Chapter 45.docx - BUSINESS LAW Chapter 45 Corporate Powers and Management 1 Powers of a Corporation Understand the two types of corporate power Consider

Chapter 45.docx - BUSINESS LAW Chapter 45 Corporate Powers...

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BUSINESS LAW Chapter 45 Corporate Powers and Management 1. Powers of a Corporation Understand the two types of corporate power. Consider the ramifications when a corporation acts outside its prescribed powers. Review legal issues surrounding corporate actions. Section Outline A corporation generally has three parties sharing power and control: directors, officers, and shareholders. o Directors are the managers of the corporation. o Officers control the day-to-day decisions and work more closely with the employees. o The shareholders are the owners of the corporation, but they have little decision-making authority. The corporation may exercise all powers expressly given to it by statute and by its articles of incorporation. o Section 3.02 of the Revised Model Business Corporation Act (RMBCA) sets out a number of express powers , including the following: To sue and be sued in the corporate name To purchase, use, and sell land and dispose of assets to the same extent a natural person can To make contracts, borrow money, issue notes and bonds, lend money, invest funds, make donations to the public welfare, and establish pension plans To join in partnerships, joint ventures, trusts, or other enterprises o Corporate powers beyond those explicitly established are implied powers . © 2017 FlatWorld 1
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BUSINESS LAW The law places limitations upon what acts a corporation may undertake. The ultra vires doctrine holds that certain legal consequences attach to an attempt by a corporation to carry out acts that are outside its lawful powers. o Ultra vires (literally “beyond the powers”) is not limited to illegal acts, although it encompasses actions barred by statute as well as by the corporate charter. o Under the traditional approach, either the corporation or the other party could assert ultra vires as a defense when refusing to abide by a wholly executory contract. o Ultra vires retains force in three circumstances: Shareholders may bring suits against the corporation to enjoin it from acting beyond its powers. The corporation itself, through receivers, trustees, or shareholders, may sue incumbent or former officers or directors for causing the corporation to act ultra vires. The state attorney general may assert the doctrine in a proceeding to dissolve the corporation or to enjoin it from transacting unauthorized business The early common law held that a corporation could not commit a crime because it did not have a mind and could not therefore have the requisite intent. o That a corporation is found guilty of a violation of the law does not excuse company officials who authorized or carried out the illegal act. o Legal punishments are being routinely added to the newer regulatory statutes, such as the Occupational Safety and Health Act, and the Toxic Substances Control Act—although prosecution depends mainly on whether and where a particular administration wishes to spend its enforcement dollars.
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  • Spring '16
  • Lynda Campbell

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