FACT PATTERN 1: ORGANIZATION OF A CORPORATION- WHAT DOES IT TAKE TO FORM A CORPORATION?

Question 1

WHAT DOES IT TAKE TO FORM A CORPORATION?

Answer 1

People, Paper, Act

Question 2

what are the people that make the corporation called?

Answer 2

incorporators

Question 3

How many incorporators do you need?

Answer 3

One or more

Question 4

What does an incorporator do?

Answer 4

They execute (sign)sign the articles and deliver them to the secretary of state.

Question 5

Can an incorporator be an entity?

Answer 5

Yes. incorporator can be an individual or an entity.

Question 6

Can XYZ, Inc. serve as an incorporator for Curl Up and Dye Beauty Supply Corp.? Can Joan Rivers?

Answer 6

Yes, incorporator can be an individual or an entity.

Question 7

What is the paper that needs to be filed to form a corporation called?

Answer 7

Articles of Incorporation.

Question 8

What are the two purposes of the articles of incorporation?

Answer 8

a. The articles are a contract between the corporation and the shareholders.
b. And also a contract between the corporation and the state.

Question 9

What is the info that needs to be in the articles of incorporation?

Answer 9

1) Corporate name.
2) Name and address of each incorporator.
3) Name and address of each initial director.
4) Name of registered agent and address of the registered office. (Registered agent is the company’s legal representative, so can receive service of process for the corporation.)

Question 10

Can I form a corporation with the name Vance Refrigeration?

Answer 10

No.

Question 11

A corporations name must include at least one of 4 words. What are they?

Answer 11

Corporation, company incorporated, limited

Question 12

What if there is no statement of the corporation’s duration?

Answer 12

Presume perpetual existence. (unless articles state something else)

Question 13

Does the corporation need to have a statement of purpose?

Answer 13

Generally, yes.

Question 14

Can the articles of Vance Refrigeration, Inc. indicate that the corporation’s purpose is to “engage in all lawful activity, after first obtaining necessary state agency approval”?

Answer 14

Most corporations say that.

Question 15

What if there is a specific statement of purpose, what do you look for?

Answer 15

ultra vires rules problems

Question 16

What if the articles of Vance Refrigeration, Inc. say the corporation will “manufacture refrigeration machinery” and the corporation then goes into gold mining?

Answer 16

Doing this is an ultra vires activity(it’s beyond the scope of the articles)

Question 17

At common law, what was the consequence of having an ultra vires contract?

Answer 17

any ultra vires contract could be voided as beyond the company’s capacity

Question 18

How do we handle ultra vires today?

Answer 18

1. Ultra vires contracts are valid as to third parties.
2. Shareholders can seek an injunction to stop an ultra vires act. (no creditor can sue)
3. The corporation itself can sue it’s mangers for any harm caused by an ultra vires act.

Question 19

What is Authorized stock?

Answer 19

maximum number of shares the corporation can sell.

Question 20

What is Issued stock?

Answer 20

number of shares the corporation actually sells.

Question 21

What is Outstanding stock?

Answer 21

shares that have been issued and not reacquired.

Question 22

What must the articles include as to stock?

Answer 22

Articles must include:

(a) authorized stock,
(b) number of shares per class, and
(c) information on voting rights and preferences of each class.

Question 23

What is the Act that is needed for incorporation?

Answer 23

Incorporators have notarized articles delivered to the Secretary of State and pay required fees.

Question 24

What happens if the Secretary of State’s office accepts the articles for filing?

Answer 24

That is “conclusive proof” of valid formation.

Question 25

After the articles have filed what kind of corporation do we have at this point?

Answer 25

At that point, we have a de jure corporation.

Question 26

What must the newly formed corporation do after it files the articles of incorporation?

Answer 26

the board of directors holds the organizational meeting, where it selects officers and adopts any bylaws and conducts other appropriate business.