Lecture_Three_-_Corporations_Nature_and_Characteristics

Lecture_Three_-_Corporations_Nature_and_Characteristics -...

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Corporations Nature and Characteristics
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Introductory Notes • Review of key questions regarding business organizations – Who owns the equity in the business? – Who is entitled to make management decisions? – Who is liable for the activities of the business?
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Corporations: Historical Development • Originally created by special charter • Primarily aimed at large public works – Often things that government could not or did not want to do • The problem of capital and limited liability – In order to muster large amounts of capital from diverse sources the contributors are necessarily distant from the venture – Who would willingly assume personal liability in a scenario such as that?
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Corporations: Natural Person Analogy • In a modern sense, corporations are rightly described as having the powers of a natural person at least in terms of their ability to contract • Consider the rationale of this description as it relates to limited liability – A natural person has limited liability, in that liability only extends to the limits of his or her individual property • Founded in a need for certainty of dealings
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Corporations: Natural Person Analogy • Practical problems associated with limited powers – How do know what the corporation is or isn’t able to legally do? • Constructive notice and the Ultra Vires rule – Parties are assumed to know any limits on the corporation • More contemporarily, no special limits • Indoor management rule
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Limitations of Natural Person Analogy • Applies effectively only to powers of contract and ownership • Does not apply to all legal rights and recognitions • The Charter in particular illustrates the odd standing of corporations – Covered by s. 2 and “everyone” (freedom of expression, most critically) – Not covered by s. 15 and “every individual” – Cannot litigate most Charter issues
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Are Corporations Like Natural Persons? • In most legal senses, yes
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This note was uploaded on 07/20/2011 for the course MGMT 31 taught by Professor Rayed during the Spring '11 term at University of Toronto- Toronto.

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Lecture_Three_-_Corporations_Nature_and_Characteristics -...

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