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Week 8 - Chapter 17 - Forms of Business Continued.doc

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York University
Administrative Studies
ADMS 2610
William Pomerantz

Corporation Corporation - a type of legal entity created by the state - Existence in law is separate from those who form it (limited liability) - Acreature of statute - Aperson in the eyes of the law with similar rights and responsibilities Th. That of an individual Limited Liability If company goes bankrupt the shareholders only loise investments in corporation and not personal assets Incorporate Federally b/c - operate in other places Nature of a Corporation Characteristic - Not an individual nor a partnership - Separate legal entity from its owners - Existence at law, but not material existence - Rights and duties set forth by law - Agents can bind corporations - Corporations aren’t alive and can’t sign a contract for themselves - Get a director (agent) to sign it - shareholders have limited liability Shareholder - a person who holds a share of interest in a corp. E.g. We don;t have much say in way Ontario is run Director - under corporation law, a person elected by shareholders to manage its affairs Officer - a person elected or appointed by the directors to fill a particular office (president, secretary, etc.) - Shareholders elect directors and directors appoint officers Company has to have an ending with: - Incorporation / inc. - Limited / ltd. - Corporation/corp. Control - management lies with directors - Subject to limitations in the articles or shareholders agreement - shareholders cannot bind the corporation in contract (only officers and directors) CASE EXAMPLE CASE Josepgh solomon sole protritoryship, has a successful shoe business -scared of getting sued, so decides to incorporate -makes a company, joseph solomon INC -has conversaqtion with himself “hey joeself Solomon, this is joseph solom inc, want to buy your shoe business. Joe asks how much? Inc says, 10 grand. Joe says your ripping me off. Inc says take it or leave it. Joe asks for the 10 grand and INC said you just incorporated me, don’t have 10 grand. Inc asks to have the money loaned. Joe says yes, but says if don’t pay me, I’m going to take your assets, put in place a lean or debenture. They do all the paper work. Inc wasn’t paying its bills to the creditors, and creditors sued and won and got a judgement against the corporation. When you get a judgment against cor- porations, (a 1000 dollars), whats next step? Next step is go and get assets from the corporation, whatever it is. When they go to take that stuff, there is a lean or deben- ture, see the lean is from joe (primary shareholder of corporation) they say can’t but a lean on your own business, Joe said im not taking my lean off. Creditors take it to court to try and get the lean taken off. Legal reason for answer - can’t make them take it back We learned that a corporation is a separate legal entity (different from owners and share- holders) There was a legal lean, it was legitimate, and the creditors were defeated, they wouldn’t be able to get the lean taken off. Another one - ABC industries INC Per: JohnAdams (sign here) If there is a deault, the bank cant sue johnAdams Another Question!! Do We need to give our company a name? Can give company name if we want to - if we dont the company is numbered - Can register a business name and then carry it on afterword ← ← If we do - can’t choose any name we want - need to to a NUANS search - search of all companies in Ontario to make sure no oth- er company has that name ← ← If names are similar (Delicious Cupcake inc.And Delicious Cupcakes inc.) - can get the name passed but will probably be sued Transfer of Interests - Freedom of shareholders to transfer shares - Freely in a public or private company - Subject to restriction in articles or shareholders agreement - partners can’t easily transfer interests among each other If a partner dies - the partnership is over If a partner quits - its partnership is over Term of Operation of the business - corporation has perpetual existence - Continues even if shareholders die Operation - governed by Statute and internal agreements Separate Existence - assets belongs to corporation not to shareholders Methods of Incororpartion Special act - Acorporation created by an act of parliament or a legislature for a specific purpose - Only powers specifically granted to it by theAct For public or quasi-public purposes i.e. Canada Post Ultra vires – if corporation attempts to perform something outside its powers - Only powers specifically granted to it by theAct - For Public or quasi-public purposes e.g. Canada Post - Ultra Vires - if corporation attempts to perform something outside its powers - Going beyondf what theyre able to do GeneralAct -Aform of incorporation whereby a corporation may be created by biling specific information re- quire by statuture - Articles of Incorporation - Fill out a Form - Name of company - Head office of company - List who intiital directors are - What is share capital? (preference or common shares) Certificate of Incorporation - a government certificate creating the corporation Doctrine of Constructive Notice - presumption at law that everyone has knowledge iof the content of all statutes - Doctrine of Ultra Vires and Constructive Notice abolished for General-act Corporations - Indoor Management Rule - a party dealing with a corporation may assume that the officers have the valid and express author- ity to bind the corporation Purposes - an agreement between shareholders of a private corp. Concerning management and/or future re- organization of the cor. Such as a buy-out of interests - Protects minority shareholders - Sets ground rules Three Types - Shareholder and corp. - Shareholder and other shareholders - Shareholders who act as directors Issues in ShareholdersAgreements - Minimums of theAct must be abided by - Various matters (set forth in text at page 314) Corporate Securities Share -the ownership of a fractional equity interest in a corp. - used to raise capital for corporation - Can be fixed or par-value - Par Value - Put a dollar value on shares - Common or preferred - Preferred - First in line for dividends when company closes - Common - Voting rights - All corporations must have some voting common shares 2 ways to raise money - Debt - Good: dont lose control - Bad: have to pay it back and if you don’t your finished - Equity - Issuing shares - Good about it: get money fast and don’t have to pay money back - Bad: lose partial control of corporation Public company - on stock market - Can trade company shares - has to do an IPO (initial public offering) to go public - Have audits Private company - don’t have audits - Not on stock market - you can be everything Debenture (not fixed assets) - a debt se
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