| Term | Definition |
|---|
| Who can incorporate? | Anyone, so long as they are 18 years or older. |
| Can an entity be in incorporator? | Yes, even another corporation can be an incorporator. |
| What are the four requirements for articles of incorporation? | (1) Corporate name and street address (2) Name of incorporators (3) Registered agent/office (4) Capital Structure |
| What is capital structure? | A breakdown of the capital shares. Must state the number of shares the corporation is authorized to issue (this is a ceiling). If more than one class is authorized, must describe the rights and preferences of each class. If only one class authorized, it must have unrestricted voting rights. |
| Does par value need to be mentioned in the articles of incorporation? | No. |
| What is ultra vires? | Anything beyond what is covered in the corporate purpose clause. |
| Must a corporate purpose clause be included? | No, it is optional. |
| What are three situations where ultra vires activities may be raised? | Shareholder action (to enjoin the ultra vires activity); Darivative lawsuit (brought by SH for losses sustained b/c of ultra vires activity); Action by attorney general |
| Can ultra vires be raised as a contract defense? | No. |
| What is the duration of a corporation? | Permanent, unless the articles say different. |
| What are bylaws? | Basic information about internal governance. But they can be more elaborate and include imposing special quorum requirements or limitations on selling shares. |
| Must bylaws be adopted? | Yes, but there is no penalty if the corporation doesn't. |
| Who may adopt bylaws? | Directors must initially adopt, then if directors adopt shareholders can. |
| Bylaws adopted by directors can be modified by whom? | Either directors or shareholders. |
| What is a de facto corporation/corporation by estoppel? | An equitable doctine by which a business failiing to achieve de jure status is treated as if it were a corporation, so shareholders are not personally liable for its debts. |
| What does a de facto corporation require? | A state corporation statute, a good faith attempt to comply with the statute, and an act on the corporation's behalf. |
| Hannah mails articles to the Secretary of State. Two weeks later, she enters a contract on the corporation's behalf. The articles had not been filed, having been lost in the mail. Are the shareholders personally liable on the contract? | Probably not, because Hannah made a good faith attempt to comply with the contract, shareholders are protected even though the corporation hasn't actually been formed. |
| What is corporation by estoppel? | One who deals with a business as if it were a corporation may be estopped from later arguing it's not really a corporation. |
| Does corporation by estoppel apply to torts? | no, it only applies to contracts on the theory that contract creditors should have protected themselves in advance. |
| What are the two ways to pierce the corporate veil? | Alter ego liability and gross undercapitalization. |
| X and Y are the shareholders of C Corp. X is also the CEO. X commingled personal and corporate funds. C Corp is now insolvent. Can a creditor of C Corp collect from X or Y? | Yes, the creditor can collect from X because X treated the corporation's assets as his own, i.e. as his alter ego. However, Y is not liable because she committed no wrong. |
| Is mere failure to follow corporate formalities enough fro the court to pierce the corporate veil? | Yes, but there must be some unfair or inequitable conduct. |
| S is a shareholder of G Corp., which hauls nuclear waste. G Corp. has initial capital of $1,000 and carries no insurance. V is injured when a G Corp truck melts down. Is S personally liable to V? | Probably yes, because corp had very little money and no insurance at all furthermore the business is extremely dangerous. Note: Courts are more likely to pierce the corporate veil in torts cases because victim couldn't protect themselves in advance. |
| If the bylaws and the articles of incorporation conflict, which one controls? | The articles of incorporation control. |
| What is a promoter? | A person acting for a corporation before it has been formed. |
| When is a corporation liable on a pre-incorporation contract? | When it adopts (either expressly or impliedly) the contract as its own. |
| What is express adoption? | When the board passes a resolution adopting the contract on the corporation's behalf. |
| What is implied adoption? | When the corporation knowingly accepts the benefit of the contract. |
| Juno, a promoter for a corporation not yet formed, leases land and signs the lease "Invisible, Inc." Later on, Invisible, Inc. is formed. Is the corporation liable on the lease? | Only if the corporation adopts the contract either expressly or impliedly. |
| Will Juno be liable if Invisible, Inc. never formed? | Yes, somebody has to be liable and that is the promoter. |
| Will Juno still be liable if the corporation is formed and adopts the lease as its own? | Yes, all adoption means is that both promoter and corporation are liable on the contract, unless there is a novation. |
| On, January 10th 2008, Juno begins work as a promoter. On February 20th Juno sells land to the corporation for $40,000. Juno bought the land in 1996 for $100. Does Juno owe the corporation any profit? | Only if the corporation paid more than fair market value on February 20th, 2008. What Juno paid in 1996 is irrelevant. |
| On January 10 2008, Juno started work as a promoter. On February 20th 2008, Juno bought land to $18,000. On March 30, 2008, the board agreed to buy it from her for $25,000. Is Juno liable to the corporation for her $7,000 profit? | Only if that profit was secret, if Juno told the board and got their approval that this was o.k. Only secret dealings are barred. |
| What is a foreign corporation? | A corporation incorporated outside of North Carolina, not necessarily the United States. |
| What is the general rule on foreign corporations? | A foreign corporation transacting business in N.C. must qualify to do business here. |
| For purposes of a foreign corporation, what does transacting business mean? | It means engaging in intrastate transactions in N.C. on a regular basis. Sporadic activity is not enough. |
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