Promoters & Incorporation Flashcards

1
Q

General

A

Corporation Definition - separate entity that can sue and be sued, enter into contracts, and can last forever

Sharholder Liability - limited liabilty; not personally liable for debts of entity

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2
Q

Pre-Incorporation Transactions - Promoters

A

Definition - person who persuades people to invest in a corporation that she intends to form

Liability - generally personaly liable for any contracts entered into before the corp exists

After Formation - generally libable after corporation has been formed unless the corporation has an expressly released the promoter from responsibility (i.e.g, novation)

Indemnificaiton - can limit liability though an agreement with an indemnification clause

Exception - promoter not liable for pre-incorporation contract if:

  1. contract specifically states that the promoter is acting only on behalf of the future corporation and assumes no personal liability
  2. the corporation is then formed properly
  3. the corporation then adopts that contract
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3
Q

Pre-Incorporation Transactions - Corporation’s Liability

A

Before Corp. Exists - corp not liable for contracts entered into by prommoter because no fiduciary relationship exists between the two

Adoption - can be liable where the corp adopts the contract.

Adoption Rule - when corporation accepts the benefits of the transaction or gives an express or implied acceptence of liability for the debt

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4
Q

Pre-Incorporation Transactions - Incorporators

A

Definition - person who signs and files the articles of incorporation

Liability - not liable for pre-incorporation contracts

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5
Q

Incorporation

A

Key Document - Article-s of Incoporporation filed with Secretary of State with fees paid

Article of Incorporation Contents:

  1. incorporator name and address
  2. corproations name and address
  3. magic word (e.g., inc, corp, co, etc.)
  4. designated agent in ohio for service of process
  5. the number of shares the corporation has it is authorized to issue
  6. if the copr has ny initial stated capital
  7. purpose not required
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6
Q

Bylaws

A

Required? - no but nearly every corp has them

Contents - working rules for the coproration

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7
Q

Defective Corporations

A

De Jure Corp - when proper requirements are ment for forming the corp, it is called this

Liable if Defective Application - if requirements not met but does business as though it had complied, then either incorporator or corporation may be laible

Oblgiations AfterFormation” - if good faith effort made to incorporate, may be liable for obligations entered into after corporation was supposedly formed

No Good Faith - then personally liable for obligations incurred in the name of the would be corp

Yes Good Faith - then corp may be treated as if it were a de jure corp and not personally liable if either:

  1. Defacto Corp - owner has made a colorable good faith effort to compy with incorp requirements of state and operates the business as a corp without knowing that the requirements had not been met.
  2. Corp by Estoppel - person who deals with entity as if it were a corp is estopped from denying its existence and thereby prevented from seeking personal liablity of the business owner
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8
Q

Ultra Vires Acts

A

Where Ultera Vires Action Permitted -

  1. shareholder filing suit to enjoin corp from acting outside stated purpose
  2. the corporation takes action against a director, officer, or employee of the corp who engages in such action
  3. state initiating a proceedings against the corp
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