When a business organization fails to qualify to be treated as a de jure corporation, the terms “de facto corporation” and “corporation by estoppel” are used by courts in most common law jurisdictions to describe the circumstances in which the organization will be treated as a corporation, thereby shielding shareholders from liability.
What is ‘De Jure Corporation’
A company that has met the prerequisites for establishment in accordance with state laws and has been granted a charter by the state. De jure, which translates as “as a matter of law,” denotes that the corporation has been completely and legally incorporated and is therefore authorized to engage in commercial operations. The granting of a charter by a government presumes that the de jure company will continue to operate in accordance with the law; but, although rare, certain situations may result in the revocation of the charter.
Explaining ‘De Jure Corporation’
A de jure corporation is one that has been legitimately authorized by a state government and has been recognized as such for all purposes from the date of its formation. “As a matter of practice not established on law,” du jure is the polar opposite of de facto, which means “without regard to the law.” However, despite the fact that a de facto company normally operates in good faith, it has failed to meet the technical conditions for becoming a de jure corporation.
De Jure Corporation FAQ
What is the difference between de jure and de facto corporation?
When it comes to contract law, both doctrines are valid; however, the estoppel idea is often not applicable when it comes to tort law, since knowledge of a corporation's existence is immaterial to the commission of a tort. The extent of injury produced by a tortious conduct is usually not dependent on whether or not the perpetrator was aware of the existence of a company.
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