Pre-incorporation Flashcards
What is a promoter?
the person who engages in activities such as raising capital and forming contracts in order to bring a corporation into existence.
What is Promoter Liability?
A promoter will be personally liable for pre-incorporation transactions, even after the C comes into existence, unless a subsequent novation releases the promoter from liability.
What is the Exception to Promoter Liability?
If a 3rd party with whom the promoter makes a K with on behalf of the C knew that incorporation had not occurred, the promoter will not be liable.
Does the promoter get reimbursement from the C if the promoter is held personally liable for a pre-inc. agreement made in good faith?
Yes, a promoter generally has a right to reimbursement from the C for benefits received.
Is a C generally liable for pre-inc. transactions that are formed by a promoter?
No, but the C can become liable if the C adopts the K by accepting the benefits of the transaction or accepting liability (eg through a board resolution).
Is the Incorporator, ie person who signs and files the article of inc liable for pre inc. K’s formed by promoter.
No, think skinny lawyer, is not liable.
