economic paper

Submitted By tanakarie
Words: 4930
Pages: 20

1. What is the legal nature of a corporation?
Answer: A corporation is created by the state and possesses a legal existence separate from those who from time to time possess shares in it, or who are responsible for its direction and control.
2. How does a corporation differ from a partnership?
Answer: A corporation differs from a partnership in a number of significant ways: (a) It has a separate existence. (b) Shareholders have limited liability. (c) The shareholders do not actively manage the corporation. (The directors manage). (d) Share interests are readily and easily transferred. (e) Corporations have a theoretical unlimited term of existence.
3. What is a special act corporation? For what purpose would it be formed? Give two examples.
Answer: Special Act corporations are created by the state to do specific things, usually of a public nature. For example: A provincial hydro‑electric corporation, or the Canadian Broadcasting Corporation.
4. What drawbacks are commonly associated with partnerships are overcome by the use of the corporate form? Answer: Shareholders of a corporation have limited liability, share interests are easily transferred, and control is limited to elected directors.
5. Describe briefly the relationship between a corporation and its shareholders. How does a shareholder's relationship with the corporation change if the shareholder becomes a director? Answer: A shareholder may not bind the corporation in contract. A shareholder may engage in activities in competition with the corporation, such as own shares in a competing corporation.
If a shareholder becomes a director, then the shareholder becomes liable for certain acts (such as improper declaration of dividends) and must act in good faith and put the best interests of the corporation before his/her own.
6. Explain the doctrine of corporate opportunity.
Answer: The doctrine of corporate opportunity arises when a director becomes aware of an opportunity to acquire property through his position as a director. He may not use the opportunity for his own benefit because the opportunity to acquire must be given to the corporation.
7. What are the obligations of a director of a corporation in an instance where the director has a financial interest in a firm with which the corporation wishes to do business?
Answer: The director must reveal the interest in the other corporation, must not take part in the discussion, and not vote on the proposal.
8. Indicate how the principle of "majority rule" is applied in the decision-making process of a corporation. What protection is available to a dissenting minority shareholder where a fundamental change in the corporation's object is proposed?
Answer: "Majority rule" applies for most decisions, but for some, which involve a fundamental change in the corporation, a larger majority is required (2/3 usually). A dissenting minority of shareholders may apply to the courts for relief, and the corporation may be obliged to purchase the shareholders interest.
9. Distinguish a "public" corporation from a "private" corporation. Why is this distinction made? What other terms are used for each of these types of corporations?
Answer: A public corporation is a corporation which offers its shares or securities for sale to the public. A "private" corporation is a corporation which does not offer its shares or securities to the public. "Private corporations" are sometimes called "Closely‑Held Corporations."
10. If a corporation wishes to sell its securities to the public, what requirements are imposed upon the promoters, directors, and others associated with the sale and distribution of the securities?
Answer: Promoters, directors, etc. involved in the sale of a corporation's shares to the public are subject to the securities legislation of the jurisdiction. Under this legislation they…