LGS 200 Ch 19 lecture notes
LGS 200 Ch 19 lecture notes LGS 200 - 008
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LGS 200 - 008
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This 3 page Class Notes was uploaded by Conner Jones on Tuesday March 29, 2016. The Class Notes belongs to LGS 200 - 008 at University of Alabama - Tuscaloosa taught by Charlye S. Adams in Summer 2015. Since its upload, it has received 18 views. For similar materials see Legal Environment of Business in Law and Legal Studies at University of Alabama - Tuscaloosa.
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Date Created: 03/29/16
LGS 200 Notes Chapter 19: Corporations The nature and classification of corporations a corporation is a legal “person” that enjoys the same rights and privileges as a person o can hold property o can sue and be sued o rights under bill of rights corporate personnel o board of directors – elected by shareholders, hire and fire officers, make policy decisions o officers – employees, manage day to day activities liability o generally, shareholders are not personally liable for corporate acts o “veil” can be pierced if you can prove shareholder is defrauding corporate earnings o profits can be kept as retained earnings or passed on to shareholders as dividends o corporate taxation: can be taxed twice, first on corporation then on shareholders o subchapter S – shareholders wont be taxed until they receive dividends, not taxed at the corporate level o C Corp – taxed at both business level and personal level Torts o Respondeat superior – liability for torts committed by agents within course and scope of employment, can sue both individual and corporation Criminal acts o Corporation can be liable for criminal acts, not imprisoned but fined o ‘responsible officer’ doctrine: officers can go to prison if they knew/should have known of criminal activity classification of corporations o domestic – does business within state of incorporation o foreign – formed in state X, doing business in state Y o alien – formed in another country o public/private corporations o nonprofit corporations o close corporations – shares held by very few shareholders, stock not traded publicly, not allowed to trade shares without consent o benefit corporations – for profit corporations that seek to have a positive impact on society but also seeks a profit promotional activities o subscription agreement – application by investor to join limited partnership o promoter’s liability – promoter is personally liable for pre- incorporation contracts on behalf of corporation corporate powers express powers: powers given to corporation in the articles of incorporation implied powers: all acts reasonably necessary to accomplish corporate purposes ultra vires – corporate acts beyond express/implied powers, typically involves non profit or municipal (public) corporations piercing the corporate veil courts can “pierce corporate veil” and hold shareholders personally liable in the interests of justice and fairness o have to prove that shareholders are using corporation to defraud, do anything illegal factors a court considers o corp. was set up never to make a profit but to defraud o corp. was formed to evade existing legal obligation o commingling of personal and corporate interests/assets directors and officers A corporation is governed by a board of directors elected by shareholders Directors can also be shareholders if it is a closely held corporation Rights of directors o Participate in corporate decisions, can inspect corporate books and records o Compensation (usually a nominal sum) Duty of care – duty to make informed decisions, fully formed on corporate matters Business judgment rule – immunizes director or officer from liability in bad decisions Duty of loyalty – put corporate interests before personal interests (no competition, no conflict of interest) o No insider trading o No transaction that is detrimental to minority shareholders Shareholders Powers: o Elect and remove people on board of directors o Approving fundamental changes to corporation o Amending articles of incorporation or bylaws o Approval of mergers/acquisitions o Sale of assets or dissolution Shareholders meetings o Must occur at least once annually o Voting requirements Notice of meeting Proxies Shareholder proposals o Quorum requirements – at least 50% of shares must be present to conduct business o Stock warrants – buy stock at a stated price Shareholders have limited inspection rights, cannot view corporation books whatever they want
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