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COMM 304 - BL > Session 9 > Flashcards

Session 9 Flashcards

Corporate Law

1
Q

What does corporate law encourage?

A

Corporate law aims at enouraging people to invest in business.

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2
Q

How does corporate law encourage people to invest in business?

A
  • Increases returns by decreasing costs.
  • Decreases SH risk.
  • Protects non-SH stakeholders.
  • Allows different rules for different types of corporations.
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3
Q

How many SH in a small vs. large corporation?

A

Small corporations have less than 50 SH, larger corporations have more than 50 SH.

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4
Q

Corporate Law

A

A set of rules governing the creation, running, and dissolve of corporations.

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5
Q

What is the liability of an SH in a corporation?

A

What you have invested.

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6
Q

Which level of government makes laws for corporations?

A

Both the provincial and federal levels of government can make laws, companies can be federally or provincially incorporated.

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7
Q

What does provincial laws have power over in corporate laws?

A
  • Regulate the incorporation of companies with provincial objects, and limits the scope in which a company can operate.
  • Allow companies to incorporate under another province (obtain license).
  • Licenses are discretionary but rarely refused.
  • Name registration requirements of federally incorperated companies exist in all provinces.
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8
Q

What does federal laws have power over in corporate laws?

A
  • Power to regulate companies in specific fields.
  • Power to legislate in relation to incorporation of companies with business to be carried on in more than one province.
  • No obligation of companies to incorporate under CBCA to operate across Canada.
  • Several federal powers impacting provincially incorporated companies.
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9
Q

What does incorporation do?

A

Incporporation creates a new legal person whose rights and obligations are similar to but not identical to those of a human being.

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10
Q

True or false: Courts tend to be very rigid in upholding that status of the separate legal entity.

A

True - There are very few exceptions.

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11
Q

What rights that humans have does a corporation not have?

A

Cannot marry, adopt, make a will, or be an employee.

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12
Q

True or false: Just because you are an SH you have ownership of actual assets.

A

False: Just because you are an SH does not mean you have ownership of actual assets of the corporation.

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13
Q

When will a court pierce the corporate veil?

A
  1. Person in sole control over finances and decisions.
  2. Commit fraud or wrong.
  3. Misconduct reason for other party’s loss.
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14
Q

True or false: A corporation may be incorporated by any individual or corporation or any combination of these.

A

True

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15
Q

Although there are many ways for a corporation to be incorporated, what form of incorporation do we focus on in this course?

A

Filed incorporation.

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16
Q

CBCA

A

Canada Business Corporations Act

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17
Q

When can an individual not incorporate a company?

A
  • If they are under 18 years of age
  • If they are bankrupt
  • If they lack capacity
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18
Q

What must be filed to Corporation Canada?

A
  • The articles of incorporation
  • Initial registered office address and first board of directors
  • Name-search report on the proposed name of the company
  • A fee of $200 if incorporation is done online
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19
Q

Which are more expensive: provincial incorporations or federal incorporations.

A

Provincial incorporations.

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20
Q

When does a corporation come into existence?

A

Once its certificate of incorporation is issued.

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21
Q

Must a company carry on business in order to incorporated?

A

No, there is no need to carry on business.

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22
Q

NUANS

A

Newly Upgraded Automated Name Search

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23
Q

What is NUANS?

A

Allows companies wishing to incorporate in Canada to ensure they do not infinge on the name or copyright of another corporation.

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24
Q

Articles of Incorporation

A

Legal documents filed with a government body to formally establish a corporation, acting as its “birth certificate” and outlining essential details like the company’s name, purpose, and structure.

