BA 162: PARTNERSHIPS AND CORPORATIONS January 28, 2014

Section 2. A corporation is an artificial being created by operation of law having the rights of succession,
and the powers, attributes and properties expressly authorised by law or incident to its existence.
Partnerships vs Corporations
- Partnerships have a definite life, while corporations have virtually immortal life
Two types of corporation
1. Stock
Section 3. ...Corporations which have capital stock divided into shares and are authorised to
distribute to the holders of such shares dividends or allotments of the surplus profits on the
basis of the shares held are stock corporations.
2. Non-stock
All other corporations are non-stock corporations
Other classifications of corporations (based p. 220 of ParCor book)

Different types of shares
1. Preferred Shares (Section 6) as opposed to common shares, preference with respect to
dividends as to priority in distribution. Other preferences may pertain to distribution of assets.
Preferred shares must always be issued with a par value.
2. Redeemable shares (Section 8) may be issued by the corporation when expressly so provided
in the articles of incorporation. Redemption may be at the option of the corporation or a right
of the shareholder (obligation of the corporation)
*Redeemable / Preference shareholders are more like in context, creditors than actual investors
that is why they are deprived from voting rights. Preference shareholders are sources of additional
funds.
3. Par value share one with a specific money value fixed in the articles of incorporation and
appearing in the certificate of stock. A par value may not reflect the actual value of a share based on
the corporations performance
4. No par value share The issue price is a reflection of the actual value of the share. If too
underpriced, the board will buy the shares themselves. If too high, no one will buy them.

Where non-voting shareholders are allowed by the Code to vote on the following matters (Section 6)
Amendment of the articles of incorporation
Adoption and amendment of by-laws
*Why the difference between the articles of incorporation and by-laws? (Section 46.) It is legally
possible to have a corporation without the by-laws.
Sale, lease, exchange, mortgage, pledge or other disposition of all or substantially all of the corporate
property
*When does it say to be all or substantially all? If thereby the corporation is rendered
incapable of continuing the business or accomplishing the purpose for which it was incorporated. (Eg. If
the corporation sells all of its assets, does it mean that the corporation is closing shop? This can indicate
a change in the business model or purpose if that is the case, this will call for an amendment of the
AOI.
Incurring, creating or increasing bonded indebtedness
*Bonds payable VS ordinary promissory note it only requires the vote of all shareholders if a
corporation issues bonds, which is a substantial amount compared to promissory notes. This puts
additional burden on the corporation, hence it requires the vote.
Increase or decrease of capital stock
*If only the board of directors have the power to this it will affect the percentage of ownership
of the shareholders. This is in protection of all shareholders
Merger or consolidation of the corporation with another corporation or business
*If in the case of a merger, you are actually extinguishing the life of the corporation absorbed.
Investment of corporate funds in another corporation or business in accordance with this Code; and
*Refer to Section 42. If causes for investment can be justified using the primary purpose of the
corporation, no vote is needed.
Dissolution of the corporation
*