Slide 1Corporate Nature and ClassificationCorporate Nature and ClassificationCorporate Nature and ClassificationCorporate Nature and ClassificationDuties and Liabilities of Directors and OfficersDuties and Liabilities of Directors and OfficersDuties and Liabilities of Directors and OfficersDuties and Liabilities of Directors and OfficersDuties and Liabilities of Directors and OfficersCorporate Nature and ClassificationCorporate Nature and ClassificationCorporate Formation and PowersCorporate Formation and PowersCorporate Formation and PowersPiercing the Corporate VeilPiercing the Corporate VeilPiercing the Corporate VeilTerminationTerminationTerminationTerminationTerminationMajor Business Forms ComparedMajor Business Forms Compared© 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.© 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.Business Law Today 10th Ed.Text and Summarized CasesDiverse, Ethical, Online and Global EnvironmentRoger LeRoy MillerGaylord JentzCORPORATIONS(pixhook/iStockphoto.com)© 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.CORPORATE NATURE AND CLASSIFICATION•A corporation is a creature of statute, an artificial “person.”Corporations can have one or more shareholders.Owners can be natural persons or other businesses.Corporation substitutes itself for shareholders. 2© 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.CORPORATE NATURE AND CLASSIFICATION•A corporation is a creature of statute, an artificial “person.”Can access to court systems.Has constitutional guarantees of free speech, due process, and freedom from unreasonable search and seizures.3© 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.CORPORATE NATURE AND CLASSIFICATION•Corporate Personnel. Responsibility for overall management of company rests with board of directors (elected by shareholders).Board of directors makes policy decisions and hires officers to run corporation on a daily basis. Shareholders own the corporation4© 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.CORPORATE NATURE AND CLASSIFICATION•Limited Liability of Shareholders.One of the key advantages of corporations is the limited liability of owners (shareholders). In certain situations, the corporate “veil” of limited liability can be pierced, holding the shareholders personally liable. 5© 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.DUTIES AND LIABILITIES OF DIRECTORS AND OFFICERS•Directors and officers are fiduciaries and owe the company ethical and legal duties. 6© 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.DUTIES AND LIABILITIES OF DIRECTORS AND OFFICERS•Duty of Care.Duty to Make Informed and Reasonable Decisions. Directors are expected to be fully informed on corporate matters.Duty to Exercise Reasonable Supervision. Directors are expected to supervise officers when delegated work. 7© 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.DUTIES AND LIABILITIES OF DIRECTORS AND OFFICERS•Business Judgment Rule.Immunizes a director or officer from liability from bad decisions.Court will not require directors or officers to manage “in hindsight.” 8© 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.DUTIES AND LIABILITIES OF DIRECTORS AND OFFICERS•Business Judgment Rule.As long as decision was reasonable, informed, made in good faith and in the best interests of the corporation, BJR will apply.9© 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.DUTIES AND LIABILITIES OF DIRECTORS AND OFFICERS•Duty of Loyalty: subordination of personal interests to the welfare of the corporation.No competition with Corporation.No “corporate opportunity.”No conflict of interests.No insider trading. No transaction that is detrimental to minority shareholders..10© 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.CORPORATE NATURE AND CLASSIFICATION•Corporate Earnings and Taxation.Corporate profits can either be kept as retained earnings or passed on to the