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SGMA 395 > M5 > Flashcards

M5 Flashcards

1
Q

Many types of corps exist

A

crown corps, nonprofits, for profits

BUT W FOCUS ON FOR PROFITE

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2
Q

corp is : legal entitty!

A
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3
Q

corp and sh are two separate entities!

A

corps has full capcity and rights of a natural person! it has rights and liabilites!!!! it is a separate legal person. corp can own its own rights and properties! EVEN IF THERE IS ONE PERSON OWNING THE COPR!!! THE CORP IS SEPARATE PERSON

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4
Q

How is corp created

A

under BCA (Alberta) or CBCA (Fed)

  1. application of incorporation
  2. issue of ceritifcate of incroporation!
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5
Q

but if a corp is covncted of bad stuff the OWNER or the ego of the company is responsible

A
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6
Q

why have corp?

A

cuz there is limited liability for partners!!

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7
Q

a judgement aginst shareholder is not judgement against corporation and vice versa

A

this is shareholderlimited liability

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8
Q

SHAREHOLDER IMMIUNITY

A

doctrine is not absolute ***

shareholders of a corp are as shareholders liable for any liability act or default of corpp

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9
Q

Piercing the corporate veil

A

when: no prcincple of universal application

this is when court ignores the separate personality of a company!!! basically courts holding SH repsonsible for corp actions for specific cases see 12:17

PIERCING THE VEIL DOES NOT EXTEND TO CIRCUSTANCES WHERE DECLINIGN TO DO SO WOULD BE UNFAIR

https://d2l.ucalgary.ca/d2l/le/content/619780/viewContent/6544785/View

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10
Q

EXCEPTION STO LIMITED LIABILTIY CONCEPT (situations wehre corporate veil is peirced)

A
  1. PERSONAL GUARANTEE: SHAREHOLDER WILL BE PERSONALLY LAIBLE WHEN THEY OFFER PERSONAL GUARANTEE (tHIS IS A SEPARTATE CONTRACT). this is usually for the people who need extra security of loan
  2. Improper distribution of assets: STAUTAORY exception. sh are peosoanlly liable id they recieve an improper distribution of contract assets
  3. personal torts: COMMON law. SH may have personal liability for tors from personal actions!
  4. director liability for statuatory breach: STATUTE: directors & officers will be liable for breaches of duties/obligations (such as payment for CPP, offense to OHSA, ERPA, EQA)
  5. fraud: if the corporation is doing something fraudulent the corportae viel is pierced
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11
Q

QC CPA case

A

CPA prohibited advertsiing to children! penalites were high!

irwin toly said that this limtid corporations freedom of expression!! court considered if these rights and right to liberty of the person applied to humans or corps

court agreed with irwin and said corps have freedom of expression; but the limtiation in the law was reasonbale!!!, and that corps they do not have right to life liberty and security of the person! by virtue of common sense these apply only to human beings

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12
Q

shares= part of the corporation!

but shares do not indicate ownership of a corporations property!!!!!!! ionly part of the legal entity

A
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13
Q

share - presumptons of equality

A

when only one class, it is presdumed all the shares are equal

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14
Q

when there are common and preferred shares:

A

NOT legal defintion, but legal distinction

common: full right to particpate in dividends of corp and proprertyy of a mc[me when dissoltion

preferred sahres: they rank ahead of CS, preferential right to dividends/ votiing rights etc

these are declared during articles of incorpoatiosn

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15
Q

shares and voting right

A

articles do not need to elabroate on voting rights!!! if nothing is discussed the npresumed all shares are voting shares

if multile classes it is posisble that some classes are not voting shares, but at least one has to be

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16
Q

CORP HIERARCHY

A

Shareholdrs: owners elect directors; Shares can be issued directly from the corporation or they can have it transfered to them from previous shareholder

directors: spervise affairs, appoint officers

officers: run day to day affairs this is the C SUIET, hire employess

employees

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17
Q

shareholds role power and duties

A

they are the owners, they have no role in amangement and no duty to act in interests of corportion or others unless they are “insiders” Hold >10%

right to vote on fundamental changes, right to vote in shareholdermeetings, right to dividends if declared, right to elect directors of company, right to a share in the net value of the corporation on distribution

