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Unformatted text preview: CORPORATIONS OUTLINE WHAT IS A CORPORATION • elements o separate entity : the corp.oration has the legal status of an individual and is separate from individual shareholders corp. not investors enters into Ks, incurs debt, etc… o divisible ownership : reflected by selling shares of stock in the corp.; ownership is in the hands of many small investors o Assets separated from shareholders : assets of the corp. are held by the corp.. and not individual shareholders Shareholders cannot remove their pro rata share of the corp. o Limited Liability ; K obligations, debts, and lawsuits are not incurred by employees or shareholders in a corp Any liabilities are strictly the liabilities of the corp o Indefinite duration : no limit on the duration of a corp The corp’s duration may be limited by AoI; corps existence may be dissolved b/c of insolvency; merger; or voluntary liquidation upon recommendation by board and approval by majority of shareholders; by judicial decree on finding of deadlock or oppressive behavior by controlling shareholders (not the less drastic remedy of buyout discussed infra) o Transferable and tradable shares and debt obligations : public corp stock is traded on the markets and is thus highly liquid; closely held corps may have limitations on sale; however in the absence of such an agreement shares can be freely sold (however the market for them may be limited) o Centralized Control and Separation of Ownership and Control : shareholders elect the members of the board of directors; board of directors appoint CEO/etc; CEO runs the corp; In large corp the board is self perpetuating b/c many shareholders and none with large enough stake to contest the make up of the board • This serves the needs of most investors who wish to be passive investors only PROMOTERS AND THE CORP ENTITY 3 ways to form a corp • de jure corp o this is formed by paying fee and filing AoI (see e.g. MBCA § 2.02-3) not hard to do only requires (§2.02) • corp name • # of shares authorized to issue • Address • Name and address of each incorporator May include: • Names and addresses of initial directors • Provisions which are legal under corps law concerning o Purpose of the corp o Managing the business o Defining limiting and regulating the powers of the corp; board; shareholders o Par value of shares o Imposition of personal liability for corp debt to specific extent • Provisions requires to be set forth in AoI o Limiting liability of director for actions taken or failure to act o §2.03: A corp is formed when the AoI are filed • De facto corp o Here you filed AoI but they were rejected for a technical reason but the corp is ignorant as to the defect in its incorp • Corp by Estoppel o Southern Marine Where a party had K’d w/ a corp they cannot later try to escape performance by denying legal existence of the corp • Unless the lack of corp status affects the rights of the party LIMITED LIABILITY • the basic rule is that the corp form shields shareholders/directors/officers from individuals liability for...
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This note was uploaded on 02/12/2008 for the course LAW 6211 taught by Professor Lowenstein during the Spring '06 term at Colorado.
- Spring '06