Module 1 - Corporations Flashcards
Are corporations separate legal entities?
Yes, they are separate
What can corporations do as separate legal entities?
Can own property, take out loans, and enter contracts
Corporations are incorporated under the ____________________
The Canada Business Corporations Act
or
The Alberta Business Corporations Act
Corporations are subject to _________ legislation
Securities
What does the securities legislation govern?
The trading and disclosing of shares
What forms are required to be filed in order to start at corporation?
Articles of Incorporation
Notice of directors
Notice of address
Bylaws (which set out day-to-day operation of corporation)
What does a corporation receive after filing all necessary documents at official corporate registry?
Certificate of Incorporation
What is the main document a corporation needs to file in order to be incorporated?
Articles of Incorporation
A corporation is made up of pieces called _______
Shares
Where are share rights set out?
In the Articles of Incorporation
What is a distributing corporation?
A corporation where trades are publicly recognized and traded on stock exchange
What is a non-distributing corporation?
A corporation where shares are not publicly traded
What are 3 other names for a distributing corporation
Reporting issuer
Public company
Widely held corporation
What is SEDAR?
A website which provides access to public securities documents and information filed by issuers
What are 2 other names for non-distributing corporations?
Private corporations
Closely held corporations
What is the maximum number of shareholders in a non-distributing corporation?
50 maximum shareholders
How do shareholders invest into a corporation?
By buying shares
What are the rights of shareholders?
Right to vote
Right to information
Financial rights
What are shareholders also considered as?
Owners of the corporation
How do shareholders acquire ownership interest?
By purchasing shares
Who are corporations managed by?
Directors and officers
What is the directors role?
To oversee “big picture” ideas
Has power to appoint officers
Who elects directors of a corporation?
The shareholders
Who manages or supervises management of a corporation?
Directors
Who do directors delegate work to?
Officers
What is an officers role in a corporation?
To manage day-to-day business of the corporation
Can a person hold all three positions in a corporation?
(Shareholder, director, officer)
Yes, a person can hold all three positions
Can a corporation be composed of one person?
Yes, if said person holds all three positions
Do directors and officers need to be shareholders?
No, they do not need to be shareholders
What two duties do directors and officers owe a corporation?
Fiduciary duty
Duty of competence
What is a fiduciary duty?
Duty to act honestly and in good faith in the best interests of the company
What is duty of competence?
Duty to exercise care, diligence, and skill which a reasonably prudent person would exercise under similar circumstance
What are corporations considered under law?
Corporations are considered as legal “persons”
What are corporations liable for?
The corporations own torts, debts, and actions
Are the people of a corporation liable for the corporation?
No, they are not liable
What does it mean to “pierce the corporate veil”?
To have the court put aside limited liability of a corporation’s person(s) in order to hold said person(s) liable for the actions or debts of the company
What must be shown in order to pierce the corporate veil?
Complete domination by the person(s) sought to be made liable
What is a shareholders liability limited to?
The amount invested into the company
What is “vicarious liability”?
Liability of one’s employee or agent of corporation’s torts
What is the lifespan of a corporation?
Corporations have an unlimited lifespan
Can one pass their shares to family members?
Yes, shares can be passed through families
How can a corporation be dissolved?
If a majority of shareholders vote to dissolve
What are some advantages of a corporation?
Limited liability of shareholders (corporation carries most of the risk)
Flexible corporate structure
Shareholders can be as involved as they want
Continuous lifespan
Can incentive employees
Disadvantages of Corporations
Potential for people behind corporation to be held personally liable
Strict disclosure and reporting requirements
Can be difficult to transfer shares
