Question

Please answer both questions

1. David Walker and Robert Hudson were best friends and business partners. They paid $500,000 in cash for an old warehouse. Later, they received an appointment as promoters for a new corporation that would manufacture artificial arms. The corporation need a large production facility, and David and Robert sold the warehouse they owned for $800,000 worth of stocks in the new corporation once it was formed.

Later, the corporation was formed, and the shareholders discovered just how much David and Robert paid for the facility. How much of the $800,000 in stocks is the new corporation entitled to cancel? Discuss.

2. Jeff Case, Mary McDonald, and Jen McManus tried to create a corporation in order to produce electric scooters. They satisfied all of the requirements but did not file the corporate charter with the state of California. They believed that a valid corporation had been formed and conducted business as a corporation.

After seven years, the corporation became bankrupt. The creditors of the corporation would like to hold each of the three owners of the business personally liable. Can they? Discuss.

Answer 1

Answer 1)

Any property which is buy by corporation will be recognised to the extent its actual value on the date of Tranfer.In the Given Case David Walker and Robert Hudson buy old warehouse for $ 500000 and formed it in a new warehouse that is transfer to corporation.

So on the date of transfer David Walker and Robert Hudson both made some modification and if actual value on the date of transfer is around $800000 then it will be a proper deal and there is not any voilation if Law and shareholder are not entitiled to cancel any amount if there is a genuine transaction.

Answer 2)

Ccorporate charter refers corporation's name, its purpose, whether the corporation is a for-profit or nonprofit institution, the location of the corporation, the number of shares that are authorized to be issued, and the names of the parties involved in the formation.

In the given case  Jeff Case, Mary McDonald, and Jen McManus tried to create a corporation without file the corporate charter with the state of California. This is not a valid corporation until corporate charter is filled and all the persons are personaly liable is there is any fraud in the corporation.

If after seven years, the corporation became bankrupt. The creditors of the corporation would like to hold each of the three owners of the business personally liable beacuse the corpoartion is not valid due to not filling coporate charter and all the owners are personaly liable for repayment of dues of creditors.