Liability in Corporations

Question 1

Pre-Incorporation Contract Liability

Answer 1

Promoter: personally liable unless (i) there is a novation agreed amongst all parties for corporation once it is formed; (ii) contract expreslly states as such (treated as revocable offer to proposed corp.)

NOTE: Promoters are jointly and severally liable for acts of other promoters

Corporation: Not liable unless either:
1. Adopted contract upon formation
2. Adopted Benefit

Question 2

Promoter

Answer 2

Person acting on behalf of a corporation not yet formed

Question 3

Shareholder Liability

Answer 3

NO unless you are a** controlling shareholder**, who ay not use control to obtain a special advantage at the expense of the minority shareholders