Question
9.A group of six gentlemen are considering the creation of a corporation. In preparing for the operation of the corporation, one of these gentlemen goes
9.A group of six gentlemen are considering the creation of a corporation. In preparing for the operation of the corporation, one of these gentlemen goes out and discusses deals with potential clients. As a result of these discussions, he enters several contracts on behalf of the corporation in the process being created. After its incorporation, the corporation ultimately fails, and several of the contracts entered prior to its incorporation by the one individual are left unresolved. The parties injured by the corporations breach of these contracts seeks redress individually from the person who signed on behalf of the corporation. Can they be successful?
A.Yes. The individual who signed the papers in a pre-incorporation is a promoter and has personal liability for those contracts.
B.Yes. All of the people who were involved in forming the corporation remain responsible for all the contracts of the corporation whether entered into before incorporation or after corporation.
C.No. Because of the concept of limited liability none of the investors are responsible for corporate debts and liabilities over and above their original investment.
Yes. All of the people seeking incorporation of the entity are responsible personally for all pre-incorporation debts whether they have signed on a contract for the same or not.
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