Chapter 12: Corporations

Front 1

separate legal entity

Back 1

a corporation exists separately from the people who created it

Front 2

corporate myth

Back 2

a corporation is a legal fiction

Front 3

limited liability

Back 3

liability restricted to capital contributed, shareholders are shielded from liability for corporations debt

Front 4

personal guarantee

Back 4

a guarantee of payment for another's obligation

Front 5

intellectual property

Back 5

personal property in the form of ideas and creative work

Front 6

franchising

Back 6

arrangements based on contracts of service and the supply of products between larger and smaller units of one organization

Front 7

deeds of settlement

Back 7

contracts used historically for setting up a company

Front 8

registration

Back 8

legislated requirement for incorporating a company in some jurisdictions

Front 9

letters patent

Back 9

government grants recognition to company as separate legal entity

Front 10

articles of incorporation

Back 10

internal regulations setting out procedures for governing corporation in registration jurisdiction

Front 11

memorandum of association

Back 11

sets out name of company, authorized share capital and objects of incorporation

Front 12

articles of association

Back 12

sets out internal procedural regulations for operation of company

Front 13

share

Back 13

provides holder an interest in corporation

Front 14

common shares

Back 14

shares with no preferential rights or privileges attached
ex. right to vote

Front 15

preferred shares

Back 15

shares giving holder preference over other classes of shares
ex. right to collect first, receive back payment first

Front 16

preferred shareholder

Back 16

holder of preferred shares who may have a right to vote arising if dividends are not paid

Front 17

par value share

Back 17

each share given a specific value at time of issuance

Front 18

bond

Back 18

share interest in corporation secured against specific assets

Front 19

debenture

Back 19

share interest in corporation that may be unsecured or secured by floating charge against inventory

Front 20

closely held corporation

Back 20

corporation with relatively few shareholders
- cannot sell shares to public on stock market
- more free from government regulations and control
- requires at least one director

Front 21

broadly held corporation

Back 21

corporation with more than 15 shareholders
- shares publicly traded on stock market
- more closely regulated by government
- cannot restrict transfer of shares

Front 22

derivative action

Back 22

allows certain shareholders right to launch civil action against directors on behalf of corporation. also know as representative action

Front 23

due diligence

Back 23

doing everything reasonable to avoid problem leading to legal liability

Front 24

promoter

Back 24

participates in initial setting up of corporation or assists corporation in making public share offering
- ensure full disclosure and no misrepresentation to prospectus
- owe fiduciary duty to corporation

Front 25

securities commission

Back 25

prevent fraud and encourage free and efficient market in corporate shares and securities

Front 26

prospectus

Back 26

purpose is to disclose all pertinent information o interest to investors about corporation and business operations

Front 27

auditor

Back 27

party responsible for ensuring that financial statements for an organization are properly done

Front 28

proxy

Back 28

right to vote passed by someone else

Front 29

oppression action

Back 29

action against directors who allegedly offended rights of creditors or minority shareholders

Front 30

dissent and appraisal

Back 30

right of minority shareholders who are adversely affected by major changes to indicate their opposition and force the company to buy back their shares at a fair price

Front 31

dividend

Back 31

a payment to shareholders out of company profits