37: Corporate Formation and Financing Flashcards
general corporation statutes
state statutes that permit corporations to be formed without the separate approval of the legislature
corporation codes
state statutes that regulates the formation, operation, and dissolution of corporations
model business corporation act / MBCA
a model act, drafted in 1950, that was intended to provide a uniform law for the formation, operation, and termination of corporations
characteristics of a corporation
legal existence, free transferability of shares, perpetual existence, centralized management, and limited liability of shareholders
corporate officers
employees of a corporation who are appointed by the board of directors to manage the day-to-day operations of the corporation
limited liability of shareholders
a general rule of corporate law that provides that generally shareholders are liable only to the extent of their capital contributions for the debts and obligations of their corporation and are not personally liable for the debts and obligations of the corporation
professional corporation
a corporation formed by lawyers, doctors, or other professionals
model nonprofit corporation act (MNCA)
a model act the provides comprehensive and modern law for the formation, operation, and dissolution of nonprofit corporations
alien corporation
a corporation that is incorporated in another country
holding company
a corporation that owns and operates a variety of other corporations and entities as subsidiaries
promoter
a person or persons who organize and start a corporation, negotiate and enter into contracts in advance of its formation, find the initial investors to finance the corporation, and so forth
promoters’ contracts
a collective term for such things as leases, sales contracts, contracts to purchase property, and employment contracts entered into by promoters on behalf of the proposed corporation prior to its actual incorporation
promoters’ liabiity
the liability of a person for the debts and obligations he or she has entered into on behalf of a proposed corporation prior to the formation of the corporation
novation agreement
an agreement that substitutes a new party for one of the original contracting parties and relieves the exiting party of liability on the contract
articles of incorporation / corporate charter
the basic governing documents of a corporation. they must be filed with the secretary of state of the state of incorporation
articles of amendment
a document filed with the secretary of state’s office that amends to the articles of incorporation of a corporation, the articles of organization of a LLC, ot the articles of LLP
general-purpose clause
a clause that can be included in the articles of incorporation that permits the corporation to engage in any activity permitted by law
limited-purpose clause
a clause that can be included in the articles of incorporation that stipulates the activities that a corporation can engage in. the corporation can engage in no other purposes or activities
model benefit corporation legislation (MBCL)
a model act that provides for the creation and operation of benefit corporations
general public benefits
benefits, such as the advancement of social issues, that are taken into consideration by directors and officers of benefit corporations when making corporate decisions
close corporation
a small corporation that has met specified requirements and may choose this designation under state law. as such, the corporation may dispense with some corporate formalities and operate without a board of directors, without bylaws, and without keeping minutes of meetings
organizational meeting
a meeting that must be held by the initial directors of a corporation after the articles of incorporation are filed
C corporation
a corporation that does not qualify for or has not elected to be taxed as an S corporation. where there is a C corporation, there is double taxation–that is, a C corp pays taxes at the corporate level, and shareholders pay taxes on dividends paid by the corporation
subchapter S revision act
a federal statute that allows shareholders of qualifying corporation to avoid double taxation by electing S corporation status
S corporations
a corporation that has met certain requirements and has elected to be taxed as an S corporation for federal income tax purposes. it pays no federal income tax at the corporate level. its income or loss flows to the shareholders and must be reported on the shareholders’ individual income tax returns
form 2553
a form that is filed with the IRS to elect subchapter S federal income tax status for a qualifying corporation
certificate of authority
a formal document that must be issued by the secretary of state before a foreign corp/company may conduct business in that state
express powers
powers given to a corporation by (1) the us constitution, (2) state constitutions, (3) federal statutes and state statutes, (4) corporation codes, (5) articles of incorporation, (6) bylaws, and (7) resolutions of the board of directors
ultra vires act
an act by a corporation that is beyond its express or implied powers
arrearages
the amount of unpaid cumulative dividends
treasury shares
issued shares that have been repurchased by the corporation. treasury shares may not be voted by the corporation. they may be resold by the corporation
debenture
a long-term (often 30 years or more) unsecured debt instrument that is based on a corporation’s general credit standing
indenture agreement
a contract between a corporation and a holder that contains the terms of a debt security
voluntary dissolution
dissolution of a corporation that has begun business or issued shares, upon recommendation of the board of directors and a majority vote of the shares entitled to vote
administrative dissolution
involuntary dissolution of a corporation that is ordered by the secretary of state if a corporation has failed to comply with certain procedures required by law
judicial dissolution
dissolution of a corporation through a court proceeding instituted by the state–orders a decree of dissolution
winding up
the process of liquidating the assets and distributing the proceeds to satisfy claims against the business
termination of a corporation
an act that occurs after the winding up of the corporation’s affairs, the liquidation of its asstes, and the distribution of the proceeds to the claimants
