Business Law II: Professor Sharma
Lecture #7, Chapter 36
Chapter 36: Corporate Formation and Financing
Date: April 4, 2015
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Time Stamps:
1:30 Introduction
8:24 The Corporation as a Legal "Person"
9:54 Characteristics of Corporations
14:14 Corporation
15:13 Exhibit 36.1: Corporation
16:10 Case 36.1: Shareholder's Limited Liability
19:38 Public and Private Corporations
23:14 Profit and Not-for-Profit Corporations
25:00 Publicly Held and Closely Held Corporations
27:34 Professional Corporation
30:23 Types of Corporations
32:27 Selecting a State for Incorporating
34:15 Incorporators
36:48 Promoters' Liability for Preincorporation Contracts
41:52 Articles of Incorporation
44:08 Amending the Articles
44:44 Purpose of a Corporation
46:13 Corporate Bylaws
47:43 Organizational Meetings of the Board of Directors
49:45 Corporate Powers
56:45 Delaware Attracts Corporate Formations
1:01:17 Financing the Corporation
1:03:14 Preferred Stock
1:04:36 Types of Shares
1:10:54 Voluntary Dissolution
1:12:00 Administrative Dissolution
1:13:00 Judicial Dissolution
1:13:40 Winding-up and Termination
Summary of Lecture:
A corporation is a fictitious legal entity that is created according to statutory requirements. Shareholders are owners of a corporation who elect the board of directors and vote on fundamental changes. Corporation codes are state statutes that regulate the formation, operation, and dissolution of corporations. Corporations can sue or be sued in their own names, enter into and enforce contracts, hold title to and transfer property, and be found civilly and criminally liable. Characteristics of corporations include free transferability of shares, perpetual existence, centralized management, and limited liability of shareholders. A public corporation is a corporation formed to meet a specific governmental or political purpose, and a private corporation is a corporation formed to conduct privately owned business. A profit corporation is created to conduct a business for profit, and one can distribute profits to shareholders in there form of dividends. A not-for-profit corporation is a corporation formed to operate charitable institutions, colleges, universities, and other not-for-profit entities.
A publicly held corporation consists of many shareholders, shares traded on organized security markets, and shareholders rarely involved in management. A closely held corporation consists of few shareholders, shareholders may have buy-and-sell agreements, and shareholders are often involved in management. A professional corporation is a corporation formed by lawyers, doctors, or other professionals where members are not usually liable for torts committed by agents or employees but may be liable for malpractice of members. A corporation can be incorporated in only one state, and can qualify to do business in all other states. In the process of selecting a corporate name, it must contain the corporation, company, incorporated or limited, cannot be trademarked by another company, and there should be availability as a domain name on the Internet. The persons that are responsible for incorporation of a corporation are called incorporators, whereas the persons who organize and start a corporation are referred to as a promoter. Once formed, a corporation is liable on a promoter's contract only if it agrees to become bound. And, a corporation agrees to be bound to the promoter's contract unless the parties agree otherwise.
The basic governing document of the corporation are the articles of incorporation which must be filed with the Secretary of State, it contains the name of corporation, number of shares authorized, name and address for registered agent and incorporators, and it may contain term, purpose, limitations or internal regulations. Corporate bylaws are a detailed set of rules adopted by the board of directors after the corporation is incorporated. An organizational meeting is a meeting held by the initial directors of the corporation after the articles of incorporation are filed. Equity securities are a representation of ownership rights to a corporation. Common stock is another type of equity security that has no preferences and no fixed maturity date. Preferred stock is a type of equity security that is given certain preferences and rights over common stock. Dividend preference is the right to receive a fixed dividend at stipulated periods during the year, whereas liquidation preference is the right to be paid a stated dollar amount if a corporation is liquidated. Voluntary dissolution is a dissolution of a corporation that has begun business or issued shares upon recommendation of the board of directs and a majority vote of the shares entitled to vote. Articles of dissolution must be filed with the Secretary of State of the state of incorporation.
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