Queen's Business Associations
From Law Resources For Business Lawyers, Find a Lawyer
This is the General Queen's University Business Associations Outline
You can edit this page, or discuss its contents, using the tabs above.
You can create an outline for a specific professor by editing Queen's Business Associations ProfessorName
For other courses, see Queen's Law
What form of Business should I Start?
Factors: 1) number of owners (passive or active?) 2) carrying on a business or just co-ownership? 3) uninsurable risk? (corp. for limited liability) 4) capital requirements (corp. can sell shares to raise money) 5) costs (corp. has annual costs and filings) 6) tax considerations (cor
Partnerships
Is there a partnership? relationship ... of 2+ persons ... carrying on a business ... with a view to a profit co-ownership with a view to a profit does not alone constitute a partnership --> A.E. LePage v. Kamex Development Ltd Splitting of profit is prima facie a partnership, unless you can prove otherwise --> Volzke Construction Ltd. v. Westlock Foods Ltd. (1986)
What are the rights/duties of the partner?
majority rules for ordinary matters [PA s. 24(8)] consensus needed for major decisions [PA s. 24(7)] right to share in profits and losses equally [PA s. 24(5)] right to have access to books [PA s. 24(9)] duty to act honestly and fairly re: the partnership [PA s. 28]
Is this partner liable?
not liable for debts incurred before you became a partner [PA s. 18(1)] Still liable for debts after you retire [PA s. 18(2)] Liable for new debts after you retire until everyone is notified of the change --> [Tower Cabinet Co. v. Ingram (1949, KB)] liable for debts incurred during the partnership [PA ss. 10, 13, 18] apparent authority – principal bound if agent had apparent/purported authority [PA s. 9] liable to account for profits if you compete with partnership. laid out in partnership agreement if action brought against partnership, general partners are jointly and severally liable
Is there a Joint Venture?
in all important aspects, joint ventures are treated as partnership --> [Crane & Bromberg on Partnerships] Mortgagee and Mortgagor are not a JV. Neither are lendor/debtor. --> [Central Mortgage & Housing Corp. v. Graham (1973)]
Limited Partnerships
Is there a limited partnership? must fill out form (LPA s.3) must contain at least 1 general and 1 limited partner
Is the limited partner (LP) liable? LP will become fully liable if he controls the business at all LP will become fully liable if he transacts on behalf of the company --> [Haughton Graphics. v. Hickman, 1860] LP not liable for negligence off general partners, but still liable for own negligence [OBCA s.10(2)]
Corporations
Can the directors be held liable?
Are directors personally liable to the CRA for taxes? directors can be held liable for failure to submit taxes [ITA s. 227.1(1)] due diligence is an available defence [ITA s. 227.1(3)] as soon as director becomes aware of info. that may lead him to believe there may be a problem --> [Soper. v. R. (1997, Nat. CA) – even applies to outside directors]
Are directors personally liable to the creditors? even on insolvency, the directors' duty is to the corporation as long as transfer of assets is in the best interest of the corporation, not a breach of the duty. --> [Peoples' Department Stores Ltd.] directors may be personally liable if the fail to disclose they're contracting for an LLC --> [Turi v. Swanick – didn't use “LTD” as required by OBCA s. 10(1)] directors can be held personally liable for the corporate debts if they misrepresent to creditors as to the legal or financial state of the company [Royal Stores v. Brown] may need some sort of fraud for liability [Gilford Motor Co. v. Holmes (1933)] man's sale of his house to his corporation to avoid selling it was reversed. --> “Fraud or objectionable purpose” [Jones and Another v. Lipman and Another (1962)]
Are directors personally liable to the employees? directors are liable for unpaid wages if sued within 6 months, insolvency of dissolution of company occurs within 6 months, and the company was in violation of the Bankruptcy Act) [Meshau v. Campbell, CBCA s. 119]
Are directors/officers personally liable for their torts? (NEEDS WORK)
officers are always liable for their own torts
may not be liable if you breach a contract between employer and 3rd party if acting bona fide in the scope of your authority (must be an efficient breach) (Said v. Butt)
director is liable if he induces a breach of contract that involves a third party
--> [ADGA Systems International Ltd. v. Viacom Ltd. (1999, Ont. CA)]
could be liable if you make somebody work in a dangerous area, regardless of co.'s liability
--> [Sullivan v. Desrosiers (1986, NBCA)]
Is this contract promoter liable?
What if the promoter signed a contract before the corporation existed? you're personally bound to a contract if you sign on behalf of a pre-incorporated company promoter can expressly exclude his own liability in the contract [Dairy Suppliers v. Fuchs] if the misrepresentation had nothing to do with the loss, then there may be no remedy --> [Wickberg v. Shatsky & Shatsky (1969, BCSC)] if promoter repudiated contract, he's liable, and repudiated contract can't be ratified later --> [Landmark Inns of Canada Ltd. v. Horeak]
--> What if the company adopts the contract after? the company can choose to adopt the contract [CBCA s. 14(2)] adopting must be done in a reasonable amount of time only written contracts can be adopted
--> What if both parties knew the company hadn't been incorporated? if both parties know company hasn't been incorporated, the company can choose to adopt the contract, and promoter is liable until then
--> What if only 3rd party doesn't