Corporations

CORPORATIONS

I. GENERAL LAW REGARDING CORPORATIONS.

NOTE: MANY FORMS REGARDING BUSINESS CORPORATIONS, NON-PROFIT CORPORATIONS, AND RELATED FILINGS ARE AVAILABLE FROM THE BUSINESS REGISTRY OF THE CORPORATION DIVISION, OREGON SECRETARY OF STATE "fax-back." CALL (503) 986-2200.

SEE ORS CH 62 FOR CURRENT STATUTES REGARDING PRIVATE CORPORATIONS; ORS CH 65 FOR NONPROFIT CORPORATIONS; ORS CH 63 FOR COOPERATIVES; AND ORS CH 63 FOR LIMITED LIABILITY COMPANIES.

II. KINDS OF CORPORATIONS.

A corporation is a group of persons empowered to act as a single individual, and treated by the law as a single legal "person," distinct from such individuals in most respects.
The existence of this corporate person is shown in the form of a state-issued "charter," or filing record, and other formalities.

Business corporations, engaged profit-making enterprises, are the most common. Public corporations are agencies of the government. Electric and gas utilities formed as corporations (and other "public service corporations," though providing services) are often formed as privately owned corporations.

Religious, charitable and beneficial corporations, organized for public benefit purposes, are not-for-profit. These kinds of corporations receive certain tax benefits from federal and many state and local taxing authorities. A closed corporation is one whose capital stock or ownership is confined to one family or distinct group of individuals. Some governmental districts are referred to as "quasi" corporations, or municipal corporations, but the term is confusing, since these entities are truly governmental units. SEE MUNICIPAL CORPORATIONS. School districts, resemble corporations in some ways. They can own and manage real estate, make contracts, sue and be sued like any other corporation.

III. LIABILITIES OF A CORPORATION.

Through its agents or employees a corporation can be guilty of slander, libel, false representation, trespass, or negligence, violation of civil and tax laws and can be sued accordingly.

IV. FORMATION OF A CORPORATION.

A. CONTROLLED BY STATUTE.

SEE ORS CH 62 FOR CURRENT STATUTES REGARDING PRIVATE CORPORATIONS; ORS CH 65 FOR NONPROFIT CORPORATIONS; ORS CH 63 FOR COOPERATIVES; AND ORS CH 63 FOR LIMITED LIABILITY COMPANIES.

The formation of a corporation involves numerous legal questions, and should never be attempted without the services of a competent lawyer. In most states the first step after having a certain amount of stock subscribed and paid for is to file with the secretary of the state a statement giving name, object, amount of capital stock, amount of stock paid for, location of office, and duration of the proposed corporation. The charter is then issued and a meeting of stockholders is called to elect directors. State laws vary, but usually three or more individuals may form a corporation. Corporations created in one state may transact any lawful business in another state, and they can acquire and transfer property as individuals, provided they comply with the law of the state in which they do business and obtain a license to do business there.

B. "LIFE" OF A CORPORATION.

A corporation exists until the expiration of its charter unless it, fails or is discontinued for other good reasons. Most charters are now perpetual. The stockholder's rights may pass from one to another by sale or by inheritance.

V. PRIVATE CORPORATION--CAPITAL STOCK.

Corporations generally have assets composed of money, real estate. buildings, machinery, patents, copyrights, etc. Capital stock is divided into parts called shares, and the owners of the shares are called stockholders or shareholders. By sale of shares the necessary money for the enterprise may be collected from many different sources, and unlike members in a partnership, the individual stockholders are not personally liable for the debts of the corporation. In large measure these facts account for the great popularity. of the corporate form of organization. Corporations may increase or decrease the amount of their capital stock, provided the change is made in good faith without intent to defraud, See SECURITIES LAW.

1. WHO MAY SUBSCRIBE FOR STOCK.

Anyone capable of making a contract may subscribe for the stock of a corporation. Minors are excluded. Where fictitious subscriptions are pay his subscription; he may recover the money already paid, or he may keep the stock and sue for damages. The selling of subscriptions to stock is now very strictly regulated by statute.

2. STOCK CERTIFICATE.

Stock certificate is a written statement of the number And par value of the shares to which the holder is entitled. In other words, it is the evidence of ownership. A stockholder may prove ownership even though a certificate has never been issued to the stockholder. When the capital stock of a corporation is increased, each shareholder usually has the right to purchase a portion of the new stock before it can be offered for sale to outsiders.

