Organization of Corporations Flashcards
What are the formation requirements for a NY corporation?
You need people, paper, acts. People are the incorporators. Paper is the certificate of incorporation. The act is New York Department of State filing the certificate and incorporators holding an organizational meeting to adopt bylaws and elect initial directors.
What do the initial incorporators do?
1) Execute the certificate of incorporation
2) Deliver it NY Department of State
3) Hold the organizational meeting to adopt bylaws and elect initial directors.
What information is placed in the certificate of incorporation?
1) Names and addresses - corporate name, corporate address (county in which its located), corporation’s agent (NY Secretary of State), and the name and address of each incorporator.
2) Statement of duration
3) Corporate purpose (required)
4) Capital structure (stock) - authorized stock, number of shares per class, information on par value, rights, preference and limitations of each class, and information on any series of preferred shares.
NOTE: one class of stock or bonds must have unlimited voting rights and at least one class of stock must have unlimited dividend rights.
What is authorized stock?
It is the maximum number of shares the corporation can sell.
What is issued stock?
It is the number of shares the corporation actually sells.
What is outstanding stock?
It is the stock that the corporation has sold and has not reacquired.
Can a corporation make political contributions?
Yes, but there is a $5000 per year, per candidate or organization cap.
Can a corporation guaranty a loan that is not in furtherance of the corporate business?
Yes, if it is approved by 2/3 of the shares entitled to vote.
What is a promoter?
A person acting on behalf of a corporation not yet formed.
When is the corporation liable on pre-incorporation contracts?
The corporation is only liable if it adopts the contract - it is never automatically liable for those contracts.
How does a corporation adopt a pre-incorporation contract?
In one of two ways:
1) By express adoption through board action OR
2) By implied adoption when the corporation knowingly accepts a benefit of the contract.
When is the promoter liable on pre-incorporation contracts?
Unless the contract clearly indicates otherwise, the promoter is liable on a pre-incorporation contract until there is a “novation” - that would be an agreement among the promoter, the corporation, and the other contracting party that the corporation will replace the promoter under the contract.
