7 Division of Powers Flashcards
What are the powers of Directors and where are they found?
Short term: Directors get to appoint the officers and fire them: CBCA 102(1).
Long term: They get to set the overall strategic direction of the corporation.
What are shareholders powers?
Elect directors and remove them when necessary. If things go very badly, then shareholders also have access to the oppression remedy to ensure that their interests are not unfairly disregarded by the directors.
What is the ratio from Automatic Self-Cleansing Filter Syndicate Co. v. Cunninghame
one center of power cannot tell another center of power what to do; each center of power has certain powers that go with what they do. If a person is all three, you can’t necessarily assume they can make any decision they want. The idea is you figure out who would make the decision and only those people can make those decisions – you can’t be ordered to make decisions by anyone else
What is an “agency problem”?
One example is where in a public corporation the directors have control of the business with little or no interest in the corporation. There need to be incentives to make sure they don’t enrich themselves.
What is an “agency cost”?
All of the costs that the company incurs to prevent management from enriching themselves in an “agency problem” scenario?
What are the three protective mechanisms that ensure directors and management behave?
- Minimum qualifications for directors;
- Directors’ duties;
- Oppression remedy.
What are potential answers to the problem of separation of ownership and control
- Management will not enrich themselves because the market will prevent it
- “Informational function” of the market: once it becomes known that management is enriching themselves, the market will lower the share price to compensate for the losses
- “Market for managerial talent”: once it becomes known that management is enriching themselves, the market will not be able to get the next job they want
- “Market for corporate control”: once it becomes known that management is enriching themselves, the corporation will be ripe for a takeover, which will replace incumbent management with better managers
What are the qualifications for being a director?
CBCA 105 (1) The following persons are disqualified from being a director of a corporation:
(a) anyone who is less than eighteen years of age;
(b) anyone who is incapable;
(c) a person who is not an individual; or
(d) a person who has the status of bankrupt.
How is the number of directors decided?
CBCA 102(2) A corporation shall have one or more directors but a distributing corporation, any of the issued securities of which remain outstanding and are held by more than one person, shall have not fewer than three directors, at least two of whom are not officers or employees of the corporation or its affiliates.
How are directors paid?
CBCA 103 (1) Unless the articles, by-laws or a unanimous shareholder agreement otherwise provide, the directors may, by resolution, make, amend or repeal any by-laws that regulate the business or affairs of the corporation.
How do you fill a director vacancy?
CBCA 111 (1) Despite subsection 114(3), but subject to subsections (3) and (4), a quorum of directors may fill a vacancy among the directors, except a vacancy resulting from an increase in the number or the minimum or maximum number of directors or a failure to elect the number or minimum number of directors provided for in the articles
How are directions removed?
CBCA 109 (1) Subject to paragraph 107(g), the shareholders of a corporation may by ordinary resolution at a special meeting remove any director or directors from office.
