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Unformatted text preview: C HAPTER 15 T HE C ORPORATE F ORM : O RGANIZATIONAL M ATTERS Objectives After studying this chapter, you should have an understanding of: • a corporation as a legal person • the various methods of incorporation • how a corporation is created • how the corporation is capitalized Learning Outcomes • Understand the concept that a corporation is a separate legal person (page 349) • Understand the distinction between federal and provincial incorporation (page 352) • Recognize all the information that must be included in the incorporation documents (page 358) • Understand how the company can raise money by issuing shares and bonds (page 360) • Understand the advantages and disadvantages of shares and bonds to both the corporation and the holders of the securities (page 361) • Understand the importance of compliance with securities legislation (page 362) Chapter Summary A corporation is a separate legal entity from its shareholders. As a result, owners are not liable for the debts and obligations of the corporation. This is an important concept for shareholders because it allows them to invest in a company by buying shares without risking their personal assets. If a share carries voting rights, it allows a shareholder the right to vote for directors at the annual general meeting. The role of directors is to manage the company. In this indirect way, the shareholders control the company. If shares are to be sold to the general public, the company must comply with all securities legislation, which controls registration, disclosure requirements and insider trading. There may be a temptation on the part of directors or officers of a company to trade in shares just before making a corporate announcement that will impact the price of shares. However, securities legislation prohibits this type of insider trading. Shares sold to the general public can be resold. In a closely held or private corporation, the sale of shares is restricted. A corporation raises money by selling shares. It may also raise money through borrowing by selling bonds and debentures. A bondholder does not have voting rights, but is entitled to interest payments, even if the corporation has no profits. © 20008 BY NELSON, A DIVISION OF THOMSON CANADA LTD. PART 4: STRUCTURING BUSINESS ACTIVITY Study Outline Use this outline to prepare a complete set of notes for this chapter. The Corporation Defined – page 349 ______________________________________________________________________ ______________________________________________________________________ Separate legal entity __________________________________________________ Stakeholders in the Corporation – page 351 ______________________________________________________________________ ______________________________________________________________________ Shareholders ________________________________________________________ Board of directors ____________________________________________________ Corporate officers ____________________________________________________...
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This note was uploaded on 06/04/2009 for the course BUSINESS LAW380 taught by Professor Davidmariofarmani during the Fall '08 term at Seneca.

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