1
Q
Pre-incorporation agreements &
promoter liability
A
- Promoter is personally liable for knowingly acting on behalf of a corp (C) before incorporation, and remains liable after C comes into existence unless:
1. There is a subsequent novation releasing promoter from liability
2. The 3rd party looks only to C for performance, or
3. the promoter had no actual knowledge that the C’s charter has not yet been issued.
2
Q
C’s liability for pre-incorporation transactions?
A
- Generally not liable, even those for the benefit of C (there is no principal-agent r/ship)
- C is liable if it expressly or impliedly adopts a K by accepting the benefits of the transaction, or gives an express acceptance of liability for the debt.
3
Q
What must be included in the
Articles of Incorporation (AOI)
A
- MUST include corporate name and be filed with the state
- MAY enumerate powers that C possesses, or limit its duration, may include statement of C’s legal purpose
- Corporate existence begins when the articles are filed, unless the articles establish a later date.
4
Q
Ultra Vires Actions
A
When a C has stated a narrow business purpose in its AOI then subsequently engages in activities outside that stated purpose;
A 3rd party generally can NOT escape liability for a transaction that is an ultra vires corporate act.
5
Q
What is a De Jure Corporation?
A
Occurs when all statutory requirements for incorporation are satisfied; C is liable for C’s actions
6
Q
Defective Corporation
Good faith vs. Lack of Good faith
A
- Good Faith effort: two ways to escape liability:
(1) de facto C; owner must make a GF effort to comply w/ the incorporation rqmts AND operate C w/out knowing the rqmts were not met.
(2) corporation by estoppel A person dealing with an entity in a contractual agreement as if it were a C is estopped from denying its existence and seeking personal liability - Lack of Good Faith: A person who conducts business as a C w/out complying with the incorporation reqt’s is personally liable for the non-existent C’s obligations
