Pg 15

Question 1

What is the way to bind a corporation once it is formed through acceptance of a continuing offer?

Answer 1

The original promoter’s contract is a continuing proposal which the corporation can accept when it comes into existence. This is a legal fiction but still accepted

Question 2

How can a corporation be bound by a pre-incorporation contract after formation through a new contract?

Answer 2

When a corporation adopts a promoter’s contract, it is really making a new contract for new consideration. This then removes the promoter from being liable

Question 3

How can a pre-incorporation contract bind a corporation once a corporation is formed through a novation?

Answer 3

The parties to the promoter’s contract always anticipated that the corporation would accept the contract once the corporation was formed so this is just a substitution of the parties. The original parties agree to substitute the corporation to replace the promoter. All three parties agree for the new corporation to be the substitute and that removes the promoter from liability.

Question 4

How can a corporation be bound by a pre-incorporation contract through Quantum Meruit?

Answer 4

Most courts hold corporations liable for the fair value of benefits that they got.

Question 5

What is a corporate entity?

Answer 5

This is the corporation as a legal person that is distinct from the shareholders

Question 6

What is a B Corp or a benefit corporation?

Answer 6

A corporate entity that has a mission that includes a public benefit. Corporations can elect to focus on social responsibility to make a material positive impact on society/the environment

Question 7

What is required to create a B Corp?

Answer 7

The directors must consider the interests of non-shareholder constituents, give annual benefit reports, and have a public benefit purpose

Question 8

What are some examples of public benefit purposes for B Corporations?

Answer 8

– providing low income or underserved people with beneficial products and services
– promoting economic opportunity in the normal course of business
– preserving the environment
– improving human health
– promoting the arts or sciences
– advancement of knowledge
– increased flow of capital to entities that have a public benefit purpose

Question 9

If a corporation has been formed and now wants to change to a benefit corporation, what do they need to do?

Answer 9

They need the vote of 2/3s of the shareholders

Question 10

If a B corporation wants to terminate their B corporation status, what do they have to do?

Answer 10

They must amend the articles of incorporation to delete the B corporation part and they must do this by a 2/3s vote of the shareholders

Question 11

Essentially B corporations have a dual mission, what is it?

Answer 11

To create a positive impact on society or the environment and also to make a profit

Question 12

What are the director’s duties for B corporations?

Answer 12

• promote the public interest
• consider the effects of the corporation’s actions on shareholders, employees, the workforce, suppliers, customers, community, and society
• think of the long-term interests of the corporation

Question 13

What is the annual benefit report for B corporations?

Answer 13

This is an annual report that evaluates the corporation’s success in creating a general and specific public benefit. It includes a narrative description of the ways the corporation pursued its benefits from the AOI, a description of hindrances, the way that they selected third-party standards to prepare the report, and an assessment of the overall social and environmental performance of the corporation

Question 14

What is the standard that is applied to the annual benefit report for B corporations?

Answer 14

A third-party standard for defining, reporting, and assessing corporate performance. This must be independent of the corporation, which means that there is no material relationship with the corporation

Question 15

What does the SEC require for corporations?

Answer 15

• they must have an audit committee of three independent directors that have not been employees of the corporation within three years or gotten any compensation more than $60,000 from the corporation
• each member must be financially literate (and one must be financially sophisticated)
• this committee makes disclosures with their recommendations and has discussions with management
• all directors must sign the SEC form which makes them primary participants in any suit
• the CFO and CEO certify periodic reports to the SEC saying they had knowledge that the reports didn’t have any untrue statements and fairly represented all material aspects of the financial condition of the corporation

Question 16

Can a company make a personal loan to its directors or officers?

Answer 16

No

Question 17

Can stock be transferred?

Answer 17

Yes, stock is readily transferrable by its owner. But there can be restrictions in the bylaws as long as they are on the face of the stock certificate and they give notice to potential buyers

Question 18

What does “efficient market” mean with regard to stock ownership?

Answer 18

The purchase and sale price for stock is set by the market, so it is valued at whatever a buyer will pay and sold at whatever price he can sell it for in the market.