Post-formation

Question 1

Bylaws

Answer 1

1. private document containing details for how corporation is run
2. bylaws are not required
   i. usually exists for internal governance (responsibilities of officers, board meetings, methods of giving notice)
3. bylaws are not filed with state
4. initial bylaws adopted by BoD at organizational meeting
5. SHs (and BoD in some states) can amend or repeal bylaws
6. if bylaws conflict with the articles, the articles control

Question 2

Pre-incorporation contracts

Answer 2

1. often tested
2. promotors may enter into a contract on behalf of a corporations not yet formed
   i. promotor (entrepreneur): a person acting on behalf of a corporations not yet formed

Question 3

Corporation’s liability

Answer 3

1. general rule of no liability
2. the corporation is not liable on pre-incorporation contracts unless it adopts the contract
3. the corporation may adopt the contract:
   i. express adoption: board action adopting the contract
   ii. implied adoption: corporation accepts a benefit of the contract
4. adoption makes the corporation liable, but the promotor is still liable (until novation)
   i. joint and several liability

Question 4

Promotor’s liability

Answer 4

1. general rule of liability
2. promotor is liable for pre-incorporation liable until there is a novation, unless the contract clearly provides otherwise
3. novation: substitution of corporation for the promotor
   i. agreement of the promoter, corporation, and contracting third party that the corporation will replace the promoter under the contract