FORMATION + OPERATION OF A CORPORATION

Question 1

everything you need for the Incorporation Process:

Answer 1

1. Name Reservation
2. Incorporation Agreement - document saying: “we agree to form into a company”
3. Articles (By-Laws) = operating rules of a company
4. Shareholder(s) = only need one
5. Directors = legal Leadership (odd number)
6. Registered Office - must be physical
7. Records Office - records kept hint
8. Pay the government fee

Question 2

what is an incorporation

Answer 2

• separate or distinct legal existence apart from its shareholders
• shareholder is not responsible for liability/debts

Question 3

what is the corporate veil

Answer 3

form of protection to the shareholders from personal liability

Question 4

should the corporate veil ever be pierced?

Answer 4

Yes if:
- the company was set up to fraud
- Alter ego = cannot tell difference between company and owner
- high level of control from parent company and substituent

Question 5

A reasonable director and officer of a company must… (2 things)

Answer 5

• Act in good faith, best interests of the company
• Exercise the care, diligence and skill that a reasonably individual would exercise

Question 6

Fiduciary duty

Answer 6

The duty of utmost loyalty and good faith in a relationship of trust

Question 7

Duty to Avoid Conflicts of Interest

Answer 7

1. Give notice – tell the other board members that there is a conflict and what it is *SHOULD BE IN WRITING
2. Recuse – you completely withdraw from anything to do with the conflict (no participate in meetings, votings)

Question 8

Rights of Shareholders

Answer 8

1. The right of financial disclosure
2. The right to document disclosure
3. The right to an annual general meeting
4. The financial right

Question 9

The right of financial disclosure

Answer 9

at least once a year, you have the right to be given an audited financial statement

Question 10

The right to an annual general meeting (AGM)

Answer 10

the directors will give a report on the performance of the company (e.g. financial statements), election of the auditor happens here, election of directors here

Question 11

The right to document disclosure

Answer 11

see the records from the location that it happened at

Question 12

The financial right

Answer 12

if the company is wound up, after all creditors are paid back, whatever is left is shared

Question 13

Shareholders Remedies

Answer 13

1. investigation
2. oppression
3. derivative action

Question 13

remedy: Investigation

Answer 13

shareholder goes to court and ask the court to investigate something, the court appoints a specialized person (forensic accountant)

Question 14

remedy: oppression

Answer 14

when a person is being oppressed in some form, then they can order a Oppression Remedy

Question 15

Derivative Action

Answer 15

where a shareholder brings in action in the name of the company

Question 16

the court will not allow a derivative action to go forward unless…

Answer 16

This is where the shareholder believes that the company is suffering a loss:

1. they tried to get the directors to bring a lawsuit
2. a lawsuit would be in the best interest of the company
3. you are acting in good faith