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Ch. 4: Corporate Formation and Financing - No. 8
Clarkson et al.’s Business Law: Commercial Law for Accountants (1E)
Ch. 4: Corporate Formation and Financing - No. 9
Clarkson et al.’s Business Law: Commercial Law for Accountants (1E)
CORPORATE POWERS
(2) State Constitutions, which take priority over
(3) State Statutes, which take priority over
(4) Articles of Incorporation the corporation filed in the
state of incorporation, containing information about the
corporation’s organization and functions, which take
Implied Powers: Barring express constitutional, statutory, or
charter prohibitions, a corporation has the implied power to
perform all acts reasonably appropriate and necessary to
accomplish its corporate purpose.
Ch. 4: Corporate Formation and Financing - No. 10
Clarkson et al.’s Business Law: Commercial Law for Accountants (1E)
ULTRA VIRES DOCTRINE
Ultra Vires Acts: Acts of a corporation – through one or
more officers or directors – that exceed the corporation’s
express and implied powers, triggering the following
remedies:
Derivative Action: The corporation’s shareholders may
officers or directors to recover damages caused by a
completed ultra vires act.
State Action: The state attorney general may seek an
injunction or may dissolve the corporation.
Ch. 4: Corporate Formation and Financing - No. 11
Clarkson et al.’s Business Law: Commercial Law for Accountants (1E)
PIERCING THE CORPORATE VEIL
If the owners or officers or directors of a corporation use a
corporate entity to commit fraud or act illegally, a plaintiff
may be able to “pierce the corporate veil” – i.e., disregard
the corporate entity and its attendant limitations on personal
liability – and sue the wrongdoers individually for actions
to evade an existing legal obligation;
(3) the corporation had insufficient capital when formed to
meet its prospective debts or potential liabilities;
(4) the corporation does not observe statutorily-required
corporate formalities; or
Ch. 4: Corporate Formation and Financing - No. 12
Clarkson et al.’s Business Law: Commercial Law for Accountants (1E)
CORPORATE FINANCING
Common Stock: Shares of stock in a corporation that
give the shareholder a proportionate interest in the
corporation with regard to voting, earnings, and net
assets. Common stock shares are the last to receive
corporation’s dissolution, but generally afford holders
less input in corporate decisionmaking.
Ch. 4: Corporate Formation and Financing - No. 13
Clarkson et al.’s Business Law: Commercial Law for Accountants (1E)
the ownership to the venture capitalists. The venture
capitalist may also provide managerial and technical support.
Private Equity Capital: Equity firms that obtain their capital
from wealthy investors in private markets. These firms use
their capital to invest in existing corporations.
Ch. 4: Corporate Formation and Financing - No. 9
Clarkson et al.’s Business Law: Commercial Law for Accountants (1E)
CORPORATE POWERS
(2) State Constitutions, which take priority over
(3) State Statutes, which take priority over
(4) Articles of Incorporation the corporation filed in the
state of incorporation, containing information about the
corporation’s organization and functions, which take
Implied Powers: Barring express constitutional, statutory, or
charter prohibitions, a corporation has the implied power to
perform all acts reasonably appropriate and necessary to
accomplish its corporate purpose.
Ch. 4: Corporate Formation and Financing - No. 10
Clarkson et al.’s Business Law: Commercial Law for Accountants (1E)
ULTRA VIRES DOCTRINE
Ultra Vires Acts: Acts of a corporation – through one or
more officers or directors – that exceed the corporation’s
express and implied powers, triggering the following
remedies:
Derivative Action: The corporation’s shareholders may
officers or directors to recover damages caused by a
completed ultra vires act.
State Action: The state attorney general may seek an
injunction or may dissolve the corporation.
Ch. 4: Corporate Formation and Financing - No. 11
Clarkson et al.’s Business Law: Commercial Law for Accountants (1E)
PIERCING THE CORPORATE VEIL
If the owners or officers or directors of a corporation use a
corporate entity to commit fraud or act illegally, a plaintiff
may be able to “pierce the corporate veil” – i.e., disregard
the corporate entity and its attendant limitations on personal
liability – and sue the wrongdoers individually for actions
to evade an existing legal obligation;
(3) the corporation had insufficient capital when formed to
meet its prospective debts or potential liabilities;
(4) the corporation does not observe statutorily-required
corporate formalities; or
Ch. 4: Corporate Formation and Financing - No. 12
Clarkson et al.’s Business Law: Commercial Law for Accountants (1E)
CORPORATE FINANCING
Common Stock: Shares of stock in a corporation that
give the shareholder a proportionate interest in the
corporation with regard to voting, earnings, and net
assets. Common stock shares are the last to receive
corporation’s dissolution, but generally afford holders
less input in corporate decisionmaking.
Ch. 4: Corporate Formation and Financing - No. 13
Clarkson et al.’s Business Law: Commercial Law for Accountants (1E)
the ownership to the venture capitalists. The venture
capitalist may also provide managerial and technical support.
Private Equity Capital: Equity firms that obtain their capital
from wealthy investors in private markets. These firms use
their capital to invest in existing corporations.
