CORPORATION LAW

1
CORPORATION LAW

• Canadian Business Law I
• Lecture 9
• November 15, 2007

2
Business Corporations

• What is a business corporation?
• The nature of a corporation
• The incorporation process
• Corporate securities
• Division of corporate powers
• Shareholders agreements
• Dissolution
• Factors relevant to choice of corporate form

3
The Nature of a Corporation

• Control of corporations shareholders,
  directors, officers
• Limited liability
• Term of operation of business
• Separate existence of the corporation Salomon
  v. Salomon Co. Ltd. (1896)
• Corporate name
• Distributing corporation

4
The Incorporation Process

• Older forms royal charters, letters patent and
  special statutes
• General corporation statutes Canada Business
  Corporations Act incorporation attained by
  submitting specified documents
• Certificate of incorporation
• Relations with third parties
• Doctrine of constructive notice
• Doctrine of indoor management
• Capacity and powers of corporations

5
Corporate Securities

• Shares
• Common and preferred or preference shares
• Payment of dividend and repayment of capital
• Debentures or bonds
• Payment of interest and repayment of principal
• Hybrid securities debt convertible into shares
• Listing on stock exchanges and transferability

6
Division of Corporate Powers

• Election of directors by the shareholders
• Corporate control with the directors
• Directors can appoint officers and delegate
  powers
• The position in large and smaller corporations
• Fundamental changes to be decided by the
  shareholders

7
Division of Corporate Powers (contd.)

• Fiduciary duties of directors and officers
  Canadian Aero Service v. OMalley (1973)
• Conflict contracts duty of disclosure
  approval by shareholders
• Defence of due diligence available to directors
  and officers
• Personal liability of directors
• The oppression remedy

8
Shareholders Agreements

• Corporate decisions by simple majority or
  super-majority
• Shareholders agreements alter the power
  structure in corporations
• Veto rights
• Affirmative vote requirement

9
Dissolution

• Solvent corporations
• Shareholders can decide
• Liquidation of assets and discharge of
  liabilities
• Certificate of dissolution
• Insolvent corporations governed by the
  Bankruptcy and Insolvency Act

10
Choice of Corporate Form Relevant Factors

• Process of setting up
• Ability to mobilize capital
• Compliance
• Management
• Liability
• Transfer of ownership