Exam 25: The Nature of a Corporation and Its Formation

A,B,and C are three lawyers who want to start a construction business.Each has enough capital to invest in the business to avoid borrowing money from the bank,and all of them want to limit their liability as much as possible while having a role in the management and operation of the business.In this case,they can protect themselves by

Explain the general distinction between the capital of a corporation and indebtedness of a corporation.Who owns the capital of the corporation?

Use this fact situation to answer the related questions that follow. Mary and Joan are dentists who practise dentistry in Ontario as Mary and Joan PC.A year after incorporation,one of Mary's patients suffers injuries as a result of Mary's negligence. In this case,who is liable for the patient's injuries?

The "charter" is an unsuitable instrument for reflecting special arrangements and side agreements between shareholders.Explain.

Bond and share certificates in bearer form are considered to be negotiable instruments.The holder of such instruments,if acquired honestly,is said to have acquired them

When we speak of lifting the corporate veil,we are referring to the ability of a court to recognize a proper case where the corporation has been set up simply as a means of protecting its incorporators from liability for acts of fraud or breach of duty.

Megacorp Ltd.is a large private Ontario construction company in which Albert,John,and Michael are the shareholders and George,Mary,and Sam are the directors.Recently,Albert and John started up a building supplies business,which now has a contract to provide building supplies to Megacorp Ltd.However,Michael objects to this.In this situation,

What capacity and powers does a corporation have in the eyes of the law?

Elvin inherited 1000 shares of 7 percent preferred.She has been assured by her broker that the company is in sound financial health even though it did not pay any dividends this year.Elvin should next find out whether

Albert is the principal shareholder of a large investment company and holds 45 percent of its common shares,which are valued at $500 000.00.Recently,Albert's company invested heavily in a gold mining company,which fraudulently represented finding and owning a new gold deposit in northern Canada.Albert's company lost a substantial amount of money,with the result that the value of Albert's common shares dropped to $25 000.00.Albert now launches a lawsuit against the gold mining company for the loss in value of his shares.In this case,

Several years back,while Tommy was still in school,he mowed the lawn of widow Jerome's large estate.Since she could not pay Tommy in cash,she gave him 100 bearer bonds of the Delray Corp.Tommy believes he will be able to cash in on these bonds because he

A private corporation is one that is not permitted to offer its shares to the public.

Until the nineteenth century,all corporations were created by

When a corporation issues more than one class of shares,the specific rights of each class do not have to be set out in the constitution.

A corporation can sue and be sued in its own name.

There is no practical difference between the rights of a shareholder and those of the holder of a debenture.

What does it mean to pierce the corporate veil? When can this be done?

In a private corporation without a shareholders agreement,why would it be necessary to restrict the transfer of shares by first requiring the consent of the board of directors?

There is no practical difference between a limited liability partnership and a professional corporation.Explain.

Jim incorporated his small business so that he would obtain limited liability on company indebtedness.But when he applied for a bank loan,the bank insisted that he give a personal guarantee for the loan made to the corporation.Has the incorporating of the business helped Jim as far as limiting his business liability?