Corporations And Types Of Shares

Question 1

Corporations

Answer 1

Creature of statute - formed under either the ab business corporations act or the Canada business corporation act (CB)

Question 2

What do corporations do?

Answer 2

File forms
Search
Select a name
Fees
Then a certificate

Question 3

Disadvantages

Answer 3

• Cost
• Fees
• Reporting annual meeting of board * shareholders
• Corp minute book
• audit financial

Question 4

Advantages

Answer 4

Sole business liability (not personal)

Small business tax

Ease of finance

Ease of sale

Separation of ownership and management

Question 5

How does a corporation work?

Answer 5

Shareholders

Board of directors

Corporate officers

Hire employees

Public interface+ business world

Question 6

Shareholders

Answer 6

Owners

Get reports at annual meeting

Get to vote on board of directors

Major political issues

Can waive with audit requirement with a unanimous vote

Question 7

Board of directors

Answer 7

Control the direction and policy

Largest influence

Hire the executive management team

Must act in the best interest of the corporation - put corporation interest first before shareholders

Directors have to act honestly
Duty of utmost good faith to the corp

Question 8

Corporate officers

Answer 8

Implement the strategy day to day

Question 9

Hire employees

Answer 9

Follow officers direction

Question 10

What happens when a director takes personal advantage of a corporate opportunity st the expense of the corp?

Answer 10

Theft of corporate opportunity - if proven the director must pay back any profits or if it is “insider trading” =fines (2x or 3x profits) potential jail

Martha Stewart

Question 11

Directors can be personally liable for

Answer 11

Taxes

Up to 6 months wages of the corp

Insider trading

Certain environmental offences

Question 12

How to sell or buy a corporation?

Answer 12

1. Sales of shares

2. Buy assets

Question 13

Sales of shares

Answer 13

50% + 1 share (common share) gives you control of a corp- cheapest - don’t pay for every asset

Risk. Buy control get benefits but you also get any potential liabilities

Question 14

Buy assets

Answer 14

All of just the ons that are viable and have no associated liability

Do you want to lick only the best assets

Often times this is the most expensive option

Question 15

Types of shares

Answer 15

Common shares

Preferred shares

Question 16

Common shares

Answer 16

3 rights

Right to vote (choose directors)
Right to profit (dividends)
Right to equity ($ value of assets)

Question 17

Preferred shares

Answer 17

Usually no vote but preferred priority for dividends and assets on winding up (ending it)