Bài giảng Business Law - Chapter 41: History and Nature 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 ProfessionalsCorporationsPARTHistory and Nature of CorporationsPAETRHC41In every era, society must strike the right balance between the freedom businesses need to compete for a market share and to make profits and the preservation of family and community values. Hillary Clinton, in It Takes a Village (1996)Learning ObjectivesDiscuss the history of corporationsRecognize the types of corporationsUnderstand state regulation of foreign and alien corporationsDescribe how to pierce the corporate veilBy purpose, as for-profit or not-for-profit By ownership, as publicly held, close, or government-owned corporationsBy origin. A company is:Domestic in its incorporation stateForeign in all other states in which it operatesAlien in all countries other than the country in which it incorporatedClasses of U.S. CorporationsUnder the Commerce Clause of the U.S. Constitution, the federal government has power to regulate interstate commerce Article 1, Section 8, Clause 3: “The Congress shall have Power To regulate Commerce with foreign Nations, and among the several States, and with the Indian Tribes”Federal Regulation of FirmsA state law that regulates business activities is constitutional (i.e., does not unduly burden interstate commerce) if: It serves a legitimate state interestIt is the least burdensome means of promoting that interest,That legitimate state interest outweighs the burden on interstate commerceFederal Regulation of FirmsIn the U.S., states regulate how a corporation is created and operatedGenerally follows Model Business Corporation Act (MBCA) or Model Nonprofit Corporation Act (MNCA)A state may require a foreign corporation to qualify to do business within the stateBy obtaining a certificate of authorityBut what does “doing business” mean?State Regulation of FirmsMBCA lists several activities that are not doing business within a stateSoliciting orders (by mail or employees)Selling through independent contractorsOwning property for investment purposesConducting an isolated transaction completed within 30 daysMaintaining a bank account for collection purposesThe Meaning of Doing BusinessMost states have enacted a long-arm statute that allows the state to exercise jurisdiction over an entity that harms a state interestIn the landmark case of International Shoe, the Supreme Court held that under the Due Process Clause of the Fourteenth Amendment, a state may exercise jurisdiction over a foreign corporation only if the corporation has sufficient minimum contacts with a stateLong-Arm Statutes & Due ProcessCorporation law provides an imaginary wall – the corporate veil – between a corporation and its shareholders to protect shareholders from personal liability for a corporation’s actionsHowever, sometimes a court will pierce the corporate veil to reach individual shareholders if shareholders dominate the corporation or use it for improper purposesPiercing the Corporate VeilSigns that corporation is an instrumentality or alter ego of shareholders:Inadequate capitalization (defrauds creditors)Transfers of corporate assets for less than fair market value (looting; defrauds creditors)Commingling assets between corporate entities or between shareholders and corporation (defrauds creditors)Establishing subsidiary to circumvent or evade statutory or contractual obligationPiercing the Corporate VeilThought QuestionsDoes an online stock transaction meet the sufficient minimum contacts criteria of the International Shoe ruling? In other words, if a consumer is injured by an online stock trade, could the consumer sue the firm in his or her state court system?