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General Corporations & Closed Corporations

General Corporations & Closed Corporations

General Corporations

In most cases, if a corporation decides to go public or conduct private share sales, this corporation is regarded as a “General Corporation.” Accordingly, if this corporation chooses to raise capital money, global corporations are quite useful.

There are three different management layers of global corporations: shareholders, directors, and officers. They all have different responsibilities within the corporation.

Shareholders

They are the owners of the company; yet, they cannot manage this company. Typically, each shareholder has the right to vote per each share he/she has. This right to vote is used to determine the directors of the company, or for important decisions about the company.

The shareholder with more shares can hold the control of the company. They are merely called “majority shareholders.”  So, they have responsibilities upon the company.

Shareholders with fewer shares are called “minority shareholders,” and they usually do not take any responsibilities and pass their right to vote for someone else. They can also sell their shares to anyone.

Shareholders can get their dividends according to the profit the company has made, and the value of their shares rise as the company grows more prominent.

Directors

They are the managers of the company, and they are the responsible layer for the management of this company. They have liabilities upon important decision within the company such as employment, amount of shares that will be open to the public, business policies, payrolls, etc.

Board of Management determines if dividends will be paid to the owners or not, and the amount of these dividends.

Directors should be truthful and loyal to the company. They should prioritize the interest of the company instead of their self-interest.

They can make decisions via meetings notified beforehand, or via written consent of all directors. They cannot pass their rights to vote for someone else.

Directors can be dismissed unanimously with or without any proper reason.

Officers

They are the ones dealing with the daily duties within the company, and they serve the board of management. They are the responsible body for the enforcement of the company policies. This layer usually consists of a president, vice president, and secretaries. However, if the board of management believes it is better, there can also be other positions such as CEO, sales manager, etc.

Closed Corporations

Closed corporations are usually the companies in which shareholders, directors, and officers are the same people. Moreover, they usually stick with this small group of people. Closed corporations are limited to a maximum of 30 shareholders.

When it comes to management or dividends, closed corporations can be managed as a partnership. Additionally, issues such as share sales or transfer of transactions can be stated in the by-law of the company. If shareholders decide to sell the shares of a particular shareholder, “right to preference” (priority) arises.

If you have further questions, please do not hesitate to contact us.

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