Organization of Corporation

Question 1

What does it take to form a corporation?

Answer 1

1. People - Incorporators (must have 1 or more); executive articles and deliver to secretary of state; can be a person or entity.
2. Paper - Articles of incorporation
3. Act

*Completing these steps gives us a de jure corporation!!!

Question 2

Articles of Incorporation

Answer 2

This is a contract between the corporation and shareholders and the state. MUST include:

• Names and addresses
• Corporate name
• Name and address of each incorporator
• Name of registered agent and address of the registered office in GA
• Address of the principal office, which can be anywhere
• May give a purpose or duration
• MUST include capital structure (stock)

Question 3

Pre-Incorporation Contracts (Liability)

Answer 3

Liability of Corporation - A corporation is NOT liable on pre-incorporation contracts UNTIL it ADOPTS the contract. Promoter will be liable. Adoption can be implied by taking a benefit.

Liability of Promoter - Unless the contract clearly provides otherwise, the promoter remains liable on pre-incorporation contracts until there has been a NOVATION.

Question 4

Novation

Answer 4

An agreement of the promoter, corporation, and the other contracting party that the corporation will replace the promoter under the contract.

Question 5

Adoption

Answer 5

Adoption makes the corporation liable too, but does NOT relieve promoter of liability on a pre-incorporation contract.

• Adoption may be express or implied.
• A Corporation is not liable on a contract entered into be a promoter before the corporation is formed unless there is an adoption of the contract.

Question 6

Promoter

Answer 6

A person acting on behalf of a corporation not yet formed.

• Example: Promoter might enter before corporation is formed.

Question 7

De Jure Corp

Answer 7

• A corporation that meets all the requirements of registering as a corporation in GA.
• GA law requires that you meet all the requirements in order to be accepted as a corporation.

Question 8

De Facto Corp

Answer 8

ANYONE ASSERTING DOCTRINE MUST BE UNAWARE OF FAILURE TO FORM DE JURE

Where parties failed to form a de jure corporation - so they’re personally liable for what business does.
Requirements:
1. There’s a relevant incorporation statute;
2. Parties made good faith attempt to follow; and
3. Some exercise of corporate privileges

• If all apply, then business is treated as a corporation for all purposes except in action by the state.
• ***GA may have abolished this - It is unclearly

Question 9

Duration of Corporation

Answer 9

Perpetual unless the articles say otherwise

Question 10

Internal Affairs Doctrine

Answer 10

GA laws will govern the internal affairs of a GA corporation even if it is doing business in another state.

Question 11

Generally who is liable for what a corporation does?

Answer 11

The corp itself. Corp is a separate legal person. It can sue and be sued, hold property, be a partner in a partnership, make charitable contributions, must pay income taxes, etc

Question 12

Corp By Estoppel

Answer 12

ANYONE ASSERTING DOCTRINE MUST BE UNAWARE OF FAILURE TO FORM DE JURE

One who treats a business as a corporation may be estopped from denying it’s a corporation. (People think you’re a corporation because you hold yourself out to be one) Can’t avoid liability by saying it was not a properly formed corporation if holding it out to be one.

• Good law in GA
• ONLY APPLIES IN CONTRACTS, NOT TORTS!

Question 13

Who can amend or repeal the bylaws of a corp?

Answer 13

The boar or incorporators

Question 14

Must a corp have bylaws?

Answer 14

• No
• Bylaws not filed with SOS - they are internal
• If there are bylaws - adopted by The Board or Incorporators

Question 15

If bylaws conflict with articles which controls?

Answer 15

Articles. They are a contract with the state

Question 16

Liability of Promoter

Answer 16

Unless the K clearly provides otherwise, the promoter remains liable on pre-incorporation contracts until there has been a novation

Question 17

Foreign Corporations

Answer 17

• One formed outside GA

- If transacting biz in GA needs a certificate of authority from Sec of State

Question 18

What happens if foreign corp fails to qualify for doing biz in Georgia within 30 days of transacting biz here?

Answer 18

1. Civil fine

2. Cannot sue in GA (Can defend suit)

Question 19

Ultra Vires

Answer 19

Beyond the scope of the Articles of Incorporation. At CL, an ultra vires act would be voided. Modern law says:

1. Ultra vires acts are valid;
2. Shareholders can seek an injunction; and
3. Responsible managers are liable to the Corporation for ultra vires acts.

*If a corporation is about to enter into a transaction that is beyond the scope of corporate power, a shareholder may sue to enjoin the transaction under the doctrine of ultra vires. A corporation has NO power to waste corporate assets. This is an ultra vires act.

Question 20

Authorized Stock

Answer 20

Maximum number of shares the corporation can sell.

Question 21

Capital Structure

Answer 21

The Articles must include information about authorized stock, number of shares per class, and information about voting rights and preferences of each class.

Question 22

What Kinds of Things do Bylaws Contain?

Answer 22

• Lay out responsibilities of various people
• Set regular meeting times and places,
• Prescribe methods of giving notice, etc.