Defective Formation Of Corporations And Revival Of Existence

AuthorJames D. Cox/Thomas Lee Hazen
ProfessionProfessor of Law at Duke University/Professor of Law at the University of North Carolina, Chapel Hill
§ 6.1 Problems Arising from Defects in Formation
There are various degrees of noncompliance with the statutory for-
malities, some of which are of more and others of less importance in
affecting cor porate status. The defect, shortcoming, or irregularity
complained of may or may not be accidental, may or may not affect
the merits of a case being litigated, and may or may not have harmed
the person who seeks to raise quest ions of defective incorporation. In
determining t he consequences attaching to defect ive organization,
courts ty pically speak in terms of “de jure corporation,” “de facto
corporation,” and “corporation by estoppel.”
Consider the following possibilities: (1) The associates in a business
enterprise may brazenly pretend to be incor porated without attempting
to take some or any of the required st atutory steps or may assume acting
as a corporation with k nowledge that the steps taken are incomplete.
(2) The associates may execute articles of incorporation but, by some
inadvertent mischance, may fail to get them filed in a ny public office.1
(3) The associates may file the articles of incorporat ion with a state
official, who may reject t hem.2 (4) In one of the few states that still
require the art icles to be filed in two different government offices , they
may file the art icles in only one of the two prescribed offices. (5) The
articles as f iled may not be in proper form, may omit required prov isions,
or may be incorrectly executed or ack nowledged by the i ncorporators.
(6) The associates may fail to pay in t he minimum requ ired capital
in a state in which that is st ill prescribed as a condition precedent to
doing business. (7) The associates may fail to hold an organizat ional
meeting of i ncorporators, shareholders, or di rectors, or fail to adopt
bylaws or to elect directors and officers.3 (8) The statute under which
the associates attempt to incorporate may be u nconstitutional or may
not authorize formation of corporations to do the kinds of business
the corporation is being organ ized to conduct. (9) The associates may
purport to continue to do business as a corporation after its prescribed
term of existence has expired, after revocation of its charter, or after it
has been dissolved.4
If business associates purport to conduct their enterprise as a
corporation but have not complied with statutory requ irements for
the organ ization of a corporation, or if t he organization is otherwise
defective in one or more of the respects just enumerated, will their
association be treated as a corporation? Or perhaps the more accurate
74 | C  C G: C  L
cox85509_06_c06_p073-084.indd 74cox85509_06_c06_p073-084.indd 74 6/28/12 9:15 AM6/28/12 9:15 AM

To continue reading

Request your trial

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT