Exam 42: Organization and Financial Structure of Corporations

A preincorporation share subscription is:

An organizer is the individual that incorporates a business.

The board of directors of Laylow Corporation issued 1,000 shares representing 10 percent of the corporation to Don in exchange for an unsecured promissory note to pay Laylow $50,000 within the next 20 years.Don is the son of Charles,owner of 70 percent of the shares of the corporation.The total book value of the corporation at the time Laylow issued the shares was $5,000,000.Alan and Bob,owners of 20 percent of the total shares,discovered the transaction one month after it occurred.Alan and Bob sued Don on behalf of Laylow Corporation seeking to invalidate the transaction.Should the court invalidate it? Discuss.

Which of the following corporation names would be improper?

What article of the Uniform Commercial Code (UCC)governs the issuance of stocks by a corporation?

Under the Model Business Corporation Act (MBCA),a prospective shareholder may not revoke a preincorporation subscription for a ________ period,in the absence of a contrary provision in the subscription.

A(n)________ occurs when parties,by mutual agreement,discharge a valid existing obligation by the substitution of a new valid obligation on the part of the debtor or another.

In the case in the text,Tedeton v.Tedeton,which of the following was determined to be proper consideration for shares?

Pedro is a corporate promoter for Nolo Corporation,a corporation yet to be formed.Pedro spends $40,000 of his own money and devotes 400 hours to bring Nolo and its business into existence.When Nolo is incorporated,Pedro asks the board of directors to issue some of its common shares to Pedro as compensation for his expenses and services.Would such an issuance be legal?

Rice is a promoter of a corporation to be known as Dex Corp.On January 1,1985,Rice signed a nine-month contract with Roe,a CPA,which provided that Roe would perform certain accounting services for Dex.Rice did not disclose to Roe that Dex had not been formed.Prior to the incorporation of Dex on February 1,1985,Roe rendered accounting services pursuant to the contract.After rendering accounting services for an additional period of six months pursuant to the contract,Roe was discharged without cause by the board of directors of Dex.In the absence of any agreements to the contrary,who will be liable to Roe for breach of contract?