what legal course of action is available to corporation

A corporate action is any action taken by a company – generally enacted by its board of directors – that has a material impact on the company and its shareholders. Corporate actions involve either changing a company’s name/brand, mergers, acquisitions, spinoffs, or issuing dividends.

Full Answer

What is a corporate action?

What is a Corporate Action? A corporate action is a move – enacted by a publicly-traded company – that encourages or furthers processes that have a direct impact on whatever assets the company issues. In other words, any actions (conducted by a company) that materially alter or otherwise change the company can be considered corporate actions.

What is a mandatory corporate action with options?

Mandatory (with several options) Mandatory corporate actions with options offer shareholders a choice between different options. Using the example of dividends again, with this type of action, the company offers dividends in the form of stock shares or cash dividends, with the former being the default option.

What happens if the officers of a corporation act without board approval?

If the officers act on these unique matters without Board approval, their actions may be rescinded. For this reason, banks and certain other parties dealing with corporations often require a director’s authorizing response for special transactions.

How does a licensee determine a course of action?

Licensee shall determine a course of action that may include: (i) modification of the Licensed Product or its use and Manufacture so as to be non - infringing; or ( ii) obtaining a license or assignment from said Third Party. Course of Action.

What is the legal obligation of a corporation?

You must keep detailed financial records and ensure that tax returns are filed fully and on time, for starters. A business that fails to perform these legal duties risks losing its corporate status (and the protections of incorporation).

What are corporate legal issues?

These issues can include employment law issues, contract disputes, product liability, intellectual property management, and others. Smaller corporations may be able to hire a single attorney with broad experience to handle all of the corporation's legal issues.

Can a corporation engage in any legal activity?

A general statement such as "The purpose of the corporation is to engage in any lawful activity for which corporations may be incorporated in this state" is usually sufficient. In many states, this type of statement will be preprinted on the Secretary of State's articles of incorporation form.

Can a corporation commit an intentional tort?

Business torts may be committed intentionally (by a competitor business with the intent to cause harm) or may be caused by the negligent or reckless behavior of other businesses or individuals. As a result, businesses indeed can commit torts against other businesses and individuals.

What is corporate legal framework?

Corporate law (also "company" or "corporations" law) is the study of how shareholders, directors, employees, creditors, and other stakeholders such as consumers, the community. and the environment interact with one another. Corporate law is a part of a broader. companies law (or law of business associations).

How do businesses deal with legal issues?

Document And File Everything. ... Be Impartial And Consistent. ... Deal In Facts Only. ... Keep It Clear And Concise. ... Be Familiar With Applicable Laws. ... Focus On The Issue. ... Be Your Organization's Own Worst Critic. ... Keep It Confidential.More items...•

What can a corporation do?

Under the law, corporations possess many of the same rights and responsibilities as individuals. They can enter contracts, loan and borrow money, sue and be sued, hire employees, own assets, and pay taxes. Some refer to a corporation as a "legal person."

Can a corporation enter into a contract?

Corporations have the power to enter into contracts. They make contracts through the acts of their agents, officers, and employees. Whether a particular employee has the power to bind the corporation to a contract is determined by an area of law called agency law or corporate law.

What are the powers of a corporation?

Section 35. Corporate Powers and Capacity.(a) To sue and be sued in its corporate name;(b) To have perpetual existence unless the certificate of incorporation provides otherwise;(c) to adopt and use a corporate seal;(d) To amend its articles of incorporation in accordance with the provisions of this Code;More items...

When can a corporation be held criminally liable?

Can a corporation be held criminally liable in the same way as an individual can be held liable? A. Yes. A corporation can be prosecuted for essentially all of the same crimes as individuals and, if proven guilty beyond a reasonable doubt, convicted of felonies and misdemeanors.

Can a corporate officer be held personally liable?

Typically, a corporate officer isn't held personally liable, as long as his or her actions fall within the scope of their position and the parameters of the law. An officer of a corporation may serve on the board of directors or fulfill a managerial role.

Who is liable in a corporation?

A corporation is an incorporated entity designed to limit the liability of its owners (called shareholders). Generally, shareholders are not personally liable for the debts of the corporation. Creditors can only collect on their debts by going after the assets of the corporation.

What is corporate action?

Summary: A corporate action is any action taken by a company – generally enacted by its board of directors – that has a material impact on the company and its shareholders. Corporate actions involve either changing a company’s name/brand, mergers, acquisitions, spinoffs, or issuing dividends. Corporate actions fall into one of three categories: (1) ...

What are the parties involved in corporate actions?

The concerned parties include: Preferred and/or common shareholders. Stakeholders. Stakeholder In business, a stakeholder is any individual, group, or party that has an interest in an organization and the outcomes of its actions. Common examples.

What is mandatory corporate action?

Mandatory corporate actions are enacted by a company’s board of directors. A mandatory action – such as the issuance of a cash dividend – affects all of the company’s shareholders. It is performed by the governing body of the company. Shareholders need to do nothing aside from collecting the cash dividend on their shares.

What is voluntary action?

