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Chapter 17

chapter 17.docx

6 Pages

Administrative Studies
Course Code
ADMS 2610
William Pomerantz

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Chapter 17Corporation Law Pages 306309 313314 315327IntroductionCorporation a type of legal entity created by the state o Existence is separate from those who form it those who control it and those who possess shares it inUsed for large amounts of capital to accumulate for business purposesLarge number of persons can participate in business transactions requiring more capital than one individual possessed or cared to riskHistorical Development of the CorporationCreation dates back to creation of citystates when trade became importantCreation and operation remained under control of sovereign or state formed to carry out public or quasipublic functions th In 19 century English trading corporations were permitted to incorporate tho in last half of 19 century limited liability was available to shareholdersModern form of corporation and following procedure set out in statute did not emerge until middle of century o Decades behind a similar change in Canada and United StatesIn US War of Independence severed ties and special legislation for incorporation of companies was introduced o In 1811 New York passed statute with form of general incorporation actFirst incorporation act in Upper and Lower Canada in 184849In 1867 British North America Act established rights of provinces and federal government to incorporate companies o No uniform legislation exists throughout CanadaThe Nature of a CorporationSeparate legal entity has existence at law but no material existencePossesses attributes of natural person but artificially created and never diesRights and duties are delineated by law and existence can be terminated by stateCharacteristics o A corporation is separate and distinct from its shareholders and only acts through authorized agentsShareholders a person who holds a share interest in a corporation a part owner of the corporation o Properly authorized agents can bind corporation in contract with third parties o Shareholders of corporation possess limited liability for debts of corporation creditors can only look to assets of corporationManagement of corporation is vested in small group of shareholders chosen by general body of shareholders at annual meeting held for electing management group o Management group are directors of corporation and they select principal officers of corporation o Director under corporation law a person elected by shareholders of a corporation to manage its affairs o Officer a person elected or appointed by the directors of a corporation to fill a particular office o Management group has responsibility of binding corporation in formal contractsDirectors are free to carry out general management functions o Powers are limited to restrictions imposed by articles of incorporation or charter o Directors are obliged to report to shareholders on regular basisShareholders do not participate in management unless major changes are proposed o Shareholders must approve of proposal before it becomes effectiveExcept for private or closely held shares shareholders are free to dispose of their interests in corporation o Relationship is not personal fortunes of corporation do not depend on personal relationship and creditors are not concerned about shareholders identities o Shareholders liability is limited to amount they paid for shares they purchased ControlIn partnership every partner is agent and principal o All have input and must agree before change is madeIn corporation management is delegated by shareholders to group of directors o Directors have authority to make all decisions for corporation aside from major decisions Limited LiabilityIn ordinary partnership all general partner has unlimited liability for debts o Careless act of one partner may seriously affect all
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