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Unformatted text preview: C HAPTER 16 T HE C ORPORATE F ORM : O PERATIONAL M ATTERS Objectives After studying this chapter, you should have an understanding of: the liabilities of a corporation the duties and liabilities of corporate directors and officers the rights and liabilities of shareholders and creditors how the corporation is terminated Learning Outcomes Recognize when the corporation is responsible for tort, contract, criminal, and regulatory offences (pages 374 378) Understand the duties of directors and officers, particularly the fiduciary duty (pages 378 383) Understand the liability of directors and officers in tort, contract, and statute and how to reduce that liability (pages 384 387) Recognize the rights of shareholders (pages 391) Understand the remedies available to shareholders (pages 392 397) Recognize the importance of a shareholder agreement (pages 396) Understand how a corporation is terminated (page 398) Chapter Summary A corporation and its directors and officers all face the risk of potential liability in tort and contract, as well as for criminal and regulatory offences. Directors and officers may attempt to reduce their exposure to risk through an indemnification agreement with the corporation. In addition, directors are responsible for any breach of their fiduciary duty to the corporation. Shareholders do not face such liabilities, unless the corporate form is nothing but a sham to commit fraud. Shareholders enjoy rights to vote, receive information and some financial rights, as well as methods to enforce such rights and protect their interests. In closely held corporations, it is advisable for shareholders to enter into shareholder agreements to define their rights and responsibilities, especially in the event that one shareholder wants to sell shares. 2008 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. Corporate Liability page 373 ______________________________________________________________________ ______________________________________________________________________ Liability in tort _________________________________________________________ ______________________________________________________________________ Identification theory __________________________________________________ Liability in contract______________________________________________________ ______________________________________________________________________ Doctrine of constructive notice__________________________________________ Criminal and regulatory liability____________________________________________ ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ Directors and Officers page 378 ______________________________________________________________________...
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- Fall '08
- Business Law