module 38-business structure (corporation)

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1、Module38BusinessStructure-Corporation(CandS)C-CorporationWileybook2010Page38–43hasdiscussedthecharacteristics,typesandhowtoformacorporation.Justwanttosupplementsometerminologythatthebookhasn’texplainedinmuchdetails.·DeFactoCorporationDoctrineIftheincorporatorsmadeagoodfaithattempttoincorporatean

2、doperatedasiftheyhadincorporated(sometimesdescribedas"operatingunderthecorporateform"),thebusinesswillbetreatedasacorporationinallrespects,exceptthestatemaybringanaction(calleda"quowarranto"action)challengingthecorporation'sstatus.·DoctrineofIncorporationbyEstoppelThedoctrineofincorporationbyest

3、oppelismuchmorelimitedthanthedefactocorporationdoctrine.Undertheestoppeldoctrine,apartywhotreatsabusinessasifitwereavalidlyformedcorporationwillbeestopped(legallybarred)fromclaiminginalegalprecedingthatthecorporationwasnotvalidlyformed.Thisappliestothirdpartieswhotreatthebusinessasacorporationas

4、wellastothebusinessitself.·UltraViresActIfacorporationhasanarrowpurposeclauseandthecorporationundertakesbusinessoutsidetheclause(oroutsidethebusinesspermittedbystatute)itissaidtobeacting"ultravires."Traditionally,ifacorporationundertookanultraviresact,theactionwasvoid.Theactioncanbechallengedint

5、hreecircumstances:(1)Ashareholdercanseekaninjunction(anorderfromacourt)prohibitingthecorporationfromperformingtheultraviresact;(2)Thecorporationorshareholdersmaysuetorecoverdamagesfromtheofficersordirectorswhoauthorizedtheultraviresact;and(3)Thestate(usuallytheattorneygeneral)maybringanactiontoh

6、avethecorporationdissolvedforcommittingtheultraviresact.·PiercingtheCorporateVeilThecourtwillpiercethecorporateveilandholdshareholderspersonallyliableforallthecorporation’sdebts.Asituationthatmaycausethecourttoactinthismannerincludes:(1)Undercapitalized-inadequateamounttomeetthereasonableforesee

7、ablefinancialneeds.(2)Shareholderfraud-theshareholdersareintentionallyusingthecorporationforillegalactivities(3)Directactions-Theshareholdersarerunningthebusinessdirectly,withoutelectingboardofdirectorsornoboardmeetingthroug