1. Chapter 27 The Law of Corporations
11/16/2018
Chapter 27 The Law of Corporations
27-1 Founding a Corporation
27-2 Shareholders, Directors, and Officers
27-3 Corporate Powers and Termination
Chapter 27
LAW

2. 27-1 Founding a Corporation
GOALS
Compare the advantages and disadvantages of the corporate form
Explain the steps in corporate formation
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3. ATTRIBUTES OF THE CORPORATE FORM
Advantages of the corporate form
Perpetual life
Limited liability
Transferability of ownership interests
Ability to attract large sums of capital
Professional management
Disadvantages of the corporate form
Types of corporations
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4. Explain the corporate advantage of limited liability.
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5. HOW IS A CORPORATION FORMED?
The role of promoters
Articles of incorporation
The role of incorporators
Corporate charter
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6. What is the difference between a promoter and an incorporator?
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7. 27-2 Shareholders, Directors, and Officers
GOALS
Understand the types of stock shareholders may own
List the rights of shareholders
Explain the roles of corporate directors and officers
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8. THE ROLE OF SHAREHOLDERS
Types of stock
Par and no-par stock
Common stock
Preferred stock
Continued on the next slide
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9. THE ROLE OF SHAREHOLDERS
Shareholder rights
Right to a stock certificate
Right to transfer shares
Right to attend shareholder meetings and to vote
Right to increase capital stock
Right to share the profits
Right to share in a distribution of the capital
Right to inspect corporate books of account
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10. Name the most significant powers of a common shareholder.
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11. THE ROLES OF DIRECTORS AND OFFICERS
Directors as fiduciaries
Requirements for directors
Duties of directors
Officers
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12. What is the importance of the business judgment rule?
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13. 27-3 Corporate Powers and Termination
GOALS
Explain the powers of a corporation
Relate the various ways that the dissolution of a corporation might be brought about
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14. THE POWERS OF A CORPORATION
Power to conduct business
Power to continue indefinitely
Power to operate under a name of its own choosing
Power to make rules to govern its operation
Implied powers
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15. What are bylaws?
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16. CAUSES OF CORPORATE DISSOLUTION
At a time specified in the articles of incorporation
By agreement of the shareholders
By forfeiture of the charter
By consolidation or merger
As a result of bankruptcy
By court order
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17. What is the difference between a consolidation and a merger?
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18. PREVENT LEGAL DIFFICULTIES
Directors should be extremely careful to obey all laws, study the corporate records, and use independent judgment on policy decisions. To “rubber stamp” management proposals is to invite lawsuits by disgruntled shareholders and potential personal liability if losses occur.
Corporate officers should be selected with great care because they make most of the day-to-day management decisions. Directors tend to rely on the advice of the officers.
Continued on the next slide
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19. PREVENT LEGAL DIFFICULTIES
Shareholders should not casually sign proxies that give directors continued control. Shareholders should try to exercise their voting rights after studying the annual reports and comparing the corporation’s progress with that of similar corporations.
Shareholders with a minority position have a better chance to be represented on the board if the company uses cumulative voting.
Continued on the next slide
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20. PREVENT LEGAL DIFFICULTIES
It is usually risky to buy stock in new or small, once closely held corporations because they are more likely to fail. The majority of shareholders may favor themselves with high salaries as officers and pay low or no dividends, and it may be difficult to sell the shares to others.
The buyer of preferred stock who desires greater assurance of receiving dividends should invest in cumulative and participating shares.
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