Corporations 1

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Author:
paul
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23945
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Corporations 1
Updated:
2010-06-25 17:27:05
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Organization Formation Corporations
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Corporations 1 - Organization & Formation of Corporations
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  1. FORMATION REQUIREMENTS

    What 3 things are needed in order to form a corporation?

    (hint: people, paper, acts)
    1) INCORPORATORS (people)

    2) CERTIFICATE OF INCORPORATION (paper)

    3) ACTS

    • SIGNING of certificate of incorporation by EACH INCORPORATOR before a notary public
    • DELIVERY of signed certificate to NY Department of State (and payment of fees)
    • ORGANIZATIONAL MEETING held
  2. FORMATION REQUIREMENTS

    INCORPORATORS

    1) What 2 things do they do?
    2) How many do you need?
    3) Who can be one?
    1) DO THE FOLLOWING 2 THINGS

    • EXECUTE the certificate of incorporation, AND
    • HOLD an ORGANIZATIONAL MEETING

    2) AT LEAST ONE (may have more)

    3) ANY ADULT HUMAN
  3. FORMATION REQUIREMENTS

    CERTIFICATE OF INCORPORATION

    1) What information MUST the certificate contain?
    2) What additional info MAY be included in the certificate?
    1) MUST CONTAIN THE FOLLOWING

    • Corporate NAME (designated as "Corp.," "Inc.," or "Ltd.")
    • COUNTY where incorporated
    • NY SECRETARY OF STATE as agent for process
    • ADDRESS for forwarding mailed-process to corporation
    • statement of CORPORATE PURPOSE (to "engage in all lawful activity, after obtaining necessary state agency approval" is sufficient)
    • STOCK STRUCTURE (bascially ANYTHING and about the stock, including number of shares authorized, per class, par value, rights, preferences, limitations, prefered shares, etc.)

    2) MAY ALSO INCLUDE THE FOLLOWING

    • statement of DURATION (otherwise PERPETUAL EXISTENCE is presumed)
    • Additional registered agent for service of process (in addition to NYSS)
  4. FORMATION REQUIREMENTS

    ACTS--What must be done as to

    1) Certificate of Incorporation?
    2) Organizational Meeting?
    1) CERTIFICATE OF INCORPORATION

    • EACH INCORPORATOR must sign before a NOTARY PUBLIC
    • must be DELIVERED to NY DEPT OF STATE (Dept's filing is CONCLUSIVE evidence of valid formation (i.e., "de jure" corporation))

    2) ORGANIZATIONAL MEETING--incorporators

    • adopt any BYLAWS
    • ELECT initial BOD (the BOD then takes over the management of the corporation)
  5. FORMATION REQUIREMENTS

    Why does it matter that a corporation is formed as to the following?

    1) Internal affairs
    2) Separate legal person
    3) Extent of liability
    1) INTERNAL AFFAIRS

    • Governed by NY LAW, regardless of where corporation does business
    • includes duties, relationship among directors, officers, S/H

    2) SEPARATE LEGAL PERSON--corporation can

    • enter Ks, acquire/dispose of property interests, etc.
    • make POLITICAL CONTRIBUTIONS (up to $5K/year per candidate or organization)
    • make CHARITABLE CONTRIBUTIONS
    • guaranty loans (even if NOT in furtherance of business if approved by ≥ 2/3 share entitled to vote)

    3) LIMITED LIABILITY

    • SHs loss limited to price of stock paid
    • corporation is separately liable for all debts (even if there is ONLY ONE SH)
  6. FORMATION REQUIREMENTS

    When does a DE FACTO corporation exist?

    (note: not frequently tested)
    IN VERY LIMITED CIRCUMSTANCES—must show

    • relevent corporation statute (BCL)
    • parties made GOOD FAITH, colorable attempt to comply with statute
    • business being conducted as a corporation
  7. FORMATION REQUIREMENTS

    When does a corporation exist by ESTOPPEL?

    (note: not frequently tested)
    • MBE: One DEALING with a business and treating the business AS A CORPORATION may be estopped from denying corporate status to the business
    • NYBE: ABOLISHED BY BCL--i.e.., no such thing as a corporation by estoppel in NY
  8. FORMATION REQUIREMENTS

    BYLAWS (not frequently tested)

    1) Must a corporation have bylaws (BL)?
    2) If the BL are inconsistent with the Certificate of Incorporation, which prevails?
    3) Who adopts intial BL?
    4) Who can amend, repeal, or adopt new BL?
    5) May the BOD ever amend, repeal, or adopt new BL?
    1) NO--adopting BL are optional

    2) CERTIFICATE OF INCORPORATION prevails in a conflict with the BL

    3) INCORPORATORS adopt the initial BL (at the organziational meeting)

    4) SHs can amend, repeal, or adopt new BL

    5) BOD may amend, repeal, or adopt new BL ONLY IF the certificate or a SH BL allows it (but event then, the SHs can modify or repeal ANY BOD-adopted BL)
  9. PRE-INCORPORATION Ks***

    1) Who is a promoter?
    2) Is a promoter liable on pre-incorporation Ks?
    1) Person acting on behalf of unformed corp.

    2) Liable on all Ks until novation
  10. PRE-INCORPORATION Ks***

    When is a corporation liable on pre-incorporation Ks?
    • corporation ADOPTS the K (BOD action, or knowing accepts benefits)
    • NOVATION (all parties agree)
  11. SECRET PROFT RULE

    1) What is the rule?
    2) How is profit computed?
    1) No Secret Profits

    • REQUIRES: (1) PROFT, (2) undisclosed to incorporators or BOD (i.e., SECRET)
    • REMEDY: ACCOUNTING (e.g., disgorge)

    2) Computing the Profit

    • PRE-PROMOTER: Profit = (a) Price paid by Corp. MINUS (b) FMV
    • POST-PROMOTER: Proft = (a) Price paid by Corp. MINUS (b) Price paid by Promoter
  12. FOREIGN CORPORATIONS

    1) When is a foreign corporation "doing business" in NY?
    2) What happens if a foreign corp. does business in NY w/o "qualifying"?
    3) How does a foreign corp. "qualify" to do busiess in NY?
    1) CONDUCTS A REGULAR COURSE of INTRASTATE business activity in NY

    2) Foreign corp. CANNOT SUE another in a NY court—i.e., can't be π--until it qualifies (though it can be sued or defend itself in a NY court)

    3) PROCEDURE FOR QUALIFYING

    • apply to NY Dept of State
    • provide info from home state's certificate of incorporation AND proof of good standing
    • designate NYSS as agenct for service of process
    • pay all FEES, TAXES, PENALTIES that may be due
  13. FORMATION OF CORPORATIONS

    What is the MOST IMPORTANT topic for this FIRST fact pattern?
    Pre-Incorporation Ks

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