* A properly authorized agent may bind the corporation in contract with third parties. * Shareholders possess limited liability for the debts of the corporation, and creditors may look only to the assets of the corporation to satisfy their claims.
Director – a person elected by the shareholders of a corporation to manage its affairs. They are free to carry functions in accordance to corporation’s objects, but their powers are limited by any restrictions mentioned in articles of corporation.
Officers – a person elected or appointed by the directors of a corporation to fill a particular office (such as president, secretary, treasurer, etc.).
Methods of Incorporation
1. Royal Charter: The issue of the charter was for the purpose of creating a legal existence for the entity, to permit it to either operate as a monopoly or to own land. It was an exercise of king’s prerogative, and issue of charter gave the entity all the rights at law of a natural person. 2. Letters Patent: A government document that creates a corporation as a legal entity. Crown’s representative issues the incorporating document. 3. Special-Act: A corporation created by an Act of Parliament or a legislature for a specific purpose. The corporation has powers specially granted to it by the statute. If the corporation attempts to do something that is not authorized under the statute, the act is ultra vires (beyond the powers of) corporation and a nullity. 4. General-Act: A form of incorporation whereby a corporation may be created by filing specific information required by the statute. The document filed is known as Memorandum of Association. In Ontario, document filed is called articles of incorporation and document issued by government is called certificate of incorporation. Powers are limited to those specified under the act.
Doctrine of constructive notice: Presumption at law that everyone has knowledge of the content of all statutes (related to corporation). For example, third party may not enforce any contract on a corporation, if the corporation’s act was ultra vires, as it is pre-assumed that the third party had knowledge of all statutes.
Indoor management rule: A party dealing with a corporation may assume that the officers have the valid and express authority to bind the corporation. Officers may show a document, containing the approval of shareholders before entering the contract.
The Incorporation Process
1. It begins with the preparation of an application for incorporation that sets out the name of the proposed corporation, the address of the local office and principal place of business, names of incorporators for the application for incorporation, the object of the incorporation, the share capital, any restrictions or rights attached to shares, and any special powers or restrictions that apply to acts of the corporation. 2. The complete application is then submitted to appropriate office in the incorporating jurisdiction, with a fee charged for incorporation. The filing date becomes date of incorporation. 3. After incorporation, the incorporators perform remaining formalities. They set the various duties of directors and officers. Also provide for banking, borrowing, the issue of shares, or purchase of some existing business. 4. Incorporators may resign as first directors, and shareholders elect permanent BOD.
Shareholders’ Agreement: An agreement between shareholders of a private corporation concerning management and future reorganization of the corporation such as buy-out of interests.
Shares: Ownership of a fractional equity interest in a corporation.
Floating Charge: A debt security issued by a...