Corporations

Question 1

Separate legal entity

Answer 1

An incorporation creates a separate legal entity, that has a legal personality separate from the people who own shares in it

Question 2

Pros of separate legal entity

Answer 2

-shareholders are protected from unexpected corporate obligations (torts from employees)
-shareholders can leave funds in the corporation and use it as a way to defer taxes
-shares can be transferred at will

Question 3

Obligations of shareholders in separate legal entity

Answer 3

-shareholders owe no duty to the company
-shareholders can carry on business in competition

Question 4

Disadvantages of separate legal entity

Answer 4

-position of minor shareholder is weak
-free transfer of shares may be restricted
-most expensive way to operate a business

Question 5

Directors rights/responsibilities

Answer 5

-elected by shareholders
-must exercise duty/care and skill of a reasonable person
-they have a fiduciary duty to the company (not the shareholders)
-can face personal liability

Question 6

Directors can be personally liable for

Answer 6

-unpaid wages/taxes
-damage to environment
-causing employees to commit crimes
-commission of tort

Question 7

Senior executives rights/responsibilities

Answer 7

-same type of general obligations as directors but can be held to an even higher standard
-oversee day to day management
-fiduciary duty
-duties of care and competence

Question 8

Promoters

Answer 8

-assist with public share offering
-owe fiduciary duty to the company

Question 9

Corporate structure

Answer 9

Shareholders elect Board of directors who appoint Officers

Question 10

How can a corporation be terminated?

Answer 10

-may be voluntary or involuntary
-induced internally or externally
-bankruptcy
-neglecting to file annual return