1.Susan is a promoter for a proposed corporation, Acme Corp. As promoter, she si
ID: 1102162 • Letter: 1
Question
1.Susan is a promoter for a proposed corporation, Acme Corp. As promoter, she signed a
three-year lease to rent office space in an office park. She signed her name and indicated
below her signature she is signing as "promoter for Acme Corp., a company yet to be
incorporated."
Acme is never incorporated. The lessor believes that Susan is personally liable for any damages
it will sustain as a result of the three-year lease having to be breached. Is Susan personally liable?
Explain.
2.One of the directors of Independent Acme purchases 100 acres of timberland. In order
for him to sell the timber from this land to Independent, what must he do? If he does not
act properly in this situation, what duty would he violate, and what would be the result?
3.Kelly is the CEO of Acme Corporation. Who sets her compensation, and what types of
compensation would she likely receive in addition to her salary? Can shareholders do
anything to challenge her level of compensation if they think it is unfairly high in
comparison to average employee compensation within the company?
Explanation / Answer
1)Until a company is incorporated the liability falls solely upon the promoter. So if at the time of agreement as the firm is not incoporated the liabilty rests with Susan. She me later incorporate it and have the same notified. Though this will mean that any liability before the date of incoroporation will be with Susan. Also Susan can change it to a Plc. private limited corporation at any point of time. This would offer her more flexibility.
2)He must prove that the land was purchased at market price and that he would in no way profit from the sale of this land to the company. If he doesn't he can be charged with vested interests and/or profiting from position held at the company.
3) The person who has majority shares i.e. over 50 % will set the terms of Kelly's salary. Shareholders cannot do much about it. The major shareholder has his way. They can however appeal under a section of minority shareholder interest; that basically protects minor shareholders from any actions undertaken by major shareholders that might harm the company. But proving this is alwys tricky.
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