ch 12. corporations Flashcards
What is a corporation?
A separate legal entity created through incorporation.
What is the key benefit of a corporation?
Limited liability for shareholders.
What does “lifting the corporate veil” mean?
Courts disregard limited liability to hold directors personally responsible.
Who acts on behalf of a corporation?
Agents, including directors and officers.
What are the fiduciary duties of agents?
Act in the best interests of the corporation.
What are the advantages of incorporation?
Limited liability, tax benefits, succession, and ease of transferring ownership.
What are the disadvantages of incorporation?
Cost, weak position of minority shareholders, and inability to be discharged from bankruptcy.
What are the three types of incorporation?
Registration, letters patent, and articles of incorporation.
What is the main method of incorporation in Canada?
Articles of Incorporation.
What are closely held corporations?
Corporations with few shareholders and private ownership.
What are broadly held corporations?
Public corporations with shares traded on stock markets
What are the two primary ways corporations raise funds?
Issuing shares and borrowing.
What are common shares?
Shares that grant voting rights but no fixed dividends.
What are preferred shares?
Shares that receive dividends first but usually lack voting rights.
What is a secured creditor?
A lender with a claim over company assets as collateral.
Who elects the board of directors?
Shareholders.
What is the role of directors?
Oversee management and make key business decisions.
What are the duties of corporate directors?
Fiduciary duty and duty of care.
What liabilities can directors face?
Personal liability for unpaid wages, taxes, and environmental damage.
Who are officers in a corporation?
Senior executives responsible for daily operations.
What is a promoter?
A person who assists in forming a corporation and offering shares.
What are shareholder rights?
Voting, financial reports, and participation in major decisions.
What protections exist for minority shareholders?
Derivative action, oppression remedy, and appraisal rights.
Can shareholders force dividends?
No, dividends are at the discretion of directors.
How can a corporation be terminated?
Voluntary dissolution, creditor action, or failure to file reports.
What happens if a corporation goes bankrupt?
It cannot be discharged from bankruptcy until all debts are paid.
What is a unanimous shareholder agreement?
A contract that controls the powers of directors and shareholders.
What is vicarious liability?
A corporation being responsible for its employees’ actions.
What is a corporate constitution?
The governing rules within the articles of incorporation.
What is the significance of incorporation in Canada?
It allows businesses to operate as separate legal entities with protections.