3. PREFERRED STOCK.

This kind of stock takes preference over the ordinary or common stock of a corporation. The holders of preferred stock are entitled either to a stated percentage annually out of the net earnings of the corporation before a dividend can be declared on the common stock or to some other preference set out in the certificate. Preference, rather than actual payment, is guaranteed. Holders of preferred stock usually have the right to vote at an stockholders' meeting on the same basis as the holders of common stock. In some states, the law requires that each share of stock have equal voting rights with every other share.

4. COMMON STOCK.

The ordinary stock of a corporation is called common stock. The holders are entitled to all the rights incident to their ownership.

5. TRANSFER OF STOCK.

This is provided for by statute. Usually the seller must assign the certificate to the transferee, execute a power of attorney, and deliver the certificate to the company for cancellation. The transfer agent then issues a new certificate to the purchaser.

6. SUBSCRIPTION.

A subscription for stock is a contract and must be in writing. An agent cannot refuse to receive a subscription from a competent person, nor can he release a subscriber or alter the terms of the contract. All subscribers must inform themselves as to their obligations and cannot evade payment unless they can prove fraud.

VI. SHAREHOLDERS.

SEE ORS CH 62 FOR CURRENT STATUTES REGARDING PRIVATE CORPORATIONS; ORS CH 65 FOR NONPROFIT CORPORATIONS; ORS CH 63 FOR COOPERATIVES; AND ORS CH 63 FOR LIMITED LIABILITY COMPANIES.

A. LIABILITY.

A corporation differs from a partnership in that the shareholders in a corporation are liable only for the amount of stock they own, while each member of a partnership is liable for all the debts of the firm. However, in the case of national banks the shareholders are liable for double the amount of their holdings in case the bank fails, if that much more is required to pay the debts. The amount of a stockholder's liability is fixed by statute. A stockholder in an corporation is liable for the full amount of his stock, Whether paid in full or not.

B. SHAREHOLDERS' RIGHTS.

In most states a shareholder has the right to inspect the company's books at any reasonable time for any proper purpose.

VII. GOVERNANCE.

SEE ORS CH 62 FOR CURRENT STATUTES REGARDING PRIVATE CORPORATIONS; ORS CH 65 FOR NONPROFIT CORPORATIONS; ORS CH 63 FOR COOPERATIVES; AND ORS CH 63 FOR LIMITED LIABILITY COMPANIES.

A. MANAGEMENT.

The power of a corporation rests in its members or individual stockholders except as restricted or limited by law. Unless the charter or state laws alter the case, policies are determined by a majority vote; usually a shareholder has as many votes as he has shares in the corporation. The right to vote in a stockholders' meeting is determined by the stock record of ownership as of the date of meeting, or as of the date the books are closed prior to the meeting, The bylaws of the corporation generally fix the time for the closing of the books. A stockholder has the right to vote in person or by proxy. An executor or trustee may vote the stock of the estate.

B. MEETINGS.

The statutes or the bylaws of a corporation usually prescribe the manner in which meetings are to be called, and the bylaws fix the time and place of meetings. Should the proper officer fail to call a meeting at the required time, the meeting may lawfully be held later, and if he should refuse to issue the proper notice, he may be compelled by mandamus proceedings to do so. Regular meetings are held in the manner set forth by the charter or bylaws, and the object of the meeting need not be stated in the notice. On the other hand, special meetings may be called at any time on proper authority, but the notice must state the object of the meeting and no other business may be there transacted. Any authorized meeting may be adjourned from time to time or from day to day, and the adjournments must be considered as the same meeting. Even if a meeting is illegally called it becomes a valid meeting by ratification of the proper official or by the shareholders. Notice of meeting is sent to whoever has the right to vote the stock.

C. DIRECTORS.

Management of a corporation is vested in the directors. Most corporations delegate managerial powers to directors who are elected either by a majority vote of the shareholders or by a cumulative system of voting in states in which such system is used. Their powers are established by statute, charter, or bylaws. As a rule they have general supervision over the business of the corporation. Their authority may be delegated to committees, corporate officials, or individuals. Thus the president, the secretary, the treasurer, and other officers and committees of the corporation are chosen by the board of directors to act in the capacity of agents in administering corporation affairs. A director may not act for the corporation individually, but his unauthorized acts would bind the corporation if subsequently ratified. A director may not act both for the corporation and for the director's own self interest in the same transaction. Unless otherwise provided, directors are not entitled to compensation for their services.

