Home About us Members &
Partnerships
Conference & Symposium
Visiting Scholar
Program

Cooperative
Research Program

Report &
Thesis

Research
Briefing

What's
New
Contact
CH JP KR EN
 → BACK TO Seminar
 
Seminar on May 07

(Summary By Ma Hong Jun)
 
Time:18:00~19:00,May 7, 2011
Place:318 of the Yingshuidao lecture building
Moderator:Gongshu
Member:Gongshu, Liao Zhengyong, Ma Hongjun, Sang yitao



PartⅠ Presentation

Scope of the presentation: Chapter 4


Topics:
1. Whether the proprietors are personally liable as partners for corporation commence business or not before the corporation is formed, and why?
2. Please describe the role of shareholders, board of directors and officers in brief.





Liao Zhengyong:
During this time, we discussed chapter 4 and 5,we have two question, I think both of them are worthy to be discussed.
First question:
For this question, we can not say yes or not because it depends, whether the promoters are personally liable as partners for the corporation commence or not before the corporation if formed depends on three points:
  1. whether the promoters disclosed that the corporation is not formed yet
  2. Whether there is a notation
  3. Intention of the TP(third party)
According to these three points, three situation appears:
Situation one
The promoter did not disclose that the corporation is not formed of under the formation, and the corporation is never formed actually, off course, the promoter is liable on it.
Situation two
The corporation was formed, promoter remains liable until there is a notation-which would be a agreement of TP, the corporation and the promoters that the corporation will replace the promoters under the contract. It means that, by this notation, the corporation adopts the lease, so promoters are free of any personal liability.
Situation three
The promoter did disclose that the corporation is not formed yet, here, the lack of a corporation is clear, whether promoters are liable on the lease determined by the intent of the TP, if the TP look only to the corporation after it is formed, then, promoters are free of the liability, while, if the TP did not show its intention, courts generally will hold the promoters liable as a party to the contract
Ok, this is question one
Second question
There are three groups with responsibility in the corporation: shareholders, the board of directors and officers, their role differs widely
Firstly ,shareholders
Shareholder in the traditional statuary scheme are the owners of the corporation. Shareholders have decision-making authority in discrete areas, such as:
  1. electing and removing directors. Shareholders elect and remove them before their expire
  2. Amending bylaws. For this role, ti differs from state to state, in some states, the shareholders have the authority to amend the bylaws and in some states the board does
  3. Approving fundamental corporate changes. Shareholders generally must approve various fundamental changes to the corporation.
  4. Approval of other matters. In some states, shareholders must approve various less substantial transactions.
  5. Other powers. Shareholders have other statuary powers that do not relate directly to decision-making.
Ok, his is role of shareholders
Then, role of board of directors.
In the past decades ,role of BD has changed. In the past, business and affairs "shall be managed by the BD" ,while, nowadays, business and affairs of the corporation "be exercised by or under the direction and subject to the oversight" of the BD, so ,its role is less management than oversight because they can hire officers to manage the corporation.
Officers
Authority of officers is often considerably great, especially in public corporations because a typical provision states that each officer "has the authority and shall perform the functions set forth in the bylaws, the functions prescribed by the BD or by the direction of an officer authorized by the BD to prescribe the duties of other officers" So, we can see that ,in theory ,officers conduct the day-to-day affairs of the corporation subject to the direction of the board of directors.

