Founder’s Preformation Duties and Liabilities
Introduction
A good deal of the planning for a new business occurs before a new legal entity, such as a corporation, has been formed and founders need to understand that even though a legal entity does not exist they still have certain duties and are subject to potential liabilities to one another, to the new entity and to investors and other outsiders. For example, founders and promoters are placed in a fiduciary capacity with regard to the business entity to be formed and to the other founders and promoters of the entity, if any. As fiduciaries, founders and promoters have a duty to disclose to the entity and its other founders and promoters all material facts relating to transactions ...
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