Term
| Principal Characteristics of a Corporation |
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Definition
1) Limited liability
2) Entity Powers (can have contracts in corp's name)
3) Centralized Management (Board of Directors)
4) Continuity of Existence
5) Free Transfer-ability of Ownership Interests
6) Managers' Authority to Act Mainly derived from statutes |
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Term
| What Do Corporation Incorporators Do? |
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Definition
1) Execute the Certificate
2) Deliver it to NY Dept. of State
3) Hold Organizational Meeting |
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Term
| How many Incorporators Do Corporations Need? |
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Definition
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Term
| Who can be an incorporator? |
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Definition
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Term
| Purpose of Certificate of Incorporation |
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Definition
1) Contract between corporation and shareholders
2) Contract between corporation and state |
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Term
| Information That Goes Into the Certificate |
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Definition
1) Corporate Name (Must have "corporation," "incorporated," or "limited" in the name)
2)Address (County in New York of the office of Corporation)
3) NY Secretary of State as designate for corporation's agent for service of process
4) Name and address of each incorporator
5) Statement of Duration (if no statement then corporation had perpetual existence)
6) Corporate Purpose Statement
7) Capital Structure (Stocks) |
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Term
| How do we handle ultra vires acts today? |
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Definition
1) Ultra Vires contracts are valid
2) Shareholders can seek an injunction
3) Responsible managers are liable to corporation for ultra vires losses |
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Term
| What must be included in the certificate about the corporation's stock? |
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Definition
1) Authorized Stocks
2) Number of shares per class
3) Info on par value, rights, preferences and limits of each class
4) Info on any series of preferred shares |
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Term
| What actions must be taken to create corporation once certificate has been drawn up? |
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Definition
1) Each incorporator signs certificate and acknowledges it before a notary
2) Deliver it to the NY Dept. of State
3) Pay all fees
4) Hold Organizational meeting |
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Term
| What must happen at a corporation organizational meeting? |
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Definition
1) Adopt any bylaws
2) Elect initial board of directors |
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Term
| If corporation is formed in NY but only does foreign business, what law governs the internal affairs? |
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Definition
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Term
| Can a corporation make political donations? |
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Definition
| Yes. But no more than 5K per candidate/organization per year |
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Term
| Can a corporation make charitable donations? |
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Definition
| Yes. And there are are no statutory limits |
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Term
| Can a corporation guaranty a loan if it is not in the furtherance of corporate business? |
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Definition
| Yes if it is approved by 2/3 of the shares entitled to vote |
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Term
| Are people who run the corporation liable for what the corporation does? |
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Definition
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Term
| Are the people who own the corporation liable for what the corporation does? |
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Definition
| No, they have limited liability meaning they are only liable to pay for their stock |
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Term
| Who is liable for what the corporation does? |
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Definition
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Term
| What must be shown for a de facto corporation? |
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Definition
1) Relevant Incorporation Statute (BCL in NY)
2) Parties made a good faith, colorable attempt to comply with it.
3) Business is being run as a corporation |
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Term
| What is the status of De Facto Corporations in NY? |
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Definition
| Thought to be abolished by case law shows that it may be alive in very limited circumstances |
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Term
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Definition
| Doesn't matter - abolished in NY |
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Term
| Can we have a corporation without bylaws? |
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Definition
| Yes, they are not necessary |
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Term
| If bylaws conflict with the corporate certificate, what controls? |
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Definition
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Term
| Are bylaws of corporation filed with state? |
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Definition
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Term
| Are outsiders bound by corporate bylaws? |
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Definition
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Term
| Who adopts initial corporation bylaws? |
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Definition
| The incorporators at the organizational meeting - they have the status of a shareholder bylaw |
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Term
| Who can amend or repeal bylaws or adopt new ones? |
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Definition
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Term
| When does the board of directors get to amend/repeal/adopt the bylaws? |
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Definition
| Only when the certificate or shareholder bylaws allow it |
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Term
| Is the corporation liable for pre-incorporation contracts? |
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Definition
| Only if it adopts the contract |
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Term
| How can adoption of pre-incorporation contracts by corporations happen? |
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Definition
1) Express adoption by board action
2) Implied Action - Corporation knowingly accepts a benefit of the contract |
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Term
| Is the promoter of a corporation liable of pre-incorporation corporate contracts? |
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Definition
| Yes unless the contract clearly indicates otherwise until there is a novation. |
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Term
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Definition
| agreement between promoter, corporation, and other contracting party that the corporation will replace the promoter under the contract. |
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Term
| Can a promoter make a secret profit from her dealings with the corporation? |
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Definition
| No. If she does she is liable and must account of the profit - return it to the corporation. |
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Term
| What is the definition of a foreign corporation? |
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Definition
| A corporation incorporated anywhere outside of NY |
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Term
| How does a foreign corporation qualify to do business in NY? |
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Definition
| Applying to the NY Dept. of State and designating the Secretary of State as agent for the service of process. Pay fees. |
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Term
| What kind of information does the foreign corporation give the NY Dept. of State? |
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Definition
| Info. from its certificate and good standing in its home state |
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Term
| What happens if a foreign corporation does business in NY without qualifying? |
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Definition
| It cannot assert a claim in NY until it pays taxes, fees, penalties, and interest |
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Term
| An issuance of stock occurs when... |
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Definition
| a corporation sells its own stock |
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Term
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Definition
| a loan, the repayment of which is not secured by corporate assets |
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Term
| What is the definition of a corporate subscription? |
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Definition
| A written, signed offer to buy stock from the corporation |
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Term
| Are pre-incorporation subscriptions revocable? |
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Definition
| No, not for 3 months unless subscription provides otherwise or all subscribers agree to let you. |
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Term
| Are post-incorporation subscriptions revocable? |
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Definition
| Yes until accepted by the corporation. |
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Term
| Can a corporation decide to sell to only some subscribers and not to others? |
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Definition
| No it must be uniform within each class and series of stock |
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Term
| What happens if a corporation accepts the subscription offer and the subscriber defaults on payment? |
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Definition
1) If subscriber has paid less than half of the purchase price and fails to pay the rest within 30 days from written demand, corporation can keep the money paid and cancel the shares. (Stock becomes authorized and unissued so the corporation can sell it)
2) If subscriber has paid half or more, and fails to pay the rest within 30 days of written demand, corporation must try to sell to someone else for cash - if no one will pay remaining balance then acts like section 1 |
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Term
| What happens if someone will pay more than the remaining balance on an unpaid subscription? |
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Definition
| Defaulting subscriber recovers any excess over what she agreed to pay (but deduct corporation's expenses) |
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Term
| What are the five permitted forms of consideration for an issuance? |
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Definition
1) Money (cash or check)
2) Tangible or intangible property
3) Services already performed for corporation
4) Binding obligation to pay money or property
5) Binding obligation to perform future activities with an agreed upon value |
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Term
| What happens if a corporation issues stock to someone without consideration? |
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Definition
| All issued stock is considered unpaid stock and treated as water |
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Term
| What is the definition of par? |
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Definition
| Minimum issuance price for a corporate stock |
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Term
| Who sets the sale price for no par stock? |
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Definition
| The board unless certificate says shareholders can do it |
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Term
| What is the definition of treasury stock? |
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Definition
| Stock that was previously issued and had been reacquired by the corporation |
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Term
| Are directors liable for issuing stock at a price below par (called watered stock)? |
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Definition
| Yes if they knowingly authorized the issuance |
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