Forming a Corporation Flashcards
formation requirements
- Person: incorporators
- Paper: articles of incorporation
- Act: creation upon filing
articles of incorporation
Required contents
1. Name of corporation
2. Name and address of each incorporator
3. Registered agent and address in state of inc.
4. Number of corporation’s stock
Optional
1. Business purpose (any lawful purpose)
ultra vires
If articles include narrow business purpose, may not act outside of stated purpose
* Common law: ultra vires acts void and unenforceable
* MBCA: generally enforceable
When ultra vire acts are objectionable
* Shareholder sues to enjoin
* Corp. sues officer or director for damages for approving
* State sues to dissolve
organizational meeting
Who holds the meeting
* If inital directors named in articles, board holds meeting
* If directors not named, incorporators hold meeting
Purpose: complete organization of corporation
* Adopt bylaws
* Appoint officers
bylaws
internal document that contains provisions for managing corporation
internal affairs doctrine
Internal affairs are governed by the law of the state of incorporation
limited liability
All shareholders have limited liability
de facto corporation
- Relevant incorporation statutes (one in each 50 states, so never an issue)
- Good faith, colorable attempt to comply with the statute
- Exercise in corporate privileges (act as though)
- Applies in all cases except those by government
- Actors unaware that incorporation failed
corporation by estopeel
- Protects persons who have dealth with entity as if it were a corporation
- Third party must not know that incorporation does not exist, failed
- Applies only in contract cases
promoter
- A person acting on behalf of a corproation not yet form
- Purpose is to obtain commitments for captial and other instrumentalities
Promoter’s Fiduciary Duties
To other promoters: mutual fiduciary relationship (loyalty)
To corporation: fiduciary relationship (fair disclosure and good faith)
Promoter’s Breach to Corporation
May be liable for profits unless
* Material facts disclosed + approved by indpt board
* If board not independent, subscribers knew of transaction at time of subscription + unanimous ratification
Disclosure must be to all who are contemplated to be part of the inital financing scheme
Always liable for fraud if Ps can show promoter’s fraudulent misrep or fraudulant failure to disclose facts
Corporation’s Liability for Preincorporation Agreements
Not bound on contracts entered into by promoter in corporate name prior to incorporaiton
May only become liable thru adoption
* Express: board action
* Implied: accepts benefit
Promoter’s Liability for Preincorporation Agreements
MBCA: jointly and severally liable even after incorporation
Released only in case of novation, express agreement
Promoter may be entitled to reimbursment to extent that corporaiton benefits
foreign corporations
Corporations outside of the state
Must register and pay fees before transacting business
* Registration: secretary of state, demonstrate articles and good standing in home state
* Transacting business: regualr course of intrastate business