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25
What is the most important document in the context of incorporation?
The articles of incorporation
26
What does the articles of incorporation address?
Key matters of the company's organization such as: - Name of the organization - Location of registered office - Class and number of shares to be issued - Number of directors - Restrictions on issuing, transfer and ownership of shares - Restrictions on the type of business the company may carry on.
27
What are different types of shares called and why are they differentiated?
They are different classes of shares, which have different rights and obligations.
28
Must the number of directors be a set number?
No, directors can either be a number or a range (for example between 5 and 10).
29
What is the minimum amount of directors for a non-distributing company?
1
30
What practical matters must be passed by the board of directors?
- Appointing officers - Making banking arrangements - Approving corporate seal - Authorize the issuing of shares - Appoint intrim auditor
31
SA
Shareholders Agreements
32
What is the purpose of the SH meeting?
First SH meeting to be held to approve the by-laws and appointa temporary auditor.
33
True or false: By-laws need to be consistent with the articles of incorporation.
True
34
What does an amendment to the by-laws require?
SH approval
35
What are some of the factors impacting the choice of jurisdiction?
- Disclosure obligations - Where the company will operate - Tax considerations - Corporate law requirements - International recognition
36
Continuance
Migration from one jurisdiction to another.
37
True or false: The business name must match the corporate name.
False: Business name can be different from the corporate name.
38
What is the corporate name usually?
A number
39
Does Canada allow for corporations to be criminally liable? Is this common under common law?
Yes Canada does allow for corporations to be criminally liable. This is very strange, as most countries do not allow corporations to be criminally liable under common law.
40
True or false: You cannot jail a corporation.
True
41
How does criminal liability apply if a corporation cannot act on its own?
The person committing the crime on behalf of the corporation is the "directing mind". The thing that calssifies the corporation as criminally liable is that the individual commits the crime not for their own benefit but solely that of the corporation.
42
When is a corporation party to a crime?
If committed by one of its representatives or senior officers knew about it.
43
What is the most relevant tort liability practically for corporations?
Vicarious liability for torts committed by its employees.
44
Which is more common in practice: vicarious liability or criminal liability?
Vicarious liability
45
Indoor Management
Third parties are entitled to assume that a corporation's internal policies and proceedings have been followed and complied with.
46
What is an exception to the indoor management rule?
3rd party is aware of the defect in authority or ought to have known about it due to their dealings with the corporation.
47
What does corporate governance address?
How power is allocated between shareholders, directors and officers and how that power is exercised.
48
Who elects directors?
Shareholders
49
Who appoints officers?
Directors
50
True or false: SH have decision making power.
False: If you are an SH in Amazon you cannot do anything to impact decision making.
51
True or false: The larger the corporation the further SH are from the decision making.
True
52
Who does the real power lie with in a corporation?
Officers.
53
True or false: Directors can sometimes even be ceremonial only.
True
54
Rank the following groups in order of decision making power (most to least): officers, shareholders, and directors.
1. Officers 2. Directors 3. Shareholders
55
Is it better to have directors be outsiders or from within the company?
Preferably officers and directors ought to be kept in check, this is easier if directors are outsiders.
56
What do directors do?
- Manage/supervise the management - Supervise the business and affairs of the corporation
57
What do officers do?
- Exercise powers delegated to them by directors - Are responsible for running the day-to-day operations of the corporation
58
What do shareholders do?
- Residual claim to assets of the corporation - Vote for election of directors - Vote on proposals made by directors
59
True or false: For certain major changes in the corporation SH approval is required.
True
60
USA
Unanimous Shareholder Agreement
61
What is a USA?
Allows some SH to assume some/all powers of the directors thereby re-allocating powers between SH and directors.
62
What is the main vehicle for a corporate entity to raise capital?
Shares
63
What is a share (basically)?
A bundle of rights.
64
True or false: A corporation must establish multiple classes of shares.
False: No obligation to set up different classes of shares.
65
What are the 3 basic rights associated with shares?
1. To vote at SH meeting 2. To receive dividends declared by the Board of Directors 3. Upon the dissolution to receive the property of the corporation remaining after all creditors are paid.
66
Typical Classes of Shares
- Common Shares - Preferred Shares
67
Common Shares
- No dividend entitlement until other classes are paid - Usually voting shares, but can be designed as non-voting - Only residual claim upon dissolution
68
Subordinate Voting Shares
Less than one vote per share.
69
Preferred Shares
- Preference on receiving dividend payments - Often no/very limited voting rights - Preference upon dissolution
70
Which SH get paid first?
Preferred SH
71
Do preferred SH have voting rights?
Not usually
72
If the company is doing well but does not pay out to SH, what can SH do?
Sue for oppression
73
AGM
Annual General SH Meeting
74
What is the quorum at SH meetings?
Majority of voting shares (unless by-laws say otherwise).
75
Business items of AGM:
- Election of Board of directors - Receipt of financial statements and auditors report on them - Reappointment of incumbent auditor
76
What are location requirements for AGM?
Must be in Canada, can be online.
77
TIming of AGM?
Must be held within 6 months of end of fiscal year or 15 months of last AGM.
78
What should an SH do if they cannot attend AGM?
Appoint a proxy.
79
Proxy
A person appointed to represent a SH at an SH meeting. Exercises SH's vote and has all the powers of SH.
80
Form requirements for proxy:
In writting and signed by SH.
81
What happens if SH does not appoint a proxy?
A management nominee is selected by default.
82
True or false: One a proxy is selected it may not be revoked.
False: Proxy can be revoked anytime before meeting.
83
Management Proxy Circular
50 pages that must be shared with company before the meeting.
84
What is in Management Proxy Circular?
- Details about directors proposed for election - Disclosure regarding SH holding more than 10% of issued shares - Transactions with insiders - Details on SH right to appoint proxy - Details of any special business dealt with at SH meeting
85
What are the SH remedies?
- Derivative action on behalf of the corporation - Oppression remedy
86
Must directors be an individual?
Yes.
87
How many directors must be Canadian?
25%
88
What are the education requirements for directors?
There are no formal educational requirements to be a director.
89
How are directors elected?
By SH at annual SH meeting by simple majority.

COMM 304 - BL (10 decks)

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