Bài giảng môn Quản trị kinh doanh - Organization and financial structure of corporations

Copyright © 2013 by The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin10History and Nature of CorporationsOrganization and Financial Structure of CorporationsManagement of CorporationsShareholders’ Rights and LiabilitiesSecurities RegulationLegal and Professional Responsibilities of Auditors, Consultants, and Securities ProfessionalsCorporationsPARTOrganization and Financial Structure of CorporationsPAETRHC42Our business is company creation.Ann Winblad, venture capitalist, quoted in Fortune magazine (Sellen and Daniels, Oct. 1999)Learning ObjectivesAppreciate the risk of liability for corporate promotersUnderstand the process for incorporating a businessKnow the appropriate sources for financing a businessExplain share-transfer restrictionsEach state has enacted laws detailing how a corporation may be createdA promoter of a corporation incorporates the business, organizes initial management team, and raises initial capitalA promoter may be the person who originated the idea for the firm or may be a professional hired to undertake incorporation activitiesOverviewA promoter will be liable for contracts made during the preincorporation period unless the corporation adopts the contracts made by the promoter (adoption) and the third party agrees to substitute the corporation for the promoter (novation)Like agency ratification, may be express or impliedContracts adopted typically: employment and real property lease or purchase Preincorporation ContractsPreincorporation share subscriptions are contracts in which a prospective shareholder offers to buy a specific number of shares in a new corporation at a stated priceUnder the Model Business Corporation Act (MBCA), a prospective shareholder may not revoke a preincorporation subscription for a six-month periodShare SubscriptionsA U.S. business may incorporate in any state by following basic steps:Prepare articles of incorporationSign and authenticate articles by one or more incorporatorsFile articles with secretary of state and pay feesReceive copy of articles of incorporation stamped “Filed” by secretary of state & fee receiptHold organizational meeting for purpose of adopting bylaws, electing officers, and other businessIncorporationDe jure corporation: exists when promoters and incorporators substantially comply with each mandatory (shall, must) requirement to incorporate the businessThe validity of a de jure (by law) corporation cannot be attacked except by the state of incorporation due to noncompliance with state corporation lawsDe Jure CorporationDe facto corporation: exists when promoters fail to comply with all of the mandatory requirements, yet comply with most of the mandatory provisionsValidity of a de facto corporation could be attacked by a third party, or itself, or the state of incorporation, but may be treated by as a corporation under the judicial doctrine of corporation by estoppelDe Facto CorporationA non-profit corporation incorporates in same way as a profit corporation, but must declare whether it is a: public benefit corporation, mutual benefit corporation, or religious corporationNonprofit corporation’s articles must also state whether it will have members Non-Profit IncorporationFor-profit corporations are financed by:Sale of securities: shares, debentures, bonds, and long-term notes payableShort-term financing (e.g., inventory financing)Bank loansFinancing CorporationsEquity securities, better known as stock or shares, create an ownership relationship, thus stockholders or shareholders own a corporationState laws permit corporations to issue classes of shares with specific rights: Common PreferredEquity SecuritiesCommon shareholder claims for dividend payments or asset distribution on liquidation are subordinate to creditor or preferred shareholder claimsPreferred shareholders generally receive liquidation and dividend preferences over common shareholdersShareholder RightsA board of directors may issue options for purchasing the corporation’s sharesIssued to top-level managers as an incentive Warrants are options evidenced by certificatesRights are short-term certificated options that are usually transferableUsed to give present security holders an option to subscribe to more sharesOptions, Warrants, & RightsCorporations may borrow money to operate by issuing debt securities:Debentures are long-term, unsecured debt securities with a 10 to 30 years termBonds are long-term, secured debt securitiesNotes generally have less than a five year term and may secured or unsecured Debt SecuritiesMBCA permits shares to be issued in return for any tangible or intangible property or benefit to the corporation, including cash, promissory notes, contracts for services to be performed for the corporation, services performed for the corporation, and securities of the corporation or another corporationConsideration for SharesMBCA permits shares to be issued in return for any tangible or intangible property or benefit to the corporationThe board must issue shares for an adequate dollar amount of considerationPar value is an arbitrary dollar amount that may be assigned to shares by the articles of incorporationConsideration for SharesShare certificates are registered with the corporation in name of a specific person Indorsement of a share certificate on back by the registered owner and delivery of the certificate to another person transfers ownership of the shares Under the UCC, a corporation owes a duty to register transfer of any registered shares, provided it has proper indorsementTransfer of SharesThought QuestionDo you believe that a company’s stock price reflects a company’s value or success in (a) the marketplace, and (b) society?