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18
Q

Are shareholders fidcuiares to corp? if this is the only hat they werar

A

NO! they can act entirely in personal interests

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19
Q

ordinary and special resolutions (corporate voting meetings)

A

ordinary: measures passed by simple majority

special: 2/3 majority of shareholder votes a re required - happens when corproate name change or article change, chage to assets classes and rights, sale of subsaatnatility all the shares, dissolution of company

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20
Q

Directors - board of directors

A

this is the directing mind of the legal entity@@@

responsible for supervising activities of the coproation!!!!

elected by shareholders or appoonted by other directors if they have the pwoer

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21
Q

director characterisics

A
  1. AB corporation act and fed act: need at least 1 director / distirbuting act: means at least 3 directors needed
  2. FIDUCIARIES: DUTY OF LOYALTY AND GOOD FAITH TO THE CORPOATION!! THERE IS A DUTY HERE
  3. they are the mind of the ocmpany!!
  4. do not have to be a shareholder
  5. should be 18 and not bankrupt
22
Q

can shareholders force the directors to ac t a certain way in terms of managemetn?

A

NO!!!!

23
Q

Directors as fiduciaries

A
  • have a duty of loyalty and good faith to the corpoaion!!!
  • must act in best intersets of corproation
  • avodi all conflicts of interest
  • strictly account for all property held or adminsitedred on behlad of corp

DIRECTORS NOT ALLOWED TO DIVERT A BUSINESS OPORUTNITY BELONGING TO THE COMPANY TO THEMSELEVES FOR PERSONAL GAIN

24
Q

personal liabiltiy of directors

A

if corp liabiltiy is not met directors must pay out of pocket

25
Q

what are the different liabilities directors have? [unders tatuatory adn common law]

A

standards such as breaches of duty of loyalty, duty ot act with skill and care, breach of fiduciary duty, msirperesnartion and fraud, specific duties like env liability, ohsa, etc

26
Q

Officers

A
  • not a requirement by law!!!
  • officers are delgates to the directors

Duties of the various officers are established by directoers and by laws of corproation

27
Q

Are officers fiudcarioes?

A

YES! they must perform their duties and they must exrvise the care, diligence, and skill, that a reasonably prudcent person would exrcise in comarable circumastances

  • MINMUM STANDRD OF BUSINESS ABILITY!! FOR ALL DIRECTORS AND OFFICES
  • WHEN COURTS EVALUATE ACTION FOR DIREC OR OFFICERS, THEY DO NOT MAKE ALLOWANCES FOR PERSONAL FACTORS (LACK OF EXPERIENCE/POOR JUDGMENT). THERE IS AN OBJECTIVE STANDARD OF CONDUCT.
28
Q

officers may also be personally repsonsible for coproate crimes if personally invovled

A
29
Q

how to incorprate

A
  1. chosoe a corproate name: distirnctive, descriptive, legal element are requried in the name.
  2. obtain alberta NUANS report
  3. prepare articles of incorpoation:
  4. identify a corporate address
  5. elect a director
  6. appoint agent for service (indivudal who is in alberta who can accept notices and documents; these are typically lawyers)
  7. submit application

file the corps annual return each year!

30
Q

corps can be dissolved (special resoluiton), or involuntary (legal, bankruptcy etc)

A
  • they need to file articles of dissolution, corp ceases to exsit
31
Q

pros of incorpoating

A

-percpetion of status
- limited liability
- tax benefits
- raising capital
-perpetual existnec

32
Q

cons of incorprating

A
  • more paperwork
  • increased complexity
  • less tax flexibility
33
Q

unanimous shareholder agreement

A
  • typically used by small privately held corps; forms a contract between shareholder of a corps
  • gives shareholders more say in corps operations by limiting power of board actions (this DOES cause partial piercing of corportae veil regarding restrcited subjects!!!!!! means that shareholder immunity is reduced!)
34
Q

A usa can permit a shareholder to retain a board seat while they own shares of a corporation

