1. Corporations
Chapter 34

2. Corporate Attributes Separate Legal Entity Creature of the State
Limited Liability to Shareholders
Free Transferability of Ownership
Continuity of Existence
Centralized Management
An “artificial” person and citizen
Ease in Raising Capital

3. Florida Statutory Corporate Powers; 607.0202(3)
To sue and be sued in its corporate name
Perpetual duration and succession in its corporate name
To have a corporate seal
To purchase, receive, lease, acquire, hold, use and improve real and personal property
To sell, mortgage, convey, pledge, lease, exchange, create a security interest in and dispose of all or part of its property
To lend money to and use its credit to assist its officers and employees when such may be reasonably expected to benefit the corporation.
To enter into contracts, borrow money and guarantee debts

4. Florida Statutory Corporate Powers, Cont’d
To lend, invest and reinvest money for its corporate purposes
To elect directors and appoint officers, employees and agents and fix their compensation.
To adopt and amend by-laws
To make donations for the public welfare or for charitable, scientific or educational purposes.
To transact any lawful business, and conduct all other implied or incidental powers.
To pay pensions and establish pension and profit-sharing plans and other employee incentive plans
To enter into general or limited partnerships or joint ventures.
To indemnify corporate officers, directors, agents and employees and purchase liability insurance therefor
To provide life insurance for its benefit on directors, officers or employees

5. Disregard of Corporate Entity “Piercing the Corporate Veil”
Courts will disregard the separate corporate entity when the corporate form is used to commit wrongdoings or shield its shareholders from liability for fraud.
Shareholders may be personally liable for corporate acts.
“Alter Ego” Doctrine
Thin Capitalization
Subsidiary Corporations
“Deep Rock” Doctrine

6. Secures potential investors Liable on preincorporation contracts UNLESS an adoption by the corp. terminates promoter’s liability, or novation.
EXCEPTION to promoter liability if the Third Party:
Knew about the non-existence of the corp.
Insisted that the contract be signed in the corp’s name
Contract states the promoter will not be liable and that the Third Party will look to the prospective corporation for payment.
Promoters are NOT agents
Promoters
Promoters have
fiduciary duties

7. Subscribers
Subscribers agree to purchase a certain amount of stock at a specified price, payable at an agreed future time.
The Revised Act (and Florida) provide that a pre-incorporation subscription agreement is irrevocable for 6 months unless the agreement provides otherwise, or all subscribers consent to revocation.
Post-incorporation subscription agreements are always revocable before acceptance by corp.
Subscriber is an offeror, s(he) enters
into a contract to purchase stock

8. FORMALITIES Incorporators
Articles of Incorporation. Mandatory : name; aggregate number of shares; hether shareholders are to be given preemptive rights; street address of the corporation’s initial registered office, and agent’s name; names and addresses of incorporators; street address of initial principal office.
Permissible: purpose; duration clause; name, address and number of initial directors; par value of shares.
Corporate existence begins upon filing.

9. Organizational Meeting
Board of Directors hold an Organizational Meeting
Adopt bylaws that govern internal management
Appoint officers
Approval of a corporate seal
Approval of pre-incorporation agreements
Take other steps to complete the organizational structure, i.e., adopt stock subscription agreements

10. Defective Incorporation
de Facto - Fails to comply substantially with the incorporation statute but will be recognized as a corp if there was a good faith attempt to incorporate and an actual exercise or “use” of corporate powers.
Only the State can challenge its existence in a Quo Warranto proceeding
de Jure - A corporation which has been formed in substantial compliance with the state’s incorporation statute.
Its existence can’t be challenged.

11. Corporation by Estoppel
An organization that is neither de jure or de facto may nevertheless be estopped from denying its a corporation if:
the organization has represented itself as a corporation.
The representation is followed by reasonable reliance and material alteration of position by a third party
Injustice can be avoided only by treating the business as a corporation.

12. Ultra Vires Doctrine
Actions or contracts by a corporation which go beyond the powers expressly conferred on the corporation by law,or by its articles of incorporation.
Common Law - Ultra vires acts are void and unenforceable.
Today, Both Florida and the Model Act provide that no act of a corporation, and no conveyance of property, is invalid by reason of the fact that the corporation was without capacity or power to act (with a few exceptions). Neither corps, shareholders or third parties dealing with it can avoid responsibility for their acts based on the grounds of ultra vires.

13. Liability for Torts and Crimes
Torts - Under the doctrine of respondeat superior, a corporation is liable for the torts of its employees within the course of their employment.
Crimes - Corporations may be liable for violating strict liability statutes, or an offense perpetrated by a high corporate officer or by its board of directors.