Abstract

In the late 1960's, the Arizona legislature formed a committee to address the need for modernization of Arizona's corporation laws. The committee formulated the Arizona Business Corporation Act, which the Arizona legislature adopted in 1975. The Act took effect on July 1, 1976. On February 10, 1976, the Arizona legislature introduced a bill that made corrective changes to the Corporation Act. Among those changes was an amendment to Arizona Revised Statute section 10-146.

This Note focuses on the amendment's interpretation. Clarification is important because of the amendment's ambiguous character. Prior to the statute, Arizona applied the common law rule of promoter liability on preincorporation agreements. After the amendment, Arizona continued to apply the common law rule, thus giving no effect to the amendment.

Initially, this Note addresses the common law liability of promoters on preincorporation agreements and compares common law to modem theories of liability. Next, possible interpretations of the Arizona statute are explored. The interpretive analysis includes a comparison with other states that have adopted substantially similar provisions. Finally, a recommendation is made as to the best possible interpretation of the amended statute.

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