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De Facto Corporation

A de facto corporation requires: 1) a valid law allowing incorporation, 2) a good faith attempt to incorporate under the law, and 3) the assumption of corporate powers. While not fully incorporated according to the law, a de facto corporation has a right to exist when challenged collaterally but not directly by the state, which alone has the power to formally incorporate an organization.

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Krisha Marie Carlos
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2K views1 page

De Facto Corporation

A de facto corporation requires: 1) a valid law allowing incorporation, 2) a good faith attempt to incorporate under the law, and 3) the assumption of corporate powers. While not fully incorporated according to the law, a de facto corporation has a right to exist when challenged collaterally but not directly by the state, which alone has the power to formally incorporate an organization.

Uploaded by

Krisha Marie Carlos
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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REQUISITES OF DE FACTO CORPORATION

A valid law under which the corporation is organized

An attempt in good faith to incorporate; and

An assumption of corporate powers

VALID LAW – no de facto corporation will result if there is no law under which the corporation is organized
even if the components thereof assume corporate powers.

Consistent with the proposition that to be a de facto corporation, it must be possible to be a corporation
de jure, the absence of law erases such possibility.

GOOD FAITH

Attempt in good faith to incorporate means that there must be colorable compliance with the law.

DISTINGUISHED FROM DE JURE CORPORATION

A de jure corporation has a right to corporate existence even against the state.

A de facto corporation has a right to corporate existence even against the state if the attack is collateral
but not if the attack is direct.

NEVERTHELESS, the state which alone has the power to incorporate, may waive irregularities in the
organization of the corporation and so long as the state remains inactive in the premises, individuals must
acquiesce.

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