MGMT 3100 Lecture Notes - Lecture 7: Legal Personality, Natural Person, Issued Shares
27 Dec 2015
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Corporation as a legal person: separate and distinct legal entity. Legal person formed by incorporation according to a prescribed legal procedure. Legal person: entity recognized at law as having own legal rights, duties and responsibilities; entirely a creation of the state. Natural persons: human beings; have rights and obligations (age, mental capacity) Limited liability: liability of shareholders is limited to the amount of capital. Corporations are liable for their own debts contributions. For small corporation to obtain credit, its directors and shareholders often give personal guarantees or mortgage own property as collateral. Partners need to negotiate their release with partners and creditors and may be liable for some debts contracted after his/her retirement. Shareholders have no liability to corporations debts; can sever all connections with the corp. by transferring shares to another entity. Shareholders have no authority to bind corporation to contractual obligations. Management is delegated to an elected bod that reach decision by simple majority votes.
