Formation

Question 1

What is a promoter’s liability for pre-incorporation agreements?

Answer 1

The promoter is liable for pre-incorporation agreements unless: (i) the corporation specifically relieved the promoter of liability or (ii) the promoter has no actual knowledge that the corporation’s charter has not yet been issued.

Question 2

Does the promoter have the duty to disclose a commission on a pre-incorporation transaction?

Answer 2

Yes.

Question 3

is a corporation liable for pre-incorporation transactions?

Answer 3

Generally no. Because the corporation isn’t in existence no agency relationship exists.

Exception if a contract is adopted.`

Question 4

How is a corporation created?

Answer 4

Articles of incorporation or charter is filed with the state.

Question 5

What information must be included in the articles of incorporation?

Answer 5

• Name
• Number of authorized shares
• name and address of its registered agent
• Corporate purpose
• name and address of each incorporator

Question 6

What is required of a corporation’s name?

Answer 6

It must include the word corporation, company etc.

Question 7

When does corporate existence begin?

Answer 7

When the articles or incorporation are filed unless a later date is specified by the articles.

Question 8

What is an ultra vires act?

Answer 8

A corporate action that is outside the stated corporate purpose.

Question 9

Can a third party that has entered into a coporation for the corporation to conduct an ultra vires act escape liability b/c the corporation conducts an ultra vires act?

Answer 9

No.

Question 10

How can an ultra vires act be challenged?

Answer 10

1) Shareholder suit to enjoin the action
2) Corporation taking action against an employee who engages in such action
3) State initiated action to enjoin such activity.

Question 11

De Jure Corporation

Answer 11

When all statutory requirements for incorporation are fulfilled - it is a De Jure Corporation

Question 12

De facto corporation

Answer 12

When a person makes a good faith effort to incorporate and did not know that the incorporation requirements were not met.

RMBCA has abolished this doctrine.

Question 13

Corporation by Estoppel

Answer 13

If a good faith effort has been made to incorporate and a person deals with an entity as if it were a coporation, they are estopped from denying its existence.