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Georgia Law & Distinctions > Corporations > Flashcards

Flashcards in Corporations Deck (114)
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1

What are "Articles of Incorporation"?

The articles of incorporation must be filed to incorporate, but they need not spell out the manner in which the corporation is to be governed.

2

What are "Articles of Correction"?

If the articles of incorporation contain an inaccuracy or were defectively executed, then articles of correction may be filed with the state to correct the inaccuracy or defect.

3

What are "Bylaws"?

The bylaws may contain any lawful provision for the management of the corporation’s business or the regulation of its affairs that is not inconsistent with the articles of incorporation. When there is a conflict between the articles of incorporation and the bylaws, the articles of incorporation control.

4

Who adopts the Corporate Bylaws?

Generally, the board of directors adopts the initial bylaws.

However, a majority vote by either the directors or the shareholders can adopt, amend, or repeal a bylaw.

5

What is an "Organizational Meeting"? When is it held?

Once the articles of incorporation are filed, an organizational meeting is held at which the appointment of officers, adoption of bylaws, and approval of contracts may take place.

When the incorporators hold the meeting, election of the board of directors also takes place.

6

What must be included in a corporation's articles of incorporation?

The articles of incorporation must set forth the following basic information about the corporation:

  1. its name,
  2. the number of shares it is authorized to issue,
  3. the street address of the initial registered office and the name and address of its registered agent,
  4. the name and address of each incorporator, and
  5. the mailing address of its initial principal office, if different from the initial registered office.

7

What restrictions are placed on a Corporation's name?

The corporation’s name must contain the word “corporation,” “company,” “incorporated,” “limited,” or an abbreviation thereof.

The corporate name must distinguish the corporation from any other corporation incorporated or authorized to transact business in Georgia.

8

How must the articles of incorporation provide for the corporate purpose?

In Georgia, the articles of incorporation do not need to include a statement of the corporation’s purpose.

A corporation has the purpose of engaging in any lawful business unless a more limited purpose is set forth in the articles of incorporation.

9

What are the statutory powers granted to corporations by default?

  1. To sue or be sued;
  2. To have a corporate seal;
  3. To make and amend bylaws;
  4. To purchase and transfer rights in real or personal property;
  5. To contract and incur liabilities;
  6. To lend money, invest funds, and hold property;
  7. To be a promoter, partner, member, associate, or manager of any partnership, joint venture, trust, or other entity;
  8. To elect directors and appoint officers;
  9. To establish pension and profit-sharing plans;
  10. To make donations for the public welfare or for charitable, scientific, or educational purposes;
  11. To transact lawful business that will aid governmental policy; and
  12. To make payments or donations in furtherance of the corporate business.

10

What is the default durration for a corporation?

A corporation has perpetual duration, unless otherwise provided in the articles of incorporation or in an amendment to the articles of incorporation.

11

What restrictions are placed on the Registered Agent?

A corporation must maintain a registered office and a registered agent in Georgia.

A registered agent may be any of the following individuals or entities whose business office is also the registered office of the corporation:

  • a person who resides in Georgia,
  • a domestic corporation or nonprofit domestic corporation, or
  • a foreign corporation or nonprofit foreign corporation authorized to transact business in Georgia.

12

What are the technical filing requirements for a corporation's articles of incorporations?

The articles of incorporation must be:

  1. in English,
  2. typewritten or printed,
  3. signed by the chairman of the board of directors, an officer, an incorporator, or other fiduciary, and
  4. filed with the secretary of state along with a filing fee.

The secretary of state may authorize the filing of the articles by electronic transmission. The legal existence of a corporation begins when the articles of incorporation are filed by the secretary of state.

13

Can a corporation generally commit an ultra vires action?

In general, the validity of a corporate action may not be challenged on the ground that the corporation lacks or lacked the power to act.

However, when a corporation that has stated a narrow business purpose in its articles of incorporation subsequently engages in activities outside that stated purpose, the corporation has engaged in an ultra vires act.

14

Under what mannor may a corporate action be challenged as an ultra vires act?

