I. Organization of a Corp.

Question 1

What does it take to form a corp.?

Answer 1

People. Paper. Act.

PEOPLE:
-Incorporators: MUST have 1 or more (execute the articles and deliver them to the Sec. of State); Person or Entity

PAPER:

• Articles of Incorporation:
  
  • Articles are a K between corp. and S
  • And also a K between corp. and State
    (1) Corporate Name
    (2) Name and Address of each Incorporator
    (3) Name and Address of each initial Director
    (4) Name of Registered agent and address of the registered office.
• Perpetual duration
• Generally, MUST have a statement of purpose
  
  • Specific statement of purpose and 3 (beyond scope) ultra vires rules = (1) Ultra vires K are valid (2) S can seek an injunction (3) Responsible managers are viable to corp. for ultra vires losses
• Capital Structure:
  
  • Authorized stock = Max number
  • Issued stock = Number of shares the corp. actually sells
  • Outstanding stock = Shares that have been issued and not reacquired
  • Articles MUST include: Authorized stock; Number of shares per class; Info on voting rights and preferences of each class

Question 2

Why does it matter that someone formed a Corp.?

Answer 2

Internal Affairs Rule: Governed by the law of the state of incorporation

Question 3

De Facto Corporation

Answer 3

Anyone asserting MUST be UNAWARE of failure to form de jure corporation (legal in eyes of law)

(1) There is a RELEVANT INCORP. Statute (always is)
(2) Parties made a good faith, colorable attempt to comply w/it. AND
(3) Some exercise of corporate privileges (acting like we have a corp.)

IF applies, biz treated as a corp. for ALL purposes EXCEPT an action by the state.

Question 4

Corporation by Estoppel

Answer 4

Anyone asserting MUST be UNAWARE of failure to form de jure corporation (legal in eyes of law)

-One who treats a biz as a corp. may be estopped from denying that it is a corp. (less likely than DFC)

Question 5

Bylaws

Answer 5

NOT condition precedent to forming a corp.

IF bylaws conflict w/the articles, which controls? = The ARTICLES

Question 6

Pre-Incorporation K

Answer 6

Promoter = Person acting on behalf of a corp. not yet formed. She might enter a K on behalf of a corp.-not-yet-formed.

Liability of the Corp. = The corp. is NOT liable on pre-incorporation K until it ADOPTS the K

• How to ADOPT?
  
  • Express = Board takes an action adopting the K
  • Implied = IF Corp. accepts a benefit under the K

Liability of the Promoter = Unless the K clearly says otherwise, the promoter IS LIABLE on pre-incorp. K until there is a NOVATION
-NOVATION: An agreement of the promoter, the corp., and the other K party that the corp. replaces the promoter under the K

*Remember: Adoption makes the corp. liable too, BUT does NOT relieve P.

Question 7

Foreign Corp.

Answer 7

Anything outside of state