Week 2

Question 1

Two defining characteristics of a corporation.

Answer 1

1. Separate legal personality

2. limited liability

Question 2

Advantages of a corporation? 1/4

Answer 2

Provides almost complete flexibility in allocating:
profit (dividend, income or salary),
risk (only at risk for amount contributed) and
power (shareholders voting rights, directors certain powers to make decisions).

Question 3

Advantages of a corporation? 2/4

Answer 3

Allows transfer of ownership easily through the transfer of shares (especially with a public corporation; small privately held corporations may have restrictions on transfers of shares).

Question 4

Advantages of a corporation? 3/4

Answer 4

Financing – raising capital is easier and there are more alternatives ( eg . shares, bonds, debentures etc.)

Question 5

Advantages of a corporation? 4/4

Answer 5

Lower corporate tax rates – a corporation is taxed separately from its owners and generally at a lower tax rate.

Question 6

CORPORATIONS. Disadvantages

Answer 6

• incorporation must be sought from appropriate government authority
• Requires legal formalities to create
• if doing business in more than one province have to extraprovincially register in other provinces.
• Ongoing maintenance obligations
• expensive

Question 7

Types of companies

Answer 7

• Extra-Provincial Companies
• Private or closely held companies
• Public companies

Question 8

What are the properties of private companies?

Answer 8

• small companies with a small number of shareholders.
• shares have not been listed on a stock exchange.
• There are usually restrictions on the transfer of its shares contained in the articles
• must have restrictions on the transfer of shares in your articles

Question 9

Properties of public companies?

Answer 9

• generally companies listed and traded on a stock exchange
• Usually a large number of shareholders who are mostly passive investors
• shares have been sold to the “public” pursuant to a prospectus. (Securities Act – reporting issuer)

Question 10

What legislation that regulates the trading of securities (publicly traded shared)?

Answer 10

B.C. Securities Act

Question 11

What jurisdictions can corporations incorporate under?

Answer 11

1. federally under the CBCA;

2. in one of the provinces or territories

Question 12

What federal law guides what directors and shareholders can and cannot do?

Answer 12

CBSA - Canada Business Corporations Act

Question 13

What are the advantages of federal incorporation?

Answer 13

• Capacity and power tocarry on business throughout Canada
• Name protection
• Common set of widely known ruleswhen corporation operates or has directors or lawyers in two or more provinces.

Question 14

What are the disadvantages of federal incorporation?

Answer 14

• Often difficult to clear afederal name
• Lack of familiaritywith CBCA in some law firms
• Perceived remoteness ofOttawa,time difference
• cost– is generally greater than for a BC incorporation. Fees are similar butextraprovincial registration required in BC – duplicate registration, additional filing fees and legal expenses.

Question 15

What are the advantages of BC Incorporation?

Answer 15

• Contractarian model- flexibility
• Victoriacloser than Ottawa, no time change
• directors residencyrequirements eliminated in New Act
• Where for tax reasons it is necessary for asubsidiaryto hold share in parent, BC and NS most liberal provinces. (?)