MGT393H5S - Lecture4 - MGT393H5S Lecture 4 Corporate Law -...

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MGT393H5S Lecture 4 Corporate Law - Separate legal entity (Employer, debtor, customer with a contract) - Because of it, same party can have different relationship with the corporation - Eg. Three gas stations (sole proprietorship) – risk management - Therefore incorporate three separate corporation in case of emergency - Eg. A corporation, divide the corporation Limited Liability (can’t go over the shareholders) - Delivery van where the driver drives too fast and loses control running over somebody - Sue the driver for the negligence. (can sue him because he is the driver does not matter whether or not he is in a corporation or not) - Transfer of ownership. Family, Management, Ownership (three circles overlapping some part) - Trickier than others because of the overlaps - Can have the shares of a corporation - Disadvantage: bit more formal, articles, abide laws, filings - Tax point of view: Canadian Controlled Private Corporation - Advantages and Disadvantages of corporation tax Case - $200,000, starting a corporation - Incorporate a company where you are the only shareholder and invests into the business - $200,000 in shares - Dr Cash 200,000 Cr Common Stock 200,000 - (On a Balance Sheet) Cash 200,000 Shareholder’s Equity 200,000 - Would not do it this way - You need to understand a term ‘Secured Creditor’ – - ‘Secured Creditor’ > ‘Unsecured Creditor’ > ‘Shareholder (Equity Holder) - Take $10 in the shares - And put the left over $199,990 as a secured creditor - If the company succeeds this will be nothing - If the company fails you might still get back the most of money - Dr Cash 200,000 CR debt 199,990 CR Common Stock 10 Case: Solomon - Back in 1800s, in England - A shareholder who is a secured creditor at the same time
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Can you use the corporate entity to commit a fraud? -
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This note was uploaded on 10/17/2011 for the course MANAGEMENT mgt393 taught by Professor Schneider during the Spring '10 term at University of Toronto- Toronto.

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MGT393H5S - Lecture4 - MGT393H5S Lecture 4 Corporate Law -...

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