A
  • can change voting threshold for SH descisions
  • can add restrictions on share transfers!! preventing sal of shares without first getting consent of SH, and first offering to teher Sh on the same terms “right of first refusal”
  • can create pre-emptive rights
  • may oblige shareholder to sell their shares to corps or other Sh under certain circumstances
  • can create “sunset provisions” that allow one sd to call for dissoltion
  • can create “shotgun prpovisions” forcing another shareholder to buy shares if there is a dispute
35
Q

pre-emptive rights

A

prohibits the issuing of shares of a specific class of shares UNLESS THey give the shareholder right to buy shares first to keep the proporiton ownership of the company!! this is to limit the dilution of a corporaiton

  • basically current SH have a pre-emptive right!
36
Q

Derivative actions: rule in foss v harbottle

A

DERIVATIVE ACTION: ACTION brought in the name of a corp by a SH in order to assert or defend right sto twhich th ecorp is entitled. action can only be raised for the actual losss on behalf of the corp.

only corporation can bring an action for wrongs done to corporation!!!!! the sh can not sue to recover damages against a corportation

remedy for this: ABCA section 240- a complainant can apply to the court for leave “permission”to bring an action to court

37
Q

Why may some corporations not pursue a breach of its rights?

A

BECAUSE the cliam is AGAINST the people in effective control of the corp (Directors/officers)

38
Q

who typically raises derivatce proceedings?

A

complainant!! this is typically a minority shareholder who does not control the board/a current or former director officer/ creditor

39
Q

When will court grant leave for derviactive action to contrinue?

A

this is not automatic! court balances need to compalaints interest aainst the need to avoid interfering with corproate management:

4 PART TEST:
1. COMPLAIANINAT ACTING IN GOOD FAITH
2. COMPLAINANT HAS STATUS
3. INTENDED ACTION IS NOT FRIVOULSOU AND COULD REASONABLY SUCCEED
4. INTENDD ACTION IS IN THE INTERESTS OF SHAREHOLDERS

40
Q

when will courts generally grant leave?

A

when corproation is clearly not pursuing a cliam with suffiecne diligence

41
Q

when will the ocurt not grant leave

A

when the management have made a good faith that its not in the best interespts of the corportion. to pursue a particular cliam. this happens when management can prove that they independantly and conscientiusly reviewed merits of the proposed claim.

42
Q

oppression remedy” abca section 241

A

this is when the courts get the power to intervene in the affairs of a corpoation at the behest of a comlplainanat where it is neceaassary to prevent or protect from unfairly prejudicial or similar codunt of corporation

PROTECT MINORITY SHAREHOLDERS!!!

43
Q

oporesion remedy focuses on harm to the legal and equtiable interest of a wide range of actions that can harm stakehdolers!

A

gives a court a broad jurisdiction to enforce not just what is legal but what is fair; focuses on the harm to the applicant!

44
Q

what conduct may give rise to oppression remedy?

A
  • if there is a serious dearture from normal business practice
  • lack of a valid corporate purpose fro a transaction
  • failur eon the part of a corp and its cotrolling shareholders to take steps to simulate arms length transaction
  • plan to eliinate shareholders from corporation

19:38 on https://d2l.ucalgary.ca/d2l/le/content/619780/viewContent/6544790/View

45
Q

when and how will court intervene for opression remedy

A

WHEN:
Coruts are reluctant to second guess decisions that have been made by amnagemnet in fgood faith, even if minority SH is upset!!

must have real evidence of misconduct!!!!

HOW:
Section 242(3) has a list of interventions: ex- appointing new directors, ordering purchase of complainanats shares, voting a transaction etc.

46
Q

dissent proceedings ABCA 191

A

what if minority sharehodler ibejcts a fundamental change to business ?

-> historically: they just had to suffer
-> now under s191, a sh can begin a dissent procedure !!!

47
Q

how do dissent proceedings happen?

A

corporate amangement will provide advanec notice; dissident must send the corp a written objection before this decision is voted on; if measure is passed during voting, dissenting SH must write the corp a letter demadning payment for shares-> this is when the sh ceases to have any rights other than the righ tot be paid fair valye; corp may apply to court for an orther that the rights will not arise on taking of the proposed action

47
Q
A
48
Q

good review: https://d2l.ucalgary.ca/d2l/le/content/619780/viewContent/6544791/View

A
49
Q
A

SGMA 395 (11 decks)

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