Sharon entered into a preincorporation share subscription agreement on January 1,2006.The corporation was formed on February 1,2006.What is the status of this agreement on March 1,2006,under the Model Business Corporation Act?
A)It is binding only if Sharon has already paid for the shares.
B)It is binding even if Sharon has not already paid for the shares.
C)It is not binding because the corporation did not exist on January 1,2006.
D)It is not binding unless Sharon ratifies the agreement after the corporation has been formed.

Question

Quizplus · Accepted Answer

Under the Model Business Corporation Act (MBCA),a prospective shareholder may not revoke a preincorporation subscription for a six-month period,in the absence of a contrary provision in the subscription.Therefore,the preincorporation share subscription agreement that Sharon entered into on January 1,2006 is binding on March 1,2006 even if Sharon has not already paid for the shares.

Sharon Entered into a Preincorporation Share Subscription Agreement on January