Midterm Notes

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Published on 30 Dec 2011
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m?basic types of shares
Ú?common shares
Ú?preferred shares © have some preference over common shares, and sometimes over other classes of preferred shares, such as a
preferred dividend
Ú?some class must have a vote, the right to receive dividends, and the right to receive property on a winding up
m?corporate securities ± payments
Ú?shareholders
a?dividends paid out of profit only
a?dividends not deductible for tax purposes
Ú?bondholders
a?interest paid regardless of profits
a?interest paid is a deductible expense
a?usually secured, so paid in preference to other creditors on bankruptcy or winding up
m?rights of shareholders
Ú?right to vote to elect directors
Ú?right to approve major changes
Ú?preferred shareholders
a?may have a right to dividends if the corporation can pay
a?will have preference to be paid dividends before the common shareholders
a?usually have a preference to return of capital
m?rights of bondholders
Ú?no right to vote
Ú?no right to manage business
Ú?but often has ability to exert considerable influence over business
Ú?right to appoint trustee if terms of bond not honoured
m?incorporated partnership © directors run the business, and are usually the shareholders as well
m?public corporation © directors run the business for the passive shareholder investors
m?directors are responsible in law for:
Ú?business²the commercial relations of the corporation as a legal person with other legal persons
Ú?affairs²the relations between the corporation and its shareholders
m?duties of directors to the corporation
Ú?must act honestly, in good faith
Ú?with a view to the best interests of the corporation
Ú?must act as a reasonably prudent person
Ú?directors have a fiduciary duty to the corporation ± they act as trustees
m?duties of the directors to the shareholders
Ú?specific duties to deliver financial statements and call annual meeting
Ú?submit by-laws for approval
Ú?submit other business to shareholders
Ú?no fiduciary duties to individual shareholders
m?fiduciary duties of directors
Ú?standard of highest good faith
Ú?no conflicts of interest
m?fiduciary duties and conflicts of interest
Ú?contracts
a?directors must disclose conflict to corporation, and refrain from voting to approve contract
a?corporate opportunities must be reserved for the corporation, and directors act as agents for the corporation
a?corporate information cannot be acted on or used
a?no competition with the corporation
m?remedies for breach of fiduciary duty
Ú?damages in the amount of loss
Ú?recall the contracts, if possible without affecting third parties
Ú?directors hold assets in trust for the corporation and must deliver them
Ú?accounting of profits
Ú?corporations should have full benefit and directors should be derived of any benefit
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