Corporations

Question 1

What is a corporation

Answer 1

A distinct legal entity that can conduct business in its own right by buying, selling, and holding property or by suing or being sued, and by lasting forever

Question 2

People in a corporation

Answer 2

Shareholders, directors, officers

Question 3

Pre-incorporation Promoter Liability

Answer 3

promoter is personally liable for knowingly acting on behalf of a corporation before incorporation, and remains liable after incorporation unless there is a subsequent novation, the 3d party looks only to the corp for performance, or the promoter had no actual knowledge that the corporations charter had not yet been issued

Question 4

Promoter’s Duties

Answer 4

Promoter is a fiduciary of the corporation

Question 5

Pre-incorporation Corporation Liability

Answer 5

C is not liable for pre-incorp transactions, even those for the benefit of C
C IS LIABLE if it expressly or impliedly adopts a K by accepting benefits of the transaction, or gives express acceptance of liability

Question 6

Forming Corporation

Answer 6

People, Paper, Act

Question 7

Incorporators

Answer 7

Must sign and file the articles of incorporation and pay a fee. They are not liable for contracts formed by promoters.

Question 8

Articles of Incorporation

Answer 8

Must Include:

(1) the name of the corporation, including “corp”
(2) the agent of the corporation
(3) the names and addresses of the incorporators
(4) the duration of the corporation
(5) the purpose of the corp
(6) the maximum number of shares of each class of stock that the corporation is authorized to issue

Question 9

Ultra Vires Actions

Answer 9

Acts beyond the power/purpose of the corporation
If the corporation acts outside of its state purpose, the acts will be held unenforceable. (3rd parties however cannot escape liability by asserting ultra vires)
-Shareholders, the corporation, and the state can sue or take action to enjoin ultra vires actions

Question 10

De Jure Corporation

Answer 10

Moment of incorporation is when limited liability begins. Rule: when the Secretary of State accepts the fee and files the articles, the corporation existence begins.

Question 11

De Facto Incorporation

Answer 11

Corporation will still be treated as a corporation, with limited liability, if the organizers made a good faith effort to comply with the incorporation process and have no knowledge of a defect I the corporate states

Question 12

Veil Piercing

Answer 12

General Rule: Shareholders are not personally liable for the debts of the C, except a cost may pierce the veil of limited liability to avoid fraud or unfairness