What 3 things are needed in order to form a corporation?
(hint: people, paper, acts)
2) CERTIFICATE OF INCORPORATION
- 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
1) What 2 things do they do?
2) How many do you need?
3) Who can be one?
1) DO THE FOLLOWING 2 THINGS
2) AT LEAST ONE
- EXECUTE the certificate of incorporation, AND
- HOLD an ORGANIZATIONAL MEETING
(may have more)
3) ANY ADULT HUMAN
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
2) MAY ALSO INCLUDE 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.)
- statement of DURATION (otherwise PERPETUAL EXISTENCE is presumed)
- Additional registered agent for service of process (in addition to NYSS)
ACTS--What must be done as to
1) Certificate of Incorporation?
2) Organizational Meeting?
1) CERTIFICATE OF INCORPORATION
2) ORGANIZATIONAL MEETING
- 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))
- adopt any BYLAWS
- ELECT initial BOD (the BOD then takes over the management of the corporation)
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
2) SEPARATE LEGAL PERSON
- Governed by NY LAW, regardless of where corporation does business
- includes duties, relationship among directors, officers, S/H
3) LIMITED LIABILITY
- 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)
- SHs loss limited to price of stock paid
- corporation is separately liable for all debts (even if there is ONLY ONE SH)
When does a DE FACTO corporation exist?
(note: not frequently tested)
IN VERY LIMITED CIRCUMSTANCES
- relevent corporation statute (BCL)
- parties made GOOD FAITH, colorable attempt to comply with statute
- business being conducted as a corporation
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
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)
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
When is a corporation liable on pre-incorporation Ks?
- corporation ADOPTS the K (BOD action, or knowing accepts benefits)
- NOVATION (all parties agree)
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
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
FORMATION OF CORPORATIONS
What is the MOST IMPORTANT topic for this FIRST fact pattern?