Ch 15 The Corporate Form.docx

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Western University
Management and Organizational Studies
Management and Organizational Studies 2275A/B
Frederick King

The Corporate Form: Organizational Matters 11/21/2012 9:44:00 AM Chapter 15 Stakeholders in the Corporation  The corporation is treated in law as a person  Stakeholder – one who has an interest in a corporation o Have a direct or indirect role in governing the corporation o Don’t have any direct authority to manage the corporation o Do have the power to elect the board of directors o Bulk of corporation law seeks to regulate the relationships among the corporation’s internal stakeholders  Pre-incorporation issues – decisions that must be made prior to incorporation: o Whether to incorporate federally or provincially  Federally – have a right to carry on business is each province (nationally or internationally)  Provincially – have the right to carry on business only in the province in which they are incorporated o What type of shares will be available and to whom o What to name the corporation  Shares and shareholders o Share structure – the shares that a corporation is permitted to issue by its constitution  Entails deciding on the class or classes of shares corporations will be authorized to issue, what rights and privileges to attach to each class and the number of each to authorize o Classes of shares – may include combinations of different rights  Shares don’t give the owner any right to use the assets or directly control the corporation  Does give the owner the rights that specifically attach to the shares that could include:  Voting rights – the right to vote for the election of directors  Financial rights – receive dividends declared by the directors  Preference rights – receive dividends before they are paid to another class, share in the proceeds on dissolution after the creditors have been paid  Cumulative rights – have a dividend not paid in a past year added to the amount payable to following year  Redemption rights – have the corporation buy back the shares at a set price o Availability of shares  Widely held corporation – shares are normally traded on a stock exchange  Securities legislation – laws designed to regulate transactions involving shares and bonds of a corporation  Closely held corporation – does not sell its shares to the public  Advantage of private corporation status – the potential for lower income tax  Corporate name o A jurisdictions require a company to be identified by a name or designated number o Basic requirements include:  Must be distinctive  Must not cause confusion with any existing name or trademark  Must include a legal element (Limited or Ltd., Incorporated or Inc.) to distinguish a corporation from a partnership and proprietorship and to signal limited liability  Must not include any unacceptable terms o Newly Upgraded Automated Name Search (NUANS) report – a document that shows the result of a search for business names  Prepared using a database containing existing and reserved business names as well as trademarks o Shelf company – a company that doesn’t engage in active business  Often incorporated by law firms for the future use of their clients The Process of Incorporation  All Canadian jurisdictions follow a similar procedure for the creation of a corporation, though precise requirements vary: o Articles of incorporation – defines the basic characteristics of corporations
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