Class Notes (810,222)
Canada (494,004)
Business (3,226)
BU231 (314)


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Wilfrid Laurier University
Daniel J Fife

1READING NOTESCHAPTER 27Nature of a CorporationIts FormationNature of a CorporationA legal person formed by incorporating according to a prescribed legal procedureA legal person is an entity recognized by law as having its own rights and duties of its own entirely a creation of the stateCharacteristics of CorporationsLiabilityoCorporation is liable for its own debts but shareholders can only lose the value of their sharesoValue of limited liability are often overlooked in small corporations where banks require personal guarantees or pledge propertyTransfer of OwnershipoShareholders may sever by transferring their shares to another personDuty of Good FaithoShareholders have no such obligation to the corporation may carry out multiple businessesConsequences of Separate Corporate PersonalityCapacityoUnder the Canadian Business Corporations Act CBCA a corporation has the capacity and all the rights powers and privileges of an individualoCorporation can act only through its agents employees who must have authoritySeparate ExistenceoSalomons Case 1897Man owned every share of his company but six when the business went bankrupt creditors claimed that corporation was a shamCourt upheld Salomons claim as a corporation and recognized the separate legal personality of the oneman companyLimitations on the Principle of Separate Corporate ExistenceoExceptions to Limited LiabilityShareholders of small private companies are often required to provide security or personal guarantees for loans made to their corporationsCBCA provides further exception as shareholders are liable for corporations debt if theyve received improper distribution of assets dividends paid out even when no profits madeOwners of corporations are not protected from personal liability even if the corporation is vicariously liableoLifting the Corporate VeilCourts have sometimes been prepared to disregard the separate existence of corporations
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