied

Question 6

What is the business judgment rule?

Answer 6

A director’s decision may not be challenged if the director acted in good faith, with ordinary care, and in a manner reasonably believed to be in the best interest of the corporation.

Question 7

2 reasons a transaction cannot be set aside merely because of a personal interest:

Answer 7

1. Director disclosed material facts to disinterested directors or SH
2. Transaction was fair

Question 8

May articles of incorporation limit a BOD’s personal liability for damages to SH’s?

Answer 8

No

Question 9

4 exceptions that prohibit article of incorporation from limiting a BOD’s personal liability:

Answer 9

1. Received a benefit to which not entitled
2. Intentional harm to the corp
3. Approved unlawful distributions
4. Intentionally committed a crime