D. THE DIRECTORS, LIABILITY.

The directors of a company are liable to the company and to shareholders and outsiders for negligence, fraud, or for acts committed outside the scope of their authority. These are questions of fact to be determined by the courts. The directors of a corporation are personally liable for its debts if it can be proved that they incurred the obligations knowing that the corporation. was insolvent. They have been held personally, jointly, and severally liable as partners for debts of the corporation contracted in a state in which the company was found to have been doing business without having taken out a license.

E. OFFICERS.

The officers of a corporation are usually the president, vice-president, secretary, and treasurer chosen by, and often from, the board of directors. The ordinary rules of agency govern their powers and duties. The president is the chief executive officer and usually presides at meetings of the board of directors. The vice-president takes over the duties of the president when,, for any reason, the latter is unable to perform them. Quite frequently there are numerous vice-presidents assigned to different duties. The secretary is the keeper of the records and the chief clerk of the corporation. He or she usually has the custody of the corporate seal.
The treasurer has charge of the corporation's finances and is usually under bond for the faithful performance of his duties.

VIII. PRIVATE CORPORATIONS--DIVIDENDS.

A dividend is a payment to the shareholders out of the net profits of the corporation. A dividend may not be paid out of stated capital, but may be paid out of capital surplus. It may be in actual cash, in property, or in additional stock. When stock is selling above par on the exchange, corporations sometimes grant shareholders the right to purchase additional stock at par instead of declaring a cash stock dividend. The law will not permit the payment of dividends out of capital or from borrowed money without the consent of the stockholders, and the directors would be liable for such a fraudulent payment. Furthermore, illegally paid dividends may be recovered for the benefit of creditors. The net profit of a corporation is an asset, and not secure against creditors until the money has been declared as a dividend. When the dividend has been legally declared payable, no action can be brought by creditors to stop its payment. The directors must act in good faith, but they cannot be compelled to pay dividends when they do not deem it advisable to do so. The courts hold that dividends must be general on all stock of the same class, so that each shareholder in that class will receive his just share, and that the dividends shall be paid to the owner as determined by the books of the company.

IX. NONPROFIT CORPORATIONS.

Since a charitable corporation does not have "stockholders" who may exercise some governance, and the benefits of the corporate activities are intended to be the public or charitable enterprises or an indefinite number of unidentified persons, the due administration of the charitable corporate offices obviously must be enforced at the suit of someone else. The government is regarded as being interested in such cases, and the suit is brought by the appropriate law officer of the government, i. e., usually the attorney-general.

In Oregon, the Charitable Trusts Division is administered by the Oregon Attorney General's office. Certain charitable organizations and trusts have reporting requirements, and the state may sue to enforce the obligation so charitable trustees.

MODEL ARTICLES OF INCORPORATION

NOTE: MANY FORMS REGARDING BUSINESS CORPORATIONS, NON-PROFIT CORPORATIONS, AND RELATED FILINGS ARE AVAILABLE FROM THE BUSINESS REGISTRY OF THE CORPORATION DIVISION, OREGON SECRETARY OF STATE "fax-back." CALL (503) 986-2200.

SEE ORS CH 62 FOR CURRENT STATUTES REGARDING PRIVATE CORPORATIONS; ORS CH 65 FOR NONPROFIT CORPORATIONS; ORS CH 63 FOR COOPERATIVES; AND ORS CH 63 FOR LIMITED LIABILITY COMPANIES.

The undersigned natural person(s) of the age of eighteen years or more, acting as incorporator under Oregon Non-Profit Corporation Law set forth in Chapter 61 of the Oregon Revised Statutes, hereby adopts the following Articles of Incorporation:

ARTICLE I

The name of the non-profit corporation is ________________________and its duration shall be PERPETUAL.

ARTICLE II

This non-profit corporation is organized for the following purposes:

The several clauses contained in this ARTICLE II shall be construed as both purposes and powers. This corporation shall have all the purposes and powers, subject to ARTICLE II, clause (1), above, and ARTICLES III and IV, below, now or hereafter conferred by the laws of the State of Oregon, whether or not such powers be enumerated in these Articles of Incorporation. The purpose of this corporation is from time to time to do any one or more of the acts and things herein set forth.

EXAMPLES

(1) To conduct and carry on the work of the _________________ not for profit but exclusively for ________________________ purposes in such a manner that no part of its income or property shall inure to the private benefit of any donor, member, officer, director or any individual having a personal or private interest in the activities of the ________________.

(2) To promote ______________________________________________.

