Corporation Formation - Next Generation Bar Exam

1. Under the MBCA, when does corporate existence begin?

   When the articles of incorporation are filed, unless a delayed effective date is specified. The filed articles establish the corporation's existence.

2. Under the MBCA, what purpose does a corporation have if the articles do not state a narrower one?

   Engaging in any lawful business. A corporation may adopt a narrower purpose in its articles.

3. A supplier that relied only on an entity's credit learns its incorporation was defective and sues the shareholders personally. What doctrine may protect them?

   Corporation by estoppel. A creditor that treated the entity as a corporation may be estopped from denying its existence.

4. Under the MBCA, who adopts a corporation's initial bylaws?

   The incorporators or the board of directors. The bylaws may contain any provision for managing the business that is consistent with law and the articles.

5. Under the MBCA, who may challenge a corporate act as beyond the corporation's power?

   A shareholder seeking to enjoin it, the corporation against its directors or officers, or the attorney general. Otherwise, the validity of a corporate act may not be challenged on the ground that it exceeded corporate power.

6. Under the MBCA, what is the effect of the secretary of state's filing of the articles?

   It is conclusive proof that the incorporators satisfied all conditions precedent, except in a proceeding by the state. Private parties cannot challenge the corporation's existence on the ground of a defect in formation.

7. Under the MBCA, what must the articles of incorporation include?

   A corporate name, the number of authorized shares, the registered office and agent, and each incorporator's name and address. Optional provisions, such as limits on director liability, may also be included.

8. What are the traditional requirements of a de facto corporation?

   A good-faith attempt to incorporate under a valid statute and actual use of corporate powers. The doctrine survives in some states but has largely been displaced by the MBCA.

9. Days before filing articles, an owner signs a supply contract as 'President, Acme, Inc.,' knowing the articles have not been filed. Under the MBCA, what is her liability?

   Personal liability on the contract, jointly and severally with any others who knowingly acted. Acting for a corporation known not to exist triggers personal liability.

10. Under the MBCA, what is required to form a corporation?

    Filing articles of incorporation, signed by one or more incorporators, with the secretary of state. Incorporators may be individuals or entities.

11. Under the MBCA, who is liable for acting on behalf of a corporation knowing that there was no incorporation?

    All persons who so acted, jointly and severally. Persons who did not know of the defect are not liable under this provision.

12. What is a corporation by estoppel?

    A doctrine barring a person who dealt with an entity as a corporation from denying its corporate existence. Courts apply it most often to protect shareholders from a creditor who relied only on the entity's credit.

13. What business is conducted at the organizational meeting held after incorporation?

    Adopting bylaws, appointing officers, and carrying on any other business brought before the meeting. The meeting is called by the initial directors named in the articles or, if none, by the incorporators.

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