Promoter Liability

The video tutorial discusses the role of a promoter in the early stages of forming a corporation. It explains how a corporation can adopt or ratify actions taken by the promoter before its existence, thereby transferring liability from the promoter to the corporation. However, if certain actions are not ratified, the promoter may remain liable. This is particularly relevant when promoters seek endorsements or commitments from future shareholders. The concept of promoter liability is highlighted, focusing on actions not ratified by the corporation.

What is the primary purpose of a corporation adopting the actions of a promoter?

• To ensure the promoter becomes a shareholder

• To increase the corporation's initial capital

• To transfer liability from the promoter to the corporation

• To establish the corporation's brand identity

In what situation might a promoter be held liable for their actions?

• When the corporation ratifies all actions

• When the promoter becomes a board member

• When the promoter's actions exceed what was anticipated by the corporation

• When the corporation is successfully formed

What might happen if a promoter's actions are not ratified by the corporation?

• The corporation automatically assumes liability

• The promoter could be liable for those actions

• The actions are considered void

• The promoter is rewarded with shares

Why might a shareholder have a claim against a promoter?

• If the promoter becomes a director

• If the corporation issues dividends

• If the promoter fails to deliver on promises made during the formation process

• If the corporation is highly profitable

What is a potential consequence if a promoter's promises are not fulfilled and not ratified by the corporation?

• The corporation gains more investors

• The promoter is automatically appointed as CEO

• The shareholder might take legal action against the promoter

• The corporation's stock value increases