Podcast
Questions and Answers
What is the primary role of shareholders in a corporation?
What is the primary role of shareholders in a corporation?
- Voting on major decisions and electing directors (correct)
- Overseeing the corporation's financial activities
- Managing the corporation's daily operations
- Developing corporate bylaws
Which duty requires directors to act with reasonable care and diligence?
Which duty requires directors to act with reasonable care and diligence?
- Duty of loyalty
- Duty of financial accountability
- Duty of care (correct)
- Duty of compliance
In the relationship between shareholders and the board of directors, who is responsible for managing the corporation's affairs?
In the relationship between shareholders and the board of directors, who is responsible for managing the corporation's affairs?
- Shareholders
- Stakeholders
- Officers
- Directors (correct)
What must a corporation adhere to according to company law?
What must a corporation adhere to according to company law?
If two individuals each own 50 shares of ABC Inc. which has 100 shares total, what is their ownership stake in the corporation?
If two individuals each own 50 shares of ABC Inc. which has 100 shares total, what is their ownership stake in the corporation?
Which of the following is NOT a responsibility of directors and officers in a corporation?
Which of the following is NOT a responsibility of directors and officers in a corporation?
What does the duty of loyalty require from directors?
What does the duty of loyalty require from directors?
What is a significant disadvantage of a sole proprietorship?
What is a significant disadvantage of a sole proprietorship?
What is the primary function of company law?
What is the primary function of company law?
Which of the following describes a sole proprietorship?
Which of the following describes a sole proprietorship?
What landmark case established the concept of a corporation as a legal person?
What landmark case established the concept of a corporation as a legal person?
Which step is NOT typically involved in forming a corporation?
Which step is NOT typically involved in forming a corporation?
What distinguishes a corporation from a partnership in terms of liability?
What distinguishes a corporation from a partnership in terms of liability?
What must be filed with the state to officially create a corporation?
What must be filed with the state to officially create a corporation?
Which of the following statements is true regarding partnerships?
Which of the following statements is true regarding partnerships?
What is typically included in the bylaws of a corporation?
What is typically included in the bylaws of a corporation?
Flashcards
Company Law
Company Law
A set of rules and regulations that govern the relationship between companies, directors, shareholders and stakeholders.
Corporation
Corporation
A business that is a separate legal entity from its owners, holding separate rights and liabilities.
Sole Proprietorship
Sole Proprietorship
A business owned and operated by one person, with no legal separation between the owner and business.
Partnership
Partnership
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Articles of Incorporation
Articles of Incorporation
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Bylaws
Bylaws
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Dartmouth College V. Woodward (1819)
Dartmouth College V. Woodward (1819)
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Incorporating a company
Incorporating a company
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Shareholder
Shareholder
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Director
Director
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Bylaws
Bylaws
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Duty of Care (directors, officers)
Duty of Care (directors, officers)
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Duty of Loyalty (directors, officers)
Duty of Loyalty (directors, officers)
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Sole Proprietorship - Pros
Sole Proprietorship - Pros
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Partnership - Cons
Partnership - Cons
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Corporation - Concept
Corporation - Concept
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Study Notes
Introduction to Company Law
- Company law, also known as corporate law, governs the relationships between companies, directors, shareholders, and stakeholders. It sets rules for forming, operating, and dissolving businesses.
- A landmark case, Trustees of Dartmouth College v. Woodward (1819), established corporations as legal entities separate from their owners, a crucial concept in modern company law.
Types of Business Structures
- Sole Proprietorship: Owned and run by one person. Owner is personally liable for business debts.
- Pros: Simple setup, complete control.
- Cons: Unlimited personal liability.
- Partnership: Owned and run by two or more people. Partners are personally liable for business debts.
- Pros: Shared responsibility, more capital, broader skill set.
- Cons: Shared profits/losses, unlimited personal liability for each partner.
- Corporation: Separate legal entity from its owners (shareholders). Shareholders are not personally liable for business debts.
- Pros: Limited liability for shareholders, easier to raise capital.
- Cons: More complex setup, more regulations.
Forming a Corporation
- Requires specific steps:
- Choose a name.
- File articles of incorporation with the state (e.g., Secretary of State).
- Create bylaws to govern the company's internal operations.
Rights and Responsibilities of Shareholders and Directors
- Shareholders: Owners of the corporation, vote on key decisions (directors, big transactions). Percentage of ownership dictates voting power.
- Directors: Managed the corporation and make decisions on its behalf. Elected by the shareholders.
Legal Responsibilities of Corporations, Directors, and Officers
- Duty of Care: Directors must act with reasonable care and diligence.
- Duty of Loyalty: Directors must act in the best interests of the corporation. These concepts are crucial to preventing conflicts of interest.
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