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Even so, it is not the best form for all purposes. It has significantly differentoperating mechanisms and you must properly manage its responsibilitiestoward its owners, managers, customers and regulators.36
CHAPTER COMMENTARYThe corporation, as the text points out, is a very different type of legal entity when comparedto the partnership. The various forms of incorporation (General Act, Special Act, LettersPatent, and Royal Charter) are worthwhile topics to review. In addition, the separate legalexistence of the corporation and its powers should be examined, perhaps by way ofcomparison to the partnership. Since a partnership is a relationship subject to the "utmostgood faith" duty for partners, an approach to the rights and duties of shareholders anddirectors might be to chart each as a part of classroom discussion. For example:ACTIVITYDUTYPartnerDirectorShareholder(public company)Personal interest incontract with firmfull disclosurefull disclosurerefrain fromdiscussion and vote onmatterno duty to discloseInterest incompeting businessentityfull disclosure andconsent required full disclosure no duty to discloseThe duties which might be charted in this manner are found in this and the next chapter for directors, and for partners in Chapter 16 - (Law of Sole Proprietorship and Partnership). Corporation law includes a number of doctrines, principles, and rules which should also be reviewed. In particular, the doctrine of corporate ultra vires, constructive notice, corporate opportunity, and the indoor management rule should be covered in classroom discussion.The Court Decisions included in the chapter represent two important aspects of corporation law. The Salomon case established the nature of the corporation at law, and its existence as an entity separate and apart from its shareholders. The case is interesting in thatthe court dealt with the corporation-shareholder relationship from the "agency" point of view, the "trustee" point of view, and the corporation as an "instrument of fraud on creditors". It rejected all of these views in favour of the separate legal existence of the corporation, and the consequences which flow from it. 37
The Gluckstein v. BarnesCourt Decision provides an analysis of the duty of disclosure on the part of promoters and directors of a corporation, and the consequences of afailure to make a complete disclosure. An analysis of this case and the Salomoncase should provide students with a relatively clear idea of some of the most important fundamental concepts of corporation law. Chapter 18Securities RegulationChapter 18-- Securities Regulation334Introduction334Historical Development of Securities Regulation334What is a Security?336Purpose and Administration of Securities Regulation336Mechanics of Regulation337Registration338Disclosure338Conduct of Trading343Insider Trading345Proxy Voting and Proxy Solicitation346Takeover Bids347Investigation and Enforcement348Summary349Key Terms349Review Questions349Mini-Case Problems349