Corporations Pre Incorporation Definition

A new corporation is frequently created through the efforts of promoters who may also be active in securing capitalization for the corporation by subscriptions. The duties and compensation of promoters are proper subjects of preincorporation agreements. Promoters and promotion contracts are controlled by general fiduciary principles, as well as specific statutes. Since the corporation has no existence prior to its formal creation, it cannot be bound by promotion agreements made prior to incorporation unless these are ratified or the benefits are accepted by the corporation after its creation.

A stock subscription, strictly defined, is an agreement to purchase, at a certain price, a stated number of shares of stock of a corporation which is to be formed, although the term is also used in postincorporation stock sales agreements. Absent any statutory or corporate bylaw restriction, any natural person, and any corporation with the appropriate power, may be a subscriber to corporate stock. The rules applicable to the formation of contracts generally govern the valid creation of a stock subscription contract. The completed contract of subscription comes into existence when the corporation, after its formation, accepts the offer to subscribe. Meanwhile, the subscription constitutes a continuing offer if supported by an adequate consideration, such as the subscription promises of other subscribers.

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