Organization of a Corp Flashcards
If there is no express state of corporate activity in the A of I, then corp can do . . .
Any lawful activity
An activity that is beyond the scope of the purpose set forth in the A of I is called a ____ ____ activity
Ultra vires activity
How do we handle ultra vires activities today? Are they valid? S/H recourse? Liability?
Valid
SH can seek an injunction
Responsible managers are liable to corp for ultra vires losses.
Why is failure to form a de jure corporation a bad thing?
Can expose SH to liability
Two defenses to faulty corp formation to protect SH?
De Facto Corp
Corp By Estoppel
Three requirements for a De Facto Corp?
Relevant incorporation statute
The parties made a good faith, colorable attempt to comply with it; and
Some exercise of corporate privileges (i.e., acting like a corp)
Effect of a De Facto Corp?
If all 3 elements met, the business is treated like a corpr for ALL PURPOSES, except in an action by the state (quo warranto)
Explain Corp by Estoppel
One who treats a business like a corp may be estopped from denying that it is a corp.
Corp by Estoppel applies ONLY in these type of cases, not these
Contract, NOT tort.
If a bylaw conflicts with a A of I, which controls?
The A of I.
Are bylaws binding on outsiders?
No
Who is a promoter?
Person acting on behalf of the corp not yet formed. Enters contracts on behalf of the corp.
A corp will not be liable on pre-corp contracts until when?
It adopts the k
A corp can adopt a k in two ways. Explain them
Express – BOD action adopting the k
Implied – corp accepts the benefit of the k
A promoter will be held liable on pre-inc contracts until what happens?
A novation
P enters a k for corp pre-inc. Corp forms and adopts the k. Is P still liable?
Yes. Liable until novation. Adoption not enough to relieve the promoter.
NOTE: Corp liable, too once it adopts
What must the corp receive when it issues stock?
Consideration of some form
Who determines whether consideration for stock is adequate?
the BOD
Par value means . . .
Minimum issuance price of stock
What is a preemptive right?
The right of an existing SH to maintain a percentage of ownership by buying stock when there is new issuance.
In PA, preemptive rights only exist if . . .
The Articles provide for them
