The Law of Corporations

Question 1

The corporation

Answer 1

is primarily a method of solving problems encountered in raising substantial amounts of capital. Usually, firms whose inputs are primarily labour than capital are often either partnerships or individual proprietorships rather than corporations.

Question 2

Non-profit corporations

Answer 2

Non-profit corporations: religious sects, universities, hospitals, charities, etc. They represent corporations which are not trying to maximize profit but rather output. Donors finance them thus corresponding to the shareholder of a corporation.

Question 3

The shareholder liability is limited

Answer 3

The shareholder liability is limited to the value of his shares (limited liability)

Question 4

Passive investment is protected by:

Answer 4

• a complex of legal rights vis-a-vis management and any controlling group of shareholders
• the fact that equity interest in corporations are broken up into shares of relatively small value that can be traded in markets thus reducing the risk through diversification

Question 5

Limited liability

Answer 5

Limited liability represents a means not shifting the risks from the individual investors to the to the voluntary and involuntary creditors of the corporation – creditor bears that risks, yet he is compensated. It may be that the creditor (a bank) is in a better position to appraise the risk.

Question 6

In jurisprudence natural person is a human being, as ______________________, which may be a private (i.e. business entity or non-governmental organisation) or public (i.e. government) organisation.

Answer 6

In jurisprudence natural person is a human being, as opposed to a legal person, which may be a private (i.e. business entity or non-governmental organisation) or public (i.e. government) organisation.

Question 7

The law recognizes persons having a legal personality, which.

Answer 7

The law recognizes persons having a legal personality, which provide them with rights and also subjects them to duties. This enables persons with the appropriate capacity to enter contracts, be subject to criminal laws. Every human has a legal personality and is known as a natural legal person.

Question 8

Juristic person represents

Answer 8

Juristic person represents a company or an organisation which is bound by legal personality. After a corporation is incorporated it is recognized in law as having its own legal personality.

Question 9

Types of business organisations

Answer 9

1. Sole trader
2. Partnerships
3. Unlimited company
4. Limited liability company
5. Public companies
6. Private companies