Formation of a Corporation

Question 1

Promoters

Answer 1

One who participates in the formation of a corporation.

Question 2

Promoter Responsibilities

Answer 2

1) Arranges compliance with legal requirements to form a corporation, 2) Secures initial capitalization, 3) Enters into necessary Ks on behalf of corp. before formed.

Question 3

Promoter Duties

Answer 3

Duty of full disclosure and fair dealing as to all matters pertaining to corp.

Question 4

Promoter Liability

Answer 4

Personally liable on Ks until corp. formed. If corp. ratifies or accepts K after incorporation the corp. may be liable on the pre-incorporation promoter K.

Question 5

Promoter Rights

Answer 5

If held personally liable on preformation K, right to reimbursement or indemnification by corp. Right to enforce preformation Ks where corp. never formed. Promoter can seek indemnification regardless of whether corp. formed.