final

Question 1

what is a franchise and how is it regulated

Answer 1

a franchise is not a legal entity but a license

franchises are provincially regulated

Question 2

which agreement will two parties enter upon the start-up of a franchise

Answer 2

franchise agreement

Question 3

what are some clauses a franchise agreement may contain

Answer 3

location of business

training of all staff

franchisor owns overall rights and trademarks of company

suppliers of all equipment and inventory

Question 4

what must a franchisor provide prior to entering into an agreement

Answer 4

franchisor must provide franchisee with a disclosure document

Question 5

what are considered to be advantages of operating a franchised business

Answer 5

business plan is already established

product or service has been tested in the market

higher rate of success

Question 6

what are considered to be disadvantages of operating a franchised business

Answer 6

substantial buy-in fee

little individual creativity is allowed

ongoing royalty fees paid to the franchisor

Question 7

pursuant to the corporations act, which records are corporations required to keep and for how long

Answer 7

all constating documents:

articles
bylaws
minutes of meetings and resolutions

registers of past and present directors

shareholder registers

should be kept for 7 years

Question 8

how long does the employment standards code require employee records to be kept for

Answer 8

requires employee records to be kept for at least 3 years

Question 9

which business records does the canada revenue agency advise businesses to keep and for how long

Answer 9

receipts and invoices
bank statements
payroll records

CRA suggests keeping support documents for 6 years

Question 10

what are the two different methods for buying/selling a business

Answer 10

purchasing the assets and purchasing the shares

Question 11

what are the advantages of purchasing assets as a method of buying a business

Answer 11

to limit exposure to unwanted liabilities

parties can choose which assets and liabilities will be included in the transaction and what will not be

Question 12

what are the disadvantages of purchasing assets as a method of buying a business

Answer 12

extensive transactional paperwork required

matter is more complex, time consuming and expensive

Question 13

what are the advantages of purchasing shares as a method of buying a business

Answer 13

parties avoid conveyancing requirements of an asset purchase

title to assets remain in the name of the corporation which is carrying on the business

transaction is less complex and less expensive

Question 14

what are disadvantages of buying shares as a method of buying a business

Answer 14

assets and liabilities of the seller are taken over without choice

Question 15

what are the two alternative forms of agreements you can use for buying and selling a business

Answer 15

commercial real estate offer to purchase

purchasers lawyer may prepare a Purchase and Sale Agreement of their own

Question 16

what types of property may be sold in an asset transaction

Answer 16

real and personal property

includes land and buildings, equipment, inventory etc

Question 17

what is meant by “business due diligence” and what does this include

Answer 17

homework conducted by the buyer, with respect to the business being purchased

includes:
understanding of contracts
review of inventories
employee contracts

Question 18

what is meant by “legal due diligence” and what does this include

Answer 18

homework carried out by each party’s lawyer with respect to matters including:

confirming titles to respective property involved

ensuring assets are free from encumbrances

companies office corporate search, land titles office search, personal property registry search

Question 19

what matters are involved when performing “legal due diligence”?

Answer 19

minute book reviews

some related financial statement review

Question 20

what would you use to keep all your searches and certificates organized

Answer 20

searches checklist should be kept and maintained

Question 21

what is a closing agenda and what are some key pieces of information found in one

Answer 21

it is a plan used by parties lawyers to help them conduct closing of a transaction

it includes:
names of all documents
number of copies of each document
who is required to sign each document
any follow-up required

Question 22

what is a reporting and opinion letter

Answer 22

a letter given by each lawyer to their respective clients

Question 23

what is the difference between preference and common shares

Answer 23

preference shares is a share class having one right or preference over any other share class

common shares is a share class having no right or preference over any other share class

Question 24

who elects directors of a corporation

Answer 24

shareholders must elect at least one director

Question 25

what does it mean for two or more corporations to amalgamate

Answer 25

it means that the corporations will continue as one new corporation

Question 26

what are directors personally liable for

Answer 26

directors may be liable for the torts and any crimes committed by the corporation

if bankruptcy goes bankrupt, directors are personally liable for up to 6 months , as well as all unpaid withholding tax, EI premiums

Question 27

what are shareholders personally liable for

Answer 27

shareholders do not have any personal liability

Question 28

how are shareholders taxed on income from the corporation

Answer 28

shareholders ordinarily receive dividends and then are taxed

Question 29

what is a unanimous shareholders agreement

Answer 29

an agreement between all corporation’s shareholders and the corporation to restrict the powers of directors

Question 30

what benefits are there for incorporating federally

Answer 30

corporation can operate under the same name

registered office address can be anywhere in canada

can be recognized as a canadian entity