2) Formation Flashcards
(25 cards)
promoter
ppl who are planning to form a corporation but haven’t yet. take prelim steps
promoter as agent of contemplated corporation
is NOT!
corp doesn’t exist yet, so can’t be the principal to an agency rship
promoters binding future corporation
can’t
rship btwn promotors (and result)
mutual agency, partnership-type.
RESULT: their ks are binding on each other, joint + several
personal liability of promotors for k
when promoter enters k on behalf of not-yet-existing company
they ARE (usu) personally liable, regardless of whether say ‘obo corp’
personal liability of promotors for k: exceptions
NOT liable if:
1) preincorporation k specifically says promotor not liable
OR
2) circs demonstrate that other party agreed to look only to corp. for performance
so now the corp exists – is it liable for pre-incorp ks from promoters?
No, UNLESS
1) adoption
2) novation
(it didn’t exist so couldn’t ex. ratify)
new-existing corp: adoption: def
1) express: board passes resolution
2) implied: corp accepts or acks the benefits of the k
CANT RATIFY, only adopt (bc agency)
new-existing corp: novation: def
ALL: 1) promoter, 2) the other party to the k, and 3) corp. agree to the substitution of corp. as party to k in place of promoter
new-existing corp: adoption: result re. promoter liability
yes still personal liability for promoter, corp. liable too
NOTE: promoter is entitled to indemnification from the corp.
new-existing corp: novation: result re promoter liability
no more liability for promoter
becoming a corp: stages
1) incorporation
2) organization
incorporation: reqs
1) proper articles of incorporated
2) executed + filed w SOS (dnn to be by promoters), inc fee
properly executed arts of incorp must include
1) signatures of directors if named, or incorporators
2) name of co
3) applicable statement of purpose
4) name/address of agent SOP
5) address of corp
6) number of shares of each class can issue
name of corp: reqs
1) not taken
2) NO req to say “corp” etc (excepc close corps)
statement of purpose
usu: “any lawful activity”
only need to be more specific if: law/accounting/banking/trust co/insurance
CAN make it limited if you want
ultra vires
corp can’t do k or activity beyond scope of powers.
ultra vires: applicability
not very applicable bc usu powers are broad. AND bc in CA, can’t be raised as defense against 3rd party
effective date of incorporation
date of filing by SOS, not date submitted.
SOS filing is usu conclusive proof that properly incorporated
organizing corp: steps
1) name directors (if not already)
2) appoint officers
3) bylaws
(3+2 can be done by either incorporators or directors)
organizing corp: effect of failing to do so
shareholders might have personal liability for corp debt/obligations (pierced veil)
de facto corp
you thought you were a corp but weren’t – rare today bc SOS certificate is conclusive evidence of incorp
corp by estoppel: exs
misfile articles of incorp
misname your corp on a doc
etc
corporation by estoppel: def
- -k dispute btwn 3rd party and entity believed to be a corp
- -court can estop EITHER from alleging that it wasn’t really a corp/isn’t liable
- -if would unjustly expose corp to liability or deny relief to 3rd party
- -if equity demands (justice)
