Formation Flashcards
(14 cards)
Incorporators
may be one ore more persons, or an entity
Articles of Incorporation Requirements
- corp’s name
- # of shares authorized and the distinguishing characteristics
- authorized = max # shares corp can have/sell
- distinguishing character = diff types of stocks
- name and address of registered agent
- principal address of corporation
- name and addresses + signatures of incorporators
Permissive Info on Articles of Incorporation
- # of directors
- Par value of stock = minimum price to sell each share (if you sell below par value = water stock & board of directors are liable)
- imposition of personal liability on shareholders
- initial purposes
- Preemptive rights
- any other provision
Filing
Articles of Incorporation are filed with the department of state and corporate existence begins upon filing
Organizational Meeting
After incorporation, initial directors (if named in articles) or the incorporators will hold an organizational meeting to complete appointment of officers, adopting bylaws, etc.
- Requires at least 2 days’ notice
- These actions can be taken without a meeting if evidence by a written consent describing the action taken and signed by each incorporator or director
Bylaws
May contain any provision for managing the business and regulating the affairs of the corporation that is not inconsistent with law or the articles of incorporation
Defective Formation
(a) De Jure Corporation: Formed under substantial compliance w/ all mandatory requirements.
(b) De Facto Corporation: Good faith attempt to incorporate, but some sort of technical error.
(c) Corporation by Estoppel: Parties act as if there is a corporation, but there isn’t.
Personal Liability for Defective Incorporation
a person can be held personally liable for a defectively formed corporation only if the person KNOWS there is no valid corporation and still purports to act on behalf of the corporation
Disregard of Corporate Entity
A court may disregard the corporate entity, or “pierce the veil,” and shareholders in the business may be held jointly and severally liable
Alter Ego Doctrine
court might disregard the corporate entity when the corporation appears to be the alter ego of the shareholders and used by them as a conduit for their personal affairs
- requires a showing of improper conduct
Thin Capitalization
A corporation must have capital adequate to meet its reasonably foreseeable needs
Deep Rock Doctrine
In bankruptcy proceedings, capital contributions that are denominated as “loans” by shareholders of CLOSE CORPORATIONS may be subordinated to debts owed to outsiders
Subsidiary Corporations
A parent corp may be liable for the debts of a subsidiary when the subsidiary is inadequately capitalized, intermingled with the parent, or otherwise not a true distinct entity
Corporate Name Rules
- name of corp has to end in “corporation,” “company,” or “incorporated;”
- name can’t already be taken; and
- name can’t be misleading
