Chapter 36

  1. Corporations
    fictitious legal entity created according to statutory requirements (most dominant) (owners are shareholders)
  2. Corporation codes
    state statutes that regulate the formation operation and dissolution of corporations
  3. Legal Person
    treated as artificial person can sue be sued enter into contracts hold titles to transfer property and be found civilly and criminally liable for law violations
  4. Limited Liability of shareholders
    share holders are only liable to the extent of their capital contributions and no personal liability
  5. Shares are
    free transferable
  6. Perpetual Existence/Termination
    corps have no end can be voluntarily terminated by shareholder and can be involuntarily terminated by creditors
  7. Centralized Management
    consists of Board of Directors and corporate officers.
  8. Corporations are taxed
    double taxation
  9. Public Corporations
    government owned formed to meet as specific government/political purpose USPS water, schools
  10. Private Corps
    owned by non governmental private parties
  11. Profit and Non-for Profit
    • Private corps are for profit and
    • corps that are charitable educational purpose are non for profit and cannot give dividends cash to member and directors.
  12. Publicly Held
    many share holders and they rarely participate in the management of corps
  13. Closely Held
    few shareholders owned by family/friends involved in management decisions (shareholders)
  14. Incorporation Procedures
    • select a state (only one small in state do bus and large in state w/ best laws)
    • select a name (not trademarked and words used must correlate with business)
    • Articles of incorps: Incorporators to sign the articles of incorporation
  15. Articles of Incorporation includes
    • name of corp
    • # of shareholders
    • address of corps office and registered agent
    • name and address of each incorporator
  16. Amending Articles of Incorp
    can be done w/o shareholder approval
  17. Corporate Status is gained when
    begins when articles of incorp are filed with secretary of state (conclusive proof)
  18. Who can revoke /dissolve articles after filed
    the state can
  19. General Purpose Clause
    clause allows the corp to engage in any activity permitted by law
  20. Bylaws
    rules adopted by board of directors after corp is incorp
  21. Financing the corp
    • equity securities (stocks)
    • and Debt Securities (debentures, bonds, notes)
  22. Corporate Powers
    • Express Powers (given by us/state const, stat/fed rules and articles of incorp/bylaws
    • Implied Powers (allows corp to exceed its expressed powers in order to accomplish its corp purpose (incidental powers) )
    • Ultra Vires Act (act by corp that is beyond expressed/implied powers)
  23. Ultra Vires Act committed (remedies)
    • shareholders can sue for injunction to prevent the corp engaging in act (if sue must use own money and earnings go to company)
    • the corp or shareholders can sue board of directors and officers that cause the damages
    • attorney general of state can dissolve corp take action
  24. Dissolution/Termination of Corp
    • voluntary dissolution (can be dissolved if no business is done or no shares issued, dissolved by vote of majority must file articles of dissolution)
    • administrative dissolution
    • judicial dissolution
  25. Administrative dissolution
    • failed to file annual report
    • failed for 60 days to maintain registered agent in state
    • did not pay franchise fee
    • period of duration of corp stated in corp articles ended
    • *if corp does not cure defaults in 60 days secretary of state issues a certificate of corp default
  26. Judicial Dissolution
    • is a court proceeding instituted by the state by doing
    • -procured its articles of incorp through fraud
    • -exceeded/abused authority conferred on it by law
    • (committed ultra vires act)
  27. Winding up
    • voluntary dissolution carried out by board of directors
    • involuntary a court appointed carries out liquidation/windup
  28. Liquidation
    • 1.) expenses of liquidation (lawyers) and creditors
    • 2.) preferred shareholders
    • 3.) common stock holders
  29. When first forming a corp must have a
    promoter someone who promotes the corporation until novation (meet up w/ 3rd & promoter of corp to create agreement)
Card Set
Chapter 36
Corporate Formation and Financing