Directors Duties, Restall's Paper, Minority Shareholder Protection Flashcards
Director duties
- what do they manage
- how do they get in position
- who do they put in position
- what do they not have to be
- where are their duties owed to and not to
management of corporation
elected by shareholders
elect officers
don’t have to be shareholder
duties owed to corporation not shareholder
Director duties and the law with authority
authority but no restrictions as long as were acting appropriately to corporation they were protected
Directors and if didn’t meet fiduciaries
had duties but if fail to follow then liable to someone
fiduciaries roman definition and 3 things involved
person holding character of trustee in respect to the trust.
Confidence
high level ethics (scrupulous),
good faith and honesty (candour)
fiduciaries textbook definition
person having duties created by undertaking to act primarily for another’s benefit in matter
- Directors - care and skill - 2 meanings
- Two exceptions of greater diligence
exercise reasonable care and cannot be negligent carrying out duties.
Accountants and lawyers have higher standard
directors - good faith (bona fides)
Conflict of interest 2 actions
- disclose an interest in contracts with the company and not act in voting
- act in best interest of corporation or client
Restall’s Paper - Exam
Corporation act section 115 and 117
common law duties evolved from equity are incorporated in corporation act to codify duties
Restall’s Paper - Exam
Potential liabilities of directors
of directors are expanded beyond merely what are the common law duties
Restall’s Paper - Exam: New variety of director liabilities: Gatekeeper Liabilities
attempt to control wrong doing of companies by making directors liable through duties
Gatekeeper Liabilities:
Consists of?
how does it protect government?
some duties owed to?
how many statutes
financial, penalty nature for directors
revenue from corporations
individuals etc shareholder, employee, creditor
over 400
Gatekeeper Liabilities Rational
normal sanction and liabilities pointed to corporation/business are insufficient tor reduce corporate wrong doing
Gatekeeper Liabilities Solution
To prevent repetitive wrongful acts, corporation is not only sued but now third party involvement so directors liable and take prophlactic actions
Gatekeeper Liabilities Example (3-4)
- BOD not remitting EL, CPP or income tax
- debt liable to employees for up to 6months
- environmental legislation (jail time)
- directors liable if they quit during crisis
Social standpoint on corporations and people taking a board of director job
corporations create prosperity but with limited liability and business liabilities, reasonable people won’t take job as there are damages with prosperity
Minority Shareholder protection types (2)
Derivation action
Oppression remedy
Derivation Action and why few people do this method
- shareholder can sue BOD in name of company for wrong doing company
- court requires high deposit and costs upfront
Oppression Remedy
appeal to the court that they have been oppressed, and unfairly treated by BOD and so entitled to remedy
Oppression Remedy examples (3)
court dissolves company and disperse capital themselves
forced purchase of shares
give away particular assets
1970 amendments to corporation act to help shareholders (4)
- Disclosure of company affairs
- 5% appeal to court for inspector and shareholders attend
- shareholders right to vote and make change if majority more than 2/3
- proxy votes
1970 amendments to corporation act to help shareholders - disclosure of company affairs (2)
financial statement
document insider trading
1970 amendments to corporation act to help shareholders - proxy votes (1)
permissible for shareholders to have others vote for them. Managers get more control as get proxies
Fundamental Change to Amendment for Shareholders
changing articles of corporation, need 75% of majority of each share class
Best Protection of shareholders and why?
Unanimous Shareholder Agreement.
Frees shareholders from fiduciary duties and restrict directors to behaviours identified under the agreement
Actions under best protection of shareholders (3-5)
- Employment opportunities
- Majorities for actions to occur
- Capital Control
- Board of Directors Elections and determine duties
- Share Control Clause
Actions under best protection of shareholders: Share control clause -shotgun
shotgun clause: allows parties to free themselves from a difficult situation, protects you if you have lack of money. Create fair market value of share to sell or buy
Criteria for selection between basis forms of business entities (1-4)
- Limited Liability and nature of business - what are the risks
- Tax advantages
- Desirability of perpetual existence
- Estate Planning - how do you disburse it, minimize tax
Criteria for selection between basis forms of business entities (5-8)
- Number of proposed proprietors
- Relation to proposed proprietors
- Borrowing requirements and relation to lenders
- Available funding etc grants
Criteria for selection between basis forms of business entities (9-13)
- Employee ownership
- Costs
- Flexibility of structure
- Income tax consideration
- Applicable Government requirements/regulations
American Behaviouralists and reward
Reward for action that will lead to reward. Calibrate reward for work
Pavlovian Classical Conditioning with reward
Rewarding someone for action, but remove reward while keeping the action
