Formation Flashcards
Promoter
A person who acts on behalf of a not yet formed corporation
When is a promoter liable?
A promoter is personally liable for contracts entered into so long as both parties to the contract know the corporation is not formed
When is a promoter not liable?
When there is a novation and the corporation adopts the contract
What duty to promoters owe?
Duty of loyalty
Promoter acquires property before becoming a promoter and resells to the corporation. What result?
The corporation can recover profit, only if the resale price is more than the fair market value
Promoter acquires property after being established as a promoter and resells it to the corporation. What result?
The corporation can recover all profit, even if the resale price was fair market value
Subscriber
Person/Entity who makes an offer in writing to buy stock in a corporation before it is formed
Can a subscriber revoke?
NO. A pre-incorporation offer to buy stock is irrevocable for 6 months
Formation Requirements
Articles of Incorporation
Incorporators
Filing
Articles of Incorporation
- ) The number of authorized shares
- ) Purpose
- ) Registered Agent
- ) Incorporator
- ) Corporation name (must have indicia of corporate status)
Bylaws
Need not be included in Articles of Incorporation but need to exist
Alternative avenues for the formation
- ) De Facto
2. ) Estoppel
De Facto Corporation
Organizers made a good faith effort and had no knowledge of their failure to comply with requirements
Corporation by Estoppel
3d party deals with people as a corporation, estopped from denying corporation
Foreign Corporations in MI
To conduct regular business in the state, the corporation must file articles (“APAIN”) requirements
