This is an extract of our Corporations Bar Mini document, which we sell as part of our Corporations - Bar Exam Outlines collection written by the top tier of Thomas Jefferson School Of Law students.
The following is a more accessble plain text extract of the PDF sample above, taken from our Corporations - Bar Exam Outlines. Due to the challenges of extracting text from PDFs, it will have odd formatting:
1. Corporation Characteristics - (1) Limited Liability (2) Centralized Management (3) Free transferability of ownership (4) Perpetual existence (5) Double Taxation (6) Separate legal entity
2. PRE-Incorporation a. Subscribers- Pre-incorporation written offers to buy stock are irrevocable for 6 months. b. Promoters- Persons acting on behalf of a corporation NOT yet formed i. Liability - Corporation is liable upon adoption and promoter remains liable until novation
1. Corporation may adopt by (1) Express Resolution or (2) Ratification
2. If the corporation never forms, Promoter alone remains liable. ii. Fiduciaries - Promoters owe a duty of loyalty to each other and the corporation.
1. Loyalty - (1) self dealing (2) usurping (3) secret profits
2. Sale to the Corporation of Property Acquired: a. Before becoming a promoter - Can only sell for fair market value b. After becoming a promoter - ANY profit is recoverable by the corporation.
3. Remedy - May disgorge profits and sue for losses.
3. FORMATION Requirements a. De Jure - Existence begins on filing Articles of Incorporation (A PAIN) i. Authorized Shares - Maximum number of shares that the corp. is authorized to issue. ii. Purpose - Presumed General purpose for perpetual duration unless specific purpose stated
1. Ultra Vires - Acting beyond the purpose of corporation. Remedy (2) State or a Shareholder can sue to Enjoin the activity (2) Personal liability for losses. iii. Agent - Name and address of registered agent for service of process iv. Incorporators - Name and Address of the person who signs and files the AOI with State v. Name of Corporation - Must contain some indicia of corporate status (Inc., Corp.) vi. By-Laws - Laws by which the corporation is governed. The corporation need NOT adopt By-laws. The board has power to adopt and amend by-laws, unless AOI give shareholders power. b. De Facto Corporation Doctrine - A business failing to achieve de jure corporate status nonetheless is treated as a corporation, if: (1) Good faith, colorable attempt to comply with corporate formalities, and (2) NO knowledge of the lack of corporate status. c. Corporation by Estoppel - Applies in Contracts to prevent a corporate entity and parties who have dealt with the entity as if it were a corporation, from backing out of their contracts. d. Foreign Corporations - An out of state corporation may engage in business instate by filing a (1) Certificate of Authority with state that includes all requirements of the AOI
4. Limited Liability -Shareholders are NOT personally liable for debts and obligations of the corporation except for the price of his stock. a. Piercing the Corporate Veil - Courts allow piercing to avoid Fraud and Unfairness (FU) i. Alter-Ego - Failure to maintain Corporate Formalities (Commingling) ii. Undercapitalization - Insufficient Funds to cover Foreseeable Liabilities iii. Prevent Fraud - Necessary to prevent fraud
5. Issuance of Stock - When a Corporation sells its own Stock. (i.e. NOT 3rd parties reselling) a. Preemptive Rights - right of an existing shareholder to maintain her percentage of ownership by buying stock whenever there is a new issuance of stock for cash. (Only if stated) b. Consideration - What must the corporation receive when issuing stock 1
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