Promoters Flashcards
Promoter
an intracorporate agent who procures commitments for capital and other instrumentalities that will be used by the corporation after its formation.
What duties do promoters within the same corporation owe to one another?
promoters of the same corporation owe fiduciary duties to one another and are joint venturers.
How can a promoter breach their fiduciary duty to the corporation and one another?
by pursuing personal gain at the expense of the other promoters.
What fiduciary duty does a promoter owe to the corporation for which they work?
promoters owe their corporation a duty of fair disclosure and good faith.
A promoter who profits by selling property to the corporation may be liable for what?
for all profits from the transaction unless all material facts of the transaction were disclosed.
When will a promoter not be liable for all profits gained by him from selling property to the corporation?
when he has disclosed his transaction to an independent board of directors and approved, the promoter has met his duty and will not be liable for his profits.
Can a promoter be sued for fraud?
yes, by a plaintiff who has been damaged by the promoter’s fraudulent misrepresentations or fraudulent failure to disclose all material facts.
Where a promoter enters into a preincorporation contract with a third party on behalf of a planned but unformed corporation, who is liable?
the promoter is personally liable on the contract.
If a corporation is formed and adopts a contract which was entered into by a promoter and a third party prior to the incorporation of the corporation, who is then liable for the contract?
the promoter is still personally liable.
Where a preincorporation agreement expressly relieves the promoter of liability, is the promoter nonetheless liable?
no, he is relieved of liability for the contract.
Is a corporation liable for contracts entered into by its promoter before it is incorporated?
no, but it can adopt the contracts after it has been incorporated.
