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Multiple Choice

If a corporation fails to meet all statutory requirements but acts like a corporation, which doctrine may treat it as a corporation?

The situation tests recognizing corporate status even when the formal steps aren’t fully completed. A de facto corporation can be treated as a true corporation when there is a genuine attempt to form under the applicable statute, substantial compliance with the steps, actual use of corporate powers, and no notice to third parties that the structure isn’t legally formed. This doctrine allows the entity to bind itself and shield promoters from personal liability, provided good faith reliance on the corporate form exists. If someone knew there was no valid incorporation or there was no colorable compliance, this doctrine wouldn’t apply. The other options aren’t about establishing corporate status: de jure would require proper formation, constructive trust is a remedy to prevent unjust enrichment, and there isn’t a doctrine called “merger corporation.”

The situation tests recognizing corporate status even when the formal steps aren’t fully completed. A de facto corporation can be treated as a true corporation when there is a genuine attempt to form under the applicable statute, substantial compliance with the steps, actual use of corporate powers, and no notice to third parties that the structure isn’t legally formed. This doctrine allows the entity to bind itself and shield promoters from personal liability, provided good faith reliance on the corporate form exists.

If someone knew there was no valid incorporation or there was no colorable compliance, this doctrine wouldn’t apply. The other options aren’t about establishing corporate status: de jure would require proper formation, constructive trust is a remedy to prevent unjust enrichment, and there isn’t a doctrine called “merger corporation.”