Even so, it is not the best form for all purposes. It has significantly different
operating mechanisms and you must properly manage its responsibilities
toward its owners, managers, customers and regulators.
36
CHAPTER COMMENTARY
The corporation, as the text points out, is a very different type of legal entity when compared
to the partnership. The various forms of incorporation (General Act, Special Act, Letters
Patent, and Royal Charter) are worthwhile topics to review.
In addition, the separate legal
existence of the corporation and its powers should be examined, perhaps by way of
comparison to the partnership. Since a partnership is a relationship subject to the "utmost
good faith" duty for partners, an approach to the rights and duties of shareholders and
directors might be to chart each as a part of classroom discussion.
For example
:
ACTIVITY
DUTY
Partner
Director
Shareholder
(public company)
Personal interest in
contract with firm
full disclosure
full disclosure
refrain from
discussion and vote on
matter
no duty to disclose
Interest in
competing business
entity
full disclosure and
consent required
full disclosure
no duty to disclose
The 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 that
the 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. Barnes
Court Decision provides an analysis of the duty of
disclosure on the part of promoters and directors of a corporation, and the consequences of a
failure to make a complete disclosure. An analysis of this case and the
Salomon
case should
provide students with a relatively clear idea of some of the most important fundamental
concepts of corporation law.
Chapter 18
Securities Regulation
Chapter 18
--
Securities Regulation
334
Introduction
334
Historical Development of Securities Regulation
334
What is a Security?
336
Purpose and Administration of Securities Regulation
336
Mechanics of Regulation
337
Registration
338
Disclosure
338
Conduct of Trading
343
Insider Trading
345
Proxy Voting and Proxy Solicitation
346
Takeover Bids
347
Investigation and Enforcement
348
Summary
349
Key Terms
349
Review Questions
349
Mini-Case Problems
349
