Corporation Formation Flashcards

1
Q

Why Form Corp

A
  1. Protects owners from personal liability
  2. Promotes investment
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2
Q

De Jure Corporation

A

Formed when all steps followed

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3
Q

Promoter (Def)

A

Before formation: works on behalf of corp to create & fund entity w/ knowledge corp not yet formed

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4
Q

Promoter Liability

A

Personally liable for knowingly acting on corp’s behalf before incorp

Remains liable after corp comes into existence

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5
Q

Promoter Liability: 3Ps

A

Personally liable for B/K even after C formed UNLESS:

  1. Novation
  2. 3P knew of pre-formation status & agreed to look to corp for performance
  3. Promoter had no actual knowledge corp’s charter hadn’t been issued
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6
Q

Promoter Liability: Corp

A

Fiduciary duty

Secret profit (undisclosed commission) on pre-incorporation transaction is a breach

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7
Q

Incorporation Procedure

A

1.Incorporator signs & files articles w/ state & pays filing fee

  1. If state accepts articles entity formed on date when articles filed, or later date set out in articles

*filing by state is conclusive proof entity formed

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8
Q

Articles Require:

A
  1. Corporation Name (must include indicator, Company, Limited, etc.
  2. Name + address of local agent for service of process;
  3. Names & addresses of incorporators;
  4. Number of authorized shares in each class of stock.
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9
Q

Ultra Vires Actions

A

Corporate acts beyond what’s permitted in the articles

Issues when corp stated narrow business in articles but engages in activities beyond it

Void at CL

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10
Q

RMBCA Allows Ultra Vires Actions If:

A

SHs/state can enjoin acts if equitable

Corp can sue those who committed acts

3P cannot assert UV acts as defense to escape liability

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11
Q

Defective Incorporation

A

Failed to form de jure corp

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12
Q

De Facto Corp

A
  1. Person who makes good faith but unsuccessful effort to comply w/ incorp requirements may escape personal liability
  2. Entity treated as de facto corp & owner not personally liable for obligations incurred in purported corp’s name
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13
Q

Corp by Estoppel

A

K ONLY

Prevents 3P from denying existence of corp when de facto requirements met (good faith + no knowledge of defects)

Person who deals w/ entity as if it’s a corp is estopped from denying its existence, can’t seek personal liability of owner

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14
Q

Bylaws

A

Day-to-day rules, can be amended/repealed by SHs

Enforceable as long as don’t conflict w/ state law or articles

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15
Q

Articles v. Bylaws?

A

Articles win

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16
Q

Piercing Corporate Veil

A

Pierce veil of limited liability to recover directly from investor/SH

17
Q

PCV Grounds

A
  1. Alter Ego
  2. Undercapitalization
  3. Fraud
  4. Self-Dealing
  5. Siphoning Funds
  6. Using Corp Form to Avoid Statutory Requirements
  7. SH’s domination of corp
18
Q

Alter Ego

A

Failing to observe corp formalities, corp is SH’s alter ego

19
Q

Undercapitalization

A

failure to maintain sufficient funds to cover liabilities

20
Q

Fraud

A

Parties engaged in fraud/fraud-like behavior