(3) To develop _____________________________________________.

(4) To establish and carry on________________________________.

(5) To form special projects, programs, study groups, and similar endeavors consistent with the principles and purposes of ___________________________ as the Board may authorize from time to time.

(6) To purchase, take, receive, take by gifts, devise or bequests, or otherwise acquire, own, hold, improve, use and otherwise deal in and with real or personal property, or any interest therein, wherever situated.

(7) To sell, convey, mortgage, pledge, lease, exchange, transfer and otherwise dispose of all or any part of its property and assets.

(8) To sue and be sued, make contracts and incur liabilities, borrow money at such rates of interest as the corporation may determine, issue its notes, bonds, and other obligations, and secure any of its obligations by mortgage, or pledge any or all of its property, franchises and income.

(9) To lend money for its corporate purposes, invest and reinvest its funds, and take and hold real and personal property as security for the payment of funds so loaned or invested.

(10) To conduct its business, carry on its operations, and have offices and exercise the powers enumerated in ORS Chapter 61 in any state, territory, district or possession of the United States, on in any foreign country.

(11) To elect or appoint officers and agents of the corporation, define their duties, and fix their compensation.

(12) To make and alter by-laws, not inconsistent with its Articles of Incorporation or with the laws of this state, for the administration and regulation of the affairs of the corporation.

(13) Unless otherwise provided in the Articles of Incorporation, to make donations for the public welfare or for charitable, eleemosynary, benevolent, scientific or educational purposes.

ARTICLE III

No part of the net earnings of the corporation shall inure to the benefit of, or be distributable to, its members, directors, officers, or other private persons, except that the corporation shall be authorized and empowered to pay reasonable compensation for services rendered and to make payments and distributions in furtherance of the purposes set forth in ARTICLE II hereof. No substantial part of the activities of the corporation shall be the carrying on of propaganda, or otherwise attempting to influence legislation, and the corporation shall not participate in, or intervene in (including the publishing or distribution of statements) any political campaign on behalf of any candidate for public office. Notwithstanding any other provisions of these articles, the corporation shall not carry on any activities not permitted to be carried on (a) by a corporation, exempt from federal income tax under section 501 (c) (3) of the Internal Revenue Code of 1954 (or the corresponding provision of any future United State Internal Revenue Law) or (b) by a corporation, contributions which are deductible under section 170 (c) (2) of the Internal Revenue Code of 1954 (or the corresponding provision of any future United States Internal Revenue Law).

ARTICLE IV

STATEMENT WHETHER OR NOT THIS CORPORATION SHALL HAVE MEMBERS. UNDER OREGON LAW, MEMBERS MUST VOTE ON DIRECTORS AND LIQUIDATION. YOUR ORGANIZATION MAY HAVE ASSOCIATES, SUBSCRIBERS, VOLUNTEERS AND SUPPORTERS, BUT IF THEY DO NOT HAVE POWER TO VOTE ON DIRECTORS' THEN THEY SHOULD NOT BE DESCRIBED AS "MEMBERS" AND THIS SECTION SHOULD STATE:
This corporation shall have no members.

ARTICLE V

Upon the dissolution of the corporation, the board of directors shall, after paying or making provision for the payment of all of the liabilities of the corporation, dispose of all of the assets of the corporation exclusively for the purposes of the corporation in such manner, or to such organization or organizations organized and operated exclusively for charitable, educational, or scientific purposes as shall at the time qualify as an exempt organization or organizations under section 501(c)(3) of the Internal Revenue Code of 1954 (or the corresponding provision of any future United States Internal Revenue Law), as the board of directors shall determine. Any such assets not so disposed of shall be disposed on by the Circuit Court of the county in which the principal office of the corporation is located, exclusively for such purposes or to such organization or organizations, as said court shall determine, which are organized and operated exclusively for such purposes.

ARTICLE VI

The location of the initial registered office of this corporation shall be ____________________, and the registered agent shall be __________________, at such address.

ARTICLE VII

The number of directors constituting the initial board of directors of this non-profit corporation is ________________[Must be at least 3 in Oregon]. The names and addresses of the persons who are to serve as the directors until their successors are elected and qualified are:

________________________

ARTICLE VIII

The name and address of the incorporator is

________________________

_________________________

_________________________

I, the undersigned incorporator, declare under penalties of
perjury that I have examined the foregoing and to the best of my
knowledge and belief it is true, correct and complete.

_____________________________


	© 2004 Linda Williams. All rights reserved.