Formation

Question 1

Who is liable prior to a corporation being formed?

Answer 1

A promoter

Question 2

When is a promoter personally liable?

Answer 2

for knowingly acting on behalf of a Corporation before incorporation

Question 3

How long does a promoter remain liable?

Answer 3

1) there is a subsequent novation releasing the promoter from liability
2) the third party looks only for corporation performance or
3) the promoter had not actual knowledge that the corporation charter has not yet been issued

Question 4

Is a promoter liable for violating fiduciary duties?

Answer 4

Yes

Question 5

What expenses may a promoter seek compensation or reimbursement for?

Answer 5

expenses related to the forming of the corporation but cannot compel corp to pay becaise the acts were not undertaken at corps direction

Question 6

Prior to formation, what is the general rule about the corps liability?

Answer 6

Corp is not liable for pre-incorporation transactions, then those for the benefit of the Corp (there is no principal-agent relationship)

Question 7

A corp may be liable for things prior to incorporation by adoption. What does that mean?

Answer 7

C is liable if it expressly or impliedly adopts a contract by accepting the benefits of the transaction, or gives an express acceptance of liability for the debt

Question 8

What must be included in the articles of incorporation?

Answer 8

Must include the corporate name (w/ crop identifier) and be filed with the state

Question 9

What is another way to describe articles of incorporation?

Answer 9

The constitution of the corporation

Question 10

What MAY be included in the articles of incorporation?

Answer 10

• enumerate powers Corp possesses
• limits Corps duration
• Statement of Corp’s legal purpose

Question 11

When does a Corporation exist

Answer 11

corporate existence is when the articles are filed and the fee is accepted by the state

Exception: if the articles specify a different date

Question 12

What is an Ultra Vires action?

Answer 12

this is based upon the stated business purpose in the articles of incorporation.

If a corp acts outside that stated purpose they have breached a duty

Question 13

How can an Ultra Vires action be challenged?

Answer 13

Corp can take action against a director, officer, or employee who engaged in the action

The State can also initate proceeding

Question 14

Define

“De Jure” Corporation

Answer 14

When all statutory requirements for incorporation are satisfied, Corp is liable for Corp activities

Question 15

What are the two types of good-faith Defective Incorporations?

Answer 15

Defacto and Corporation by estoppel

Question 16

If someone conducts business as a Corporation without complying with the incorporation requirements, who is liable?

Answer 16

the person will be personally liable

this is considered acting in “bad faith”

Question 17

Define

De Facto Corp

Answer 17

the owner must make a good-faith effort to comply with the incorporation requirements and operate Corp without knwing the requirements were not met

Question 18

Define

Corporation by Estoppel

Answer 18

a person dealing with an entity in a contractual agreement as it if were a Corp is estopped from denying its existence and seeking personal liability