Lesson 3

Question 1

Promoter

Answer 1

A promoter is one who participates in the formation of a corporation by securing the initial capital, arranging for compliance with the legal requirements for formation, and by entering into necessary contracts on behalf of the corporation before it is formed.

Question 2

De Jure Corporation

Answer 2

A de jure corporation arises when there has been substantial compliance with all of the mandatory conditions precedent to incorporation.

Question 3

De Facto Incorporation

Answer 3

A de facto incorporation arises where there has been good faith compliance with all of the mandatory conditions precedent to incorporation under a valid statute followed by the good faith exercise of corporate powers.

Question 4

Corporation by Estoppel

Answer 4

A defect in incorporation can be serious enough to deny an entity de jure and de facto status. Nevertheless, a person who dealt with the entity as though it was a corporation may be estopped from denying the corporate validity.

Question 5

Alter ego theory

Answer 5

Where the corporation has been so utilized by its shareholder that no separate entity has been maintained and the corporation is merely an alter ego of the owners, the creditor may have grounds to disregard the corporate veil.