De Jure Corporation - Explained
What is a De Jure Corporation?
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What is a De Jure Corporation?
The word De jure refers to a matter of law. A de jure corporation is a business complied with all the requirements of its state incorporation statute and thus legally permitted to functions as a corporation. A corporation with de jure status is allowed to issue stocks in the market, hold board of directors meetings, and conduct the day to day business.
How Does a De Jure Corporation Work?
This doctrine is generally applied for shielding the shareholders from liability. If a person enters a contract on behalf of a corporation that is not a de jure corporation, this doctrine may protect the person from liability. However, most states do not apply the doctrine when there are reasons to believe that the concerned person was aware that the incorporation effort was flawed at the time of their reported action on behalf of the corporation. A De facto Corporation, on the other hand, is a corporation that is not properly incorporated but is recognized as a legal corporation by the court of law. In order to become a de facto corporation, a company must need to meet certain requirements prescribed by the law of the court. A third doctrine is a Corporation by estoppel. It is for protecting the officers and shareholders of a company that was not properly incorporated and does not meet the criteria of being a de jure or de facto corporation. If a person has done business with such an entity assuming it to be a corporation, later he may be estopped from denying the corporate status of the company.
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