  • A shareholder can file suit to enjoin the corporation’s ultra vires action;
  • The corporation can take action against a director, officer, or employee of the corporation who engages in such action; or
  • The state through the attorney general can initiate a proceeding against the corporation to enjoin its ultra vires action.

15

May a corporation be bound by an ultra vires agreement?

When a corporation knows of the ultra vires act and retains the benefits of an unauthorized contract executed on its behalf without authority, the corporation may be bound because of ratification, and it cannot use ultra vires as a defense for its liability.

16

May a corporation be enjoined from committing an ultra vires act?

In an action by a shareholder to enjoin an ultra vires act, it will be enjoined only if it is equitable to do so.

17

What is the effect of de jure corporation?

The corporation, rather than persons associated with the corporation (i.e., shareholders, directors, officers, and other employees), is liable for activities undertaken by the corporation.

18

What is the effect of a lack of good-faith effort to incorporate?

A person that conducts business as a corporation without attempting to comply with the statutory incorporation requirements is personally liable for those business transactions.

19

What is the effect of a defective incorporation despite a good-faith effort to incorporate?

When a person makes an unsuccessful effort to comply with these incorporation requirements, that person may be able to escape personal liability under either the de facto corporation or corporation by estoppel doctrine.

20

What is a "De facto corporation"?

Under Georgia law, any person who enters into contracts with knowledge that there was no incorporation is personally liable for all liabilities created.

This statute requires culpable knowledge. Thus, if a promoter acts, believing that the corporation exists, then there is no liability.

21

What is "Corporation by estoppel"?

A person who deals with an entity as if it were a corporation is estopped from denying its existence and is thereby prevented from seeking the personal liability of the business owner.

This doctrine does not apply if the promoter has knowledge that the corporation does not exist. This doctrine is limited to contract actions.

22

May a corporation amend its articles of incorporation?

The corporation can amend its articles with any lawful provision. The procedure for securing approval to amend the articles of incorporation varies depending on whether the corporation has issued stock. Once the necessary approval is obtained, articles of amendment must be filed with the state.

23

How may a corporation amend its articles if no stock has been issued?

If the corporation has not issued stock, then the board of directors—or, if the board does not exist, the incorporators—may amend the articles of incorporation.

24

How may a corporation amend its articles of incorporation if stock has been issued?

If stock has been issued, then corporations generally must follow a two-step approval process:

i) The board of directors must adopt the amendment to the articles of incorporation; and

ii) The board must submit the amendment to the shareholders for their approval by majority vote.

25

Who is a "promoter"?

Before the formation of a corporation, a promoter engages in activities, such as procuring capital and entering into contracts, to bring the corporation into existence as a business entity.

26

Who holds the liability for pre-incorporation agreements?

All persons purporting to act on behalf of a corporation, knowing there was no incorporation, are jointly and severally liable for all liabilities created while so acting, even after the corporation comes into existence, unless a subsequent novation releases the promoter from liability.

27

What is a common novation agreement in corporate law?

A novation is an agreement between all the parties releasing the promoter from liability and substituting the corporation. If a party who contracts with a promoter agrees to look to some other person or fund for payment, then the promoter is not personally liable.

28

What fiduciary duties does a promoter possess regarding the corporation?

A promoter stands in a fiduciary relationship with the pre-incorporated corporation.

The promoter can be liable to the corporation for violating a fiduciary duty, such as failing to disclose a commission on a pre-incorporation transaction.

29

What is a promoters right to reimbursement?

Although a promoter can seek compensation for pre-incorporation activities undertaken on the corporation’s behalf and reimbursement for related expenses, the promoter cannot compel the corporation to make such payments, because the promoter’s acts, while done to benefit the corporation, are not undertaken at the corporation’s direction.

30

What is the general rule regarding a promoters pre-incorporation transaction liablties?

A corporation is not liable for pre-incorporation transactions entered into by a promoter. The fact that the promoter entered into the transaction to benefit a future corporation is not sufficient to hold the corporation liable.

Because a corporation is not necessarily in existence during a pre-incorporation transaction, a principal-agent relationship does not exist between the corporation and the promoter.