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ADM 3360 Study Guide - Final Guide: Valet Parking, Implied Consent, Title Search

Course Code
ADM 3360
Gilles Le Vasseur
Study Guide

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ADM3360N - Final Notes
Chapter 15 - Corporation
The corporation is the predominant business vehicle in modern commerce because it is a separate legal
entity. It does not have many of the shortcomings associated with the other prevalent business forms.
The corporation alone is responsible for its own debts and other liabilities. Should the corporation fail to
make good on its obligations, the shareholders are not responsible for the default. The most that they stand
to lose is the purchase price of their shares.
Corporations, with few exceptions, continue to be treated as entities separate from their shareholders. The
cornerstone of corporation law- limited liability- is secure.
Stakeholders in the corporation
The corporation has a legal existence and, as such, is treated in law as a person. That said, the corporation
is an artificial entity whose activities are controlled entirely by humans being.
These individuals, or groups of individuals, are often referred to as the internal stakeholders of the
Internal stakeholders: Those who have either a direct or indirect role in governing the corporation and
determining its mission and how it will be achieved.
oShareholders: those who have invested in the corporation by buying shares in return for a
potential share of the corporate profits and other benefits. Shareholders do not have any direct
authority to manage the corporation. However, they do have the power to elect the board of
directors and therefore can have a strong influence n the directors of the corporation.
oThe board of directors: Charged with management functions - including policy development- and
its answerable to the shareholders since, should it perform poorly, the board runs the risk of being
voted out of office.
oCorporate officers: are another important internal group. They are charged with managing day-to-
day operations of the corporations.
The corporation has a tremendous impact on much of society.
External stakeholders: Are people who have dealings with or are affected by the corporation but do not
have an explicit role in governing the corporation. Ex: government, the general public, employees,
customers, and creditors.
Pre-incorporation issues: before turning a business into corporation, there must be some questions
oWhether to incorporate federally or provincially
oWhat type of shares will be available and to whom
oWhat to name the corporation
Provincial and federal incorporation: Federally incorporated have a right to carry on business in each
province, whereas provincially incorporated corporation have the right to carry on business only in the
province in which they are incorporated.

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ADM3360N - Final Notes
Shares and Shareholders: First there must be a share structure for the corporation. This entails deciding
on the class or classes of shares that the corporation will be authorized to issue, what rights and privileges
attach to each class, and the number of each authorized for issuance.
oClasses of shares: A share ownership interest in the issuing corporation. It does not give the
owner or holder any right to use the assets of the corporation or any right to directly control or
manage the corporation. It does give the owner the rights to specifically attach to the share. (Voting
rights, Financial rights, preference rights, cumulative rights, redemption rights)
oAvailability of shares: A corporation may issue shares to the general public ( Widely held
corporation or public corporation). A corporation that issues shares publicly is subject to the
regulation pursuant to the relevant securities legislation in those provinces in which the securities
are issued or traded. A corporation that does not issue its shares to the general public is usually
know as a closely held or private corporation. These corporations are generally exempt from most
of the obligations of securities regulation so long as they meet the definition of a privation
corporation.(they also have lower income tax)
oWho may own shares: A share is a piece of property and its freely transferable unless there is a
restriction in place. In public corporation, shares are almost always freely transferable. In closely
held corporation shares are generally issued to friends and families.
Corporate name: All jurisdiction require a company to be identified by a name or designated number.
oIt must be distinctive, not cause confusion with any existing name or trademark, Include legal
element, and not include any unacceptable terms.
oNUANS report - newly upgraded automated name search is a document that shows the result of
search for business name.
oShelf company is a company that does not engage in active business(still needs a name)
The process of incorporation
All Canadian jurisdiction follow a similar procedure for the creation of a corporation. Federal corporate
registry in Ottawa:
oarticles of incorporation, notice of registered office, notice of directors, NUANS report, and the filing
fee, payable to the receiver general of Canada
The article of incorporation: set out the basic features of the corporation-name, place of the corporation's
registered office, class and number of shares authorized to be issued, and restrictions on the transferring of
shares, the number of directors…(Incorporator - the person who sets the incorporation process in motion)
Provincial incorporation legislation has its own requirements.
Organizing the corporation
Following incorporation, the first directors will ordinarily undertake a number of tasks under federal
legislation. They are required to call an organizations meeting to:
oMake bylaws: Rules specifying the day-to-day operating procedures of a corporation
oAdopt forms of share certificates and corporate records

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ADM3360N - Final Notes
oAuthorize the issue of shares and other securities
oAppoint officers
oAppoint an auditor to hold office until the first annual meeting of shareholders
oMake banking arrangements
oTransfer any other business
The meeting must be called within 18 months of incorporation
Financing the corporation
Debt financing: A corporation may raise money by borrowing.
oThe company may obtain a loan from shareholders, family or friends of shareholders, lending
institution and government.
oLong term borrowing causes the corporation to issue bonds or debentures(corporate IOU)
oBond: A document evidencing a debt owed by the corporation, often used to refer to a secured
oDebenture: A document evidencing a debt owed by the corporation, often used to refer to an
unsecured debt.
oA bond or debenture does not represent any ownership interest in the corporation and the holder
does not have any rights to participate in the management of the corporation. However, these
debts are often secured by a charge on the assets of the corporation.
Equity financing: Shares frequently used to raise money for the use of the corporation.
oShares can be attractive to investors because, unlike debt, where the return is usually limited to a
fixed amount, shares provide an opportunity to benefit from the corporation's growth.
Shares and bonds represent two very different ways of raising money for corporate activities. Most
businesses, particularly large ones, use some combination of those two methods of raising
funds(securities), maintaining a reasonable balance between them. Furthermore, shares and bonds can
come with conversion rights( The right to convert one type of security into another type)
Securities legislation: All provinces have enacted securities acts:
oA mechanism for the transfer of securities
oEnsures that all investors have the ability to access information relevant to their securities -
oPublic confidence in the security market place
oRegulate those engaged in trading securities
oRemove those who do not comply with the rules
Registration: Any company intending to sell securities to the public in a given province must be registered to
do so with the relevant provincial securities commission.
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