Corporations Flashcards
Formation of Corporations
-
De Jure:
2.**De Facto: :
3..Estoppel **
Formation of Corporation
De Jure
The courts often reforms to a legal valid corporation as a de jure. Generally, no corporation exists, and there is no limited liability, until articles of incorporation are properly filed with the appropriate state office. This forms a de jure corporation, a full-fledged, distinct legal entity for all purposes.
Formation of Corporation
De Facto
De Facto Corporation
An association may be deemed a de facto corporation if:
* there is a procedural, administrative, or other defect in the process of
incorporation, so that a de jure corporation does not come into being (for
instance, a document getting lost in the mail, or inadvertent omission of required
information);
* the incorporators tried, in good faith, to comply with the statutory incorporation
requirements, which in some states requires actually filing or colorably
attempting to file the articles of incorporation with the appropriate state office;
and
* actual exercise of corporate prerogatives, or actually conducting the business as
though there were a de jure corporation (for instance, entering a lease on the
corporation’s behalf).
Formation of Corporation
De facto Corporation, Status and Powers
If the requirements for a de facto corporation are met, then the business will
be treated as a de jure corporation for most purposes. This means that the
shareholders enjoy limited liability, and the business may sue, be sued, acquire
and hold property, and take other actions as though it were a distinct legal
entity. Generally, only the state may challenge the corporate status of a de
facto corporation, which is thus the equivalent of a de jure corporation as
against everyone on Earth except the state. This means that people who deal
with the de facto corporation as though it is a de jure corporation cannot later
hold the shareholders personally liable, on the grounds that no de jure
corporation was ever formed. (However, the incorporators or directors should
promptly act to remedy any defective incorporation and form a de jure
corporation as soon as possible after learning of the defect.)
Corporation by Estoppel
A court may, in the interest of fairness, prevent a par ty from denying that a de jure
corporation exists (and, thus, that the shareholders have limited liability) under the
doctrine of corporation by estoppel. Generally, this doctrine applies if:
- a party dealt with an association as though it were a de jure corporation;
- the party apparently believed the association was a de jure corporation, without
fraud by the person representing the association; and - at the time, the association held itself out as a de jure corporation.
Courts typically apply corporation by estoppel if a party to the transaction
attempts to hold the shareholders personally liable, based solely on defective
incorporation. Courts may also apply the doctrine to prevent the association itself
from denying its corporate existence if a third party reasonably relied to her
detriment on the association’s status as a de jure corporation. [See 18A Am. Jur. 2d
Corporations §§ 203, 207-08, 210-11, 215, Westlaw (database updated May
2018); Timberline Equip. Co., Inc. v. Davenport, 514 P.2d 1109 (Or. 1973); see also
Cranson v. Int’l Bus. Machines, Corp., 200 A.2d 33 (Md. 1964).]
Piercing the Corporate Viel
Scope of Authority: Duty of Care
Scope of Authority: Duty of good faith
The Power and Scope of Corporate Authority
Fiduciary Duties Duty of Care
Duites of Care and the BJR
Failure to Act to Monitor the Firm
The Duty of Good Faith
The Duty of Loyalty
Duty of Loyalty: The Corporate Opportunity Doctrine
Duty of loyalty for Dominant Shareholders
Transfers of Control
Shareholders Rights: Ownership Proxies Inspections
Shareholders Rights: Shareholder Suits
Shareholder Suits: The Demand Requirments and Special Litigation Committees
Control Issues in Corporation: Issues of Control
Limitations on Control Arrengements
Freeze outs and Abuse of Controls
Oppression of Minority Shareholders.