Gongshu:
1. Whether the proprietors are personally liable as partners for corporation commence business or not before the corporation is formed, and why?
The liability of the proprietors to the corporation before the corporation is formed should be divided into different cases.
Firstly, if the proprietor enters a contract with the third party in his or her own name, he or she will be liable on it until novation of the contract. In contrast, if the proprietor enters a contract in the name of the unformed corporation, the liability will be determined by the intent of the contract parties. Without the intent, the proprietor will then be liable as a party of the contract and the agent of the corporation, and also until novation of the contract.
What’s more, the court has developed two significant common law doctrines to relieve the liability of proprietors, which are de facto corporation and corporation by estoppel. As long as the proprietor is not aware of the failure to form a de jure corporation when promoting a transaction with the third party and meets the legal requirements of the two doctrines, he or she will not liable for the corporation, neither in contract nor tort.
2. Please describe the role of shareholders, board of directors and officers in brief.
(1) Shareholders
They are owners of the corporation, and are separated form the management of the corporation according to the traditional model that the corporation law has embraced. The most influenced part of their authority is decision making, which contains electing and removing directors, amending bylaws, approving fundamental corporation changes and other matters. Besides, they also have the authority to inspect books and records of the corporation and bring derivative suits.
(2) Board of directors
Traditionally, they are the manager of the corporation. But now, the board turns to exercise, direct or oversight the business and affairs of the corporation. The power of directors flows from statute but not shareholders. So they have their independent authorities like issuance of stock. However, they are selected by the shareholders, which lead to the directors’ fiduciary duties of care and loyalty.
(3)Officer
They are administrators, and executors of the day-to-day affairs of the corporations subject to the direction and control of the board. The legal relationship between officers and the corporation is agent and principle.

Ma Hongjun:
1. For the first question, I think if the corporation was not formed, it just mean the corporation was not a de jure corporation. Without a de jure corporation, they are operating through a partnership, and all partners are liable for partnership debts. Because there is no corporation.
But under de facto corporation, they may escape liability. Under common law doctrines, they must show three things: Firstly, there must be a statute under which incorporation was permitted. Secondly, they must made a good faith, try their best to comply with the requirements for forming a de jure corporation, and are unaware of their failure to comply. Besides, they did everything required to form the corporation and had a right to rely on the lawyer to get the documents filed. At last, they must use the corporate privilege in the meantime. If they have done these, it will spare proprietors from personal liability.
2. For the second question, in my opinion, the role of shareholders: The shareholders are owners of the corporation, but have limited power to participate in management and control. They have power as follow: electing and removing directors, amending bylaws, approving fundamental corporation changes and other matters. Besides, they can inspect books and records of the corporation and bring derivative suits.
The role of board of directors: They will be managed the business and affairs. Now statutes provide that the business and affairs of the corporation be exercised by or under the direction, and subject to the oversight of the board. And the directors may disregard the desires of shareholders and act as they think best.
The role of officers: I think each officer has the authority and shall perform the functions set forth in the bylaws or, to the extent consistent with the bylaws. They administer the day-to –day affairs of the corporation subject to the direction and control of the board. But in public corporations, they do not operate in groups, they are agents of the corporation.

Sang yitao:
1、The liability of the proprietors to the corporation before the corporation is formed should be divided into three cases.
Firstly, if the proprietor enters a contract with the third party in his or her own name, he or she will be liable on it until novation of the contract.
Secondly, if the proprietor enters a contract in the name of the unformed corporation, the liability will be determined by the intent of the contract parties.
Thirdly, The promoter did disclose that the corporation is not formed yet, here, the lack of a corporation is clear, whether promoters are liable on the lease determined by the intent of the third party.
2、Shareholders are owners of the corporation, and are separated form the management of the corporation according to the traditional model that the corporation law has embraced.
They also have the authority to inspect books and records of the corporation and bring derivative suits.
The board turns to exercise, direct or oversight the business and affairs of the corporation,now. They have their independent authorities like issuance of stock. However, they are selected by the shareholders, which lead to the directors’ fiduciary duties of care and loyalty.
Authority of officers is often considerably great, especially in public corporations. The legal relationship between officers and the corporation is agent and principle.




 
 




  Copyright 2007, http://www.asia-taxlaw.com ,All Rights Reserved  
  94 WeiJinLu,NanKaiQu,TianJin,China(300071) / Tel:86-22-2350-1400 / E-mail: gpyang@nankai.edu.cn