Voluntary corporate actions involve an activity in which shareholders opt to be participants. In order for the company to move forward with the corporate action, the shareholders must respond. A prime example of a voluntary action is a tender offer.

What is a spin off company?

Spin-Off A corporate spin-off is an operational strategy used by a company to create a new business subsidiary from its parent company. , stock splits, and mergers.

What are some examples of corporate actions?

Examples include (but are not limited to): Changing a company’s name or the design of the brand. Handling pertinent financial issues (such as the company needing to liquidate or file for bankruptcy.

What is the difference between a private and a public company?

Private vs Public Company The main difference between a private vs public company is that the shares of a public company are traded on a stock exchange, while a private company's shares are not. Strategic Alliances.

What is a corporation?

A corporation is an artificial person that is created by governmental action. The corporation exists in the eyes of the law as a person, separate and distinct from the persons who own the corporation (stockholders). This means that the property of the corporation is not owned by the stockholders, but by the corpora­tion. Debts of the corporation are debts of this artificial person, and not of the persons running the corporation or owning shares of stock in it. The corporation can sue and be sued in its own name. The shareholders cannot normally be sued as to corporate liabilities.

Who can act as incorporator of a corporation?

One or more natural persons or corporations may act as incorporators of a corporation by signing and filing Articles of Incorporation with the designated government official (usually the Secretary of State). These Articles are filed in duplicate, and the Secretary of State, when satisfied that the Articles conform to the State’s corporation statutes, stamps filed and the date on each copy. The Secretary of State then retains one copy and returns the other copy, along with a filing fee receipt, to the corporation.

What is a promoter in a corporation?

Promoters are the people that bring the corporation into existence. They bring together other people interested in the company, solicit stock purchasers, and sometimes make contracts to be assigned later to the corporation. A corporation is not liable on a contract made by a promoter unless the corporation takes some sort of affirmative action to adopt the contract. The promoter still remains personally liable on the contract unless released by the other contracting party. The contract can provide that the promoter will be released from personal liability upon adoption of the contract by the corporation.

Can a court pierce a corporate veil?

A Court may disregard the corporate entity and pierce the corporate veil in exceptional circum­stances. The decision whether to disregard the corporate entity and go directly against the shareholders is made on a case-by-case basis. Factors that may lead to piercing the corporate veil are:

What are the actions that require board approval?

Actions Typically Requiring Board Approval. 1. Election of officers; hiring or dismissal of executive employees. 2. Setting compensation of principal employees. 3. Establishment of pension, profit-sharing, and insurance plans. 4. Selection of directors to fill vacancies on the Board or a committee.

Who is responsible for the decisions of a corporation?

In general, the Board is responsible for all corporate decisions and actions. In ordinary cases, the Board, through the bylaws and through resolutions, delegates most of its responsibility for day-to-day operations to the president and other officers. However, the Board must still set the corporation’s goals and policies.

What happens if a corporation fails to do the things it does?

If a corporation fails to do those things, situations such as creditors attempting to “pierce the corporate veil” and impose personal liability on stockholder can occur. If a corporation becomes involved in litigation, proper minutes and other records can be indispensable evidence.

What do corporations need to do during an audit?

During an audit, corporations need to provide documents for minutes or signed consents reflecting Board authorization for important transactions. It’s important for corporations to observe all legal formalities like holding regular board meetings and keeping minutes.

Who is personally liable for a contract entered into on behalf of a corporation?

In addition, the promoter who entered into the contract on behalf of the yet-to-be formed corporation will generally be personally liable for any contracts entered into on behalf of the future corporation. However, if the parties to the contract agreed to look only to the corporation, and not to the incorporator, for such liability, ...

Who is liable for contracts and obligations?

Corporations have always been liable for the contracts and obligations that directors, officers, and employees enter into on their behalf. Absent a severe abuse of this power to contract by an individual employee or director, any contract in which the company receives a benefit will attach to the company.

What is similar to the situation of officers and directors?

Similar to the situation of officers and directors is the case of shareholders. Companies seeking to raise capital would find themselves speaking to empty conference rooms if potential investors came to every investment knowing that they could face personal liability solely on the basis of their investment.

What is the business judgment rule?

In effect, the Business Judgment Rule says that the law and the courts will not allow shareholders, employees, and the public at large to question the business judgment of a company’s directors and officers.

Is liability to shareholders more limited than that of directors and officers?

Liability as to shareholders is even more limited than that of directors and officers. This is the natural outcome of the relationship between shareholders and directors whereby shareholders have elected the managers as their agents to augment, or at least protect, their investment.

Does a company have liability for torts?

As far as torts are concerned, generally, a company has some degree of liability for the torts committed by its directors and/or employees during the course of their employment, depending on the nature and effect of the tort. The general rule as to a company’s tort liability is that it will typically avoid liability for intentional torts on ...

Can a corporation be liable for a tort committed by an employee?

However, if the intentional tort was for eseeable to the corporate directors or if the corporation accepted the benefits of the commission of the tort, the corporation will generally be liable even for a tort committed intentionally by an employee. See Greenfield v.