Chapter 11 - corps Flashcards
incorporation/corporations
separate legal entity that has a legal personality separate from the people who own shares in it
corporation
“owner” owns shares that can be bought and sold
shareholders can be continually changing while the company remains intact
flexible
shareholders do not own assets of business
legal fiction
separate legal entity
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advantages of corps
limited liability
taxes
successsion and transferability
obligations of participants
management
limited liability
shareholders protected from unexpected corporate obligations
limited liability is lost when
directors/officers give personal guarantees for loans
courts lift corporate veil and hold principals liable for company obligations
disadvantages
major changes in corporate structure require amendments to the incorporate documents
position of minority shareholder is weak
free transferability of shares may be restricted
most expensive way to operate a business
process of incorporation
registration of a company
letters patent
articles of incorporation
registration of a company
file memorandum of association and articles of association with govt agency
- name of company
- authorized share capital
- objects of the incorporation
articles of assn
internal procedural regulations for governing the operation of the company
parvalue shares
company places a monetary value of the share at issue may not reflect actual value on the market
no par value shares
value of share is determined by the market
different classes of shares
common
preferred
common shares
vote at shareholders meetings
receive dividends declared by the corporation
receive property of the corp on its discussion
preferred shares
give shareholder preference when dividends are declared
where can corps borrow funds
single creditor: bank loans
multiple creditors: debentures and bonds
funding of corps
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closely held corps
few shareholders
shares not sold openly on stock market
private corporation
broadly held corporation
public share offering
more highly structured and regulated
directors
elected by shareholders
owe a duty to the company to be careful
fudiciary duty to the corp
directors liable for
unpaid wages
breaches of company employment standards
unpaid taxes
damage to the enviro
breached of legislation
commission of tort
causing employees to commit crimes
senior management
owes the same types of general obligations, duties of care and competence to the corp as the directors
promoter
assists corp with a public share offering
owe a fiduciary duty to the corp
corporate structure
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dissolution of a corp
may be voluntary or involuntary
induced internally or externally
bankruptcy
neglecting to file annual return
