Corporations.docx

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14 Apr 2012
Department
Course
Professor
Corporations
Most successful and popular type of organization as it provides the most in terms of flexibility in
terms of raising capital, options for shareholders etc.
Registration Jurisdiction a memorandum of association that sets out:
o The objective of the corporation
o The nature of the business must be briefly described.
o The share capital must be described
Different shares have different characteristics, the type of shares, amounts, etc.
o When the shareholders call meetings, how they elect members to board, when they can
vote vs. when the directors/officers make decisions
o In this type of corporation formation, we receive government permission
Letters Patent
o The crown used to determine when a corporation could come into existence.
o This method began to become dated as people began to feel that anyone who would
like to start a business should be able to start one as long as they have all the required
documents and proceedings completed. The idea that they must get permission from
the crown or government became unpopular
Articles of Incorporation
o There is no royal prerogative or delegated crown authority.
o When all required documents are filed properly a corporation can come into existence
o Two types of files needed to incorporate the business
When these documents are filed, they become public
The Article of Incorporation
o What the corporation’s name will be
o The name must end in one of three designations
Inc. Incorporated
Ltd. Limited
Corp. Corporation
o The number of directors that the corporation will have
Directors are people the shareholders elect to run the
corporation.
The director’s names must be set out in this document
as well.
At least one of these directors must live in Ontario (they
must live in the jurisdiction of the Corporation)
o It will restrict the activities of the business
o Sets out the share capital of the corporation
Usually you ask for far more than needed as it is difficult
to get more at a later point
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The idea is that this will bring some accountability to the corporation
for the public and government
Bylaws:
o Corporation’s own internal rules about electing new directors
o Sets who has signing authority, when there are meetings of
directors, meetings of shareholders
o When at a meeting:
Quorum when a meeting is held to decide something,
a minimum number of people are needed
Vast majority of corporations are privately owned (do not trade on the
stock exchange)
Annually filed documents are mandatory and update the public about
the latest directors, address etc.
Another document that exists but is not public is the minute book.
o It records every shareholder in the company, the minutes of all
the shareholder and director meetings
o
A corporation is its own personality that files its own taxes, and acts as
its own identity
o It has limited liability
Shareholders stand only to lose the value of their
investment, not their personal assets, if the corporation
was to fail
o Corporations sell shares to raise money,
Buyers hope that the value rises over time
o There are circumstances where the directors and managers are
liable personally for matters related to the company
o Shareholders are not involved in management at all
o The concept of limited liability is one of the ways that people
creditor-proof themselves
When starting the corporation, banks may require a
personal claim to the founders personal assets in
exchange for the loan.
If the founder does this, and they do not succeed as a
company, it is still the corporation that is liable, not the
owner personally
o One of the characteristics of a partnership is that the ease of
ownership becomes comparatively easier to do.
This can be done by having the owners sell shares
If a whole company is to be sold,
The owner can sell all their shares
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