Organization (FP #1)

Question 1

What is a de jure corporation?

Answer 1

Corporation formed in accordance with law

Question 2

Requirements for a de jure corporation

Answer 2

1) person (art. of incorp.)
2) paper AND
3) act

Question 3

What is required for the articles of incorporation?

Answer 3

1) name of corporation
2) name/address of incorporator(s)
3) registered agent & registered office’s street address
4) info re corporation’s stock

Question 4

If corporation does not have a statement of business (i.e., purpose)?

Answer 4

MBCA presumes corporation formed to conduct any lawful conduct

Question 5

What are ultra vires acts?

Answer 5

Activities beyond the scope of corporation’s stated business purpose

Question 6

In what 3 situations can ultra vires act be raised?

Answer 6

1) shareholder suing to enjoin act
2) corporation suing officer/director for damages for approving act
3) State may move to dissolve

Question 7

What is an organizational meeting? Who partakes?

Answer 7

Meeting of directors (or, if no directors, incorporators) to complete the organization of the corporation (i.e., adopt initial bylaws and appoint officers)

Question 8

When does corporate existence begin?

Answer 8

When incorporators have delivered notarized AofInc to secretary of state AND paid applicable fees

Question 9

What document prevails between the Articles of Incorp. and Bylaws?

Answer 9

Articles of Incorporation

Question 10

What is the internal affairs doctrine?

Answer 10

Idea that internal affairs of corporation governed by law of state of incorporation

Question 11

What are benefit corporations?

Answer 11

Corporation formed 1) for profit AND 2) to pursue some benefit to a broader social policy cause

Question 12

What is required to form a B corp?

Answer 12

Articles must say it’s a B Corp
Also required: annual benefit report; decision-makers must consider broader impact

Question 13

Requirements for de facto corporation

Answer 13

1) relevant inc. statute (always met)
2) parties made GF, colorable attempt to comply, AND
3) exercise of some corporate privileges (i.e., acting as corp.)

Question 13

What are corporate shareholders generally liable for?

Answer 13

Only for their stock (NOT corporate debts)

Question 14

How can incorporators avoid personal liability following defective formation?

Answer 14

1) de facto corporation
2) estoppel

Question 15

Effect of recognizing entity as de facto corporation?

Answer 15

Entity treated as corporation for all purposes EXCEPT in action by state (i.e., “quo warranto” action)

Question 16

What is the key limitation when seeking a de facto corp. finding?

Answer 16

Can only raise if unaware that there was no valid corporation

Question 17

What is a corporation by estoppel?

Answer 17

Doctrine from CL saying persons who’ve dealt with entity as if it were a corporation are estopped from denying corporation’s existence

Question 18

What are the only instances in which corp. by estoppel applies?

Answer 18

CONTRACT cases (not tort victims)

Question 19

What is a promoter?

Answer 19

Person acting on behalf of corporation not yet formed; considered joint venturers with FD to each other

Question 20

How can promoter breach FD?

Answer 20

Secretly pursuing personal gain at expenses of fellow promoters

Question 21

What is a promoter’s FD to a corporation?

Answer 21

1) fair disclosure
2) good faith

Question 22

A promoter who profits by selling property to corporation may be liable for his profit UNLESS _____.

Answer 22

All material facts were disclosed

Question 23

Promoter must disclose to _____.

Answer 23

All who are contemplated to be part of initial financing scheme

Question 24

T or F: Promoter cannot enter contracts on behalf of corporation until formed

Answer 24

False (BUT corp. not usually bound prior to incorp.)

Question 25

Under what circumstance may corporation be liable for K entered by promoter on its behalf?

Answer 25

Where it expressly or impliedly adopts the promoter’s contract

Question 26

Per MBCA, anyone who acts on behalf of corporation knowing it doesn’t yet exist is ________.

Answer 26

Jointly and severally liable for the obligations incurred

Question 27

What are foreign corporations?

Answer 27

Any corporation outside the state in question, whether from another state or another country

Question 27

If a promoter enters agreement with 3P on behalf of unformed corporation, the promoter is ______.

Answer 27

Personally liable on K until express or implied novation (i.e., agreement between all 3 parties) OR special agreement

Question 28

What is the promoter’s right to reimbursement?

Answer 28

Promoter has right to be reimbursed for contracts entered before corporation formed to extent ant benefits are received by the corporation

Question 29

Requirement for foreign corporations transacting business in a given state?

Answer 29

Must register with state and pay fees (usually means must provide info re AofInc and prove good standing in home state)

Question 30

What does “transacting business” mean?

Answer 30

regular course of intrastate business activity