Question 1

The doctrine of ultra vires is of more significance today than it has been in the past.

Accepted Answer

The doctrine of ultra vires means that a company cannot exceed its legal authority or powers stated in its articles of association. While this concept was important in the past, it has lost some significance with the development of more flexible and permissive corporate laws in many jurisdictions. Companies today have broader legal powers and more flexibility in their operations compared to the past, so the doctrine of ultra vires is less relevant in modern corporate law.

Question 2

A corporation has perpetual existence unless otherwise stated in its articles of incorporation.

Accepted Answer

According to the common law principle of "perpetual succession," a corporation has perpetual existence unless otherwise stated in its articles of incorporation. This means that a corporation can exist indefinitely, even if its original directors, officers, and shareholders resign, retire, or pass away.

Question 3

The RMBCA has been adopted, in whole or in part, by most states.

Accepted Answer

The RMBCA (Revised Model Business Corporation Act) has been widely adopted by most states in the U.S. either in whole or in part.

Question 4

A promoter who enters a preincorporation contract in the name of the corporation usually remains liable on the contract even if the corporation adopts it.

Accepted Answer

This is because a corporation does not legally exist until it has been incorporated, so the promoter is the only party capable of entering into the contract. Once the corporation is formed, it can adopt the contract, but the promoter remains liable until the corporation assumes the obligation.

Question 5

The "corporate veil" is most likely to be pierced in the case of closely held corporations and in parent-subsidiary relationships.

Accepted Answer

Closely held corporations, where there are only a few shareholders who are also involved in the management of the company, and parent-subsidiary relationships, where the parent company has significant control over the subsidiary, are more likely to have their corporate veil pierced. This is because in these situations, there is often a blurring of the line between the corporation and its shareholders or parent company, making it easier for a court to disregard the separation between them.

Question 6

Under the Revised Act, a corporation can act as an incorporator of another corporation.

Accepted Answer

According to the Revised Corporation Code of the Philippines, a corporation can act as an incorporator of another corporation. Section 10 states that "One or more natural persons, partnerships, associations, or corporations, domestically or internationally existing, may form a corporation for any lawful purpose or purposes."

Question 7

The Model Business Corporation Act is a state statute that, like the UCC, has been adopted by all of the states in the United States to make state incorporation statutes uniform throughout the United States.

Accepted Answer

The Model Business Corporation Act (MBCA) has been adopted in some form by a majority of states, not all states, to provide a template for corporate law, whereas the Uniform Commercial Code (UCC) has been adopted in some form by all states to harmonize the law of commercial transactions.

Question 8

A corporation is considered a citizen under the Fourteenth Amendment provision that, "No state shall make or enforce any law which shall abridge the privileges or immunities of citizens of the United States."

Accepted Answer

The answer of A corporation is considered a citizen under...

Question 9

"Piercing the corporate veil" will result in personal liability of shareholders.

Accepted Answer

Piercing the corporate veil can occur when a court determines that a corporation is being used for fraudulent or illegal activities, and therefore personal liability may be imposed on shareholders or directors.

Question 10

Under the Revised Act, the filing of the articles of incorporation by the secretary of state is conclusive proof that the incorporators have satisfied all conditions precedent to incorporation so that a shareholder or creditor would be unable to challenge the existence of the corporation.

Accepted Answer

The filing of the articles of incorporation is conclusive proof of incorporation and satisfies all conditions precedent to incorporation. Therefore, shareholders or creditors cannot challenge the existence of the corporation.

Question 11

Promoters have a fiduciary relationship with the corporation.

Accepted Answer

Promoters have a legal and ethical duty to act in the best interest of the corporation they are promoting, which establishes a fiduciary relationship.

Question 12

A promoter is a person who takes the preliminary steps to organize a corporation.

Accepted Answer

A promoter is someone who initiates the formation of a corporation by identifying the need for the corporation and bringing together the initial investors and stakeholders. The promoter may also assist in writing the corporation's articles of incorporation and obtaining necessary legal and financial paperwork before the corporation is officially established.

Question 13

A preincorporation subscription is an offer to purchase capital stock in a corporation yet to be formed.

Accepted Answer

A preincorporation subscription is indeed an offer to purchase capital stock in a corporation that has not yet been formed. This is a way for individuals or entities to invest in a new business venture before it becomes officially incorporated.

Question 14

Under the RMBCA, a newly formed corporation need not hold an organizational meeting.

Accepted Answer

Under the RMBCA, a newly formed corporation is required to hold an organizational meeting to elect officers, adopt bylaws, and complete other organizational tasks.

Question 15

A corporation is a creature of the state and may be formed only by substantial compliance with a state incorporation statute.

Accepted Answer

A corporation is a legal entity created and regulated by state law. To form a corporation, one must comply with the incorporation statutes of the state in which the corporation is being formed. Failure to do so can result in the corporation not being recognized as a separate legal entity and leave individuals liable for the corporation's actions.

Question 16

An  ultra vires   act  is beyond the legal authority of the corporation.

Accepted Answer

An ultra vires act is indeed beyond the legal authority of a corporation.

Question 17

Bylaws are rules governing a corporation's internal management.

Accepted Answer

Bylaws are indeed rules governing a corporation's internal management. They typically address matters such as the composition and responsibilities of the board of directors, the procedures for holding meetings and voting on corporate matters, and the duties and obligations of officers and shareholders. Bylaws can be amended by the corporation's board of directors or shareholders, subject to any applicable legal requirements or corporate governance provisions.

Question 18

Most incorporation statutes have adopted an intermediate position regarding the revocability of preincorporation subscriptions, making them irrevocable for a stated period without regard to whether they are supported by consideration.

Accepted Answer

Most incorporation statutes have adopted the position that preincorporation subscriptions are irrevocable for a stated period without regard to whether they are supported by consideration.

Question 19

In many states, the services of the incorporators are perfunctory and short-lived.

Accepted Answer

Incorporators in many states are only required to sign the articles of incorporation and file them with the state. After this perfunctory task is completed, their involvement typically ends.

Question 20

A corporation is a domestic corporation in the state in which it is incorporated.

Accepted Answer

A corporation is considered a domestic corporation in the state in which it is incorporated.

Quiz 33: Nature and Formation of Corporations