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Lecture 7

Bus 393 - Lecture 7

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Business Administration
BUS 393
Colin Hawes

BUS 393 October 29, 2010 Lecture 7 Corporation Colin Hawes Process of  Incorporating could be done through registration, letters patent and articles of incorporation Incorporation  2 types of corporations: Provincial and Federal Corporations (Whichever one is more reasonable (431) to business)  Registration: Registers with the government through memorandums which contain the corporation’s constitutions and operational rules in articles  Letters Patent: Sends a letter to the monarch granting a royal charter; letter contains corporation constitution  Articles of Incorporation: File articles of incorporation, pay an appropriate fee then the company is granted a certificate of incorporation Corporations a  Corporations are a separate entity (the corporate veil), however, sometimes court will make a Separate Entity exception on situation (458 figure)  Shareholders own  corporation  corporation own assets Shares (439)  Shares: Part interest in the corporation which is used to generate funds  Preferred Shares: Preferred shareholders have claim over common shareholders (in dividends and assets if a company is bankrupt) Usually cannot vote, unless dividends are not paid  Common Shares: Regular shares for which owners only have voting rights  Special Shares: Shares which are for estate planning; Can give beneficial interests to heirs but surrender control to others for example  Control part of corporation  Corporation not obligated to declare dividends  Share in liquidation of assets after bankruptcy, after creditors  Shareholders can vote Bonds (440)  These two items pay interest and people can sell them  Bond: Secured by company mortgage or corporation assets  Debenture: Unsecured by company  Bondholders are creditors  Bondholders have no right to vote  Corporation has legal obligation to repay loans  Entitled to be paid before shareholders in event of bankruptcy Public and  Private Corporations, those whose corporation is owned by a few shareholders and restrictive in Private the sale of shares, have the least legal requirements Companies  Public Corporations, those corporations which can be bought by anyone on the market have much (441) more legal requirements Directors/  Shareholders choose directors Managers  Duties of a Director: (442)  Owes duty not to be negligent to the corporation  Owes fiduciary duty only to the corporation  (Therefore, only the corporation, other directors, can sue the director)  Requirements for a Director:  Must be an adult of sound mind  Cannot be bankrupt  Cannot be convicted  Directors personally liable when they make prohibited decisions:  Allowing shares to be sold at less than fair price  Unauthorized transactions (payment of dividends)  Violate specific responsibilities set out in the legislation  Insider trading (illegal)  Bankrupt company while company is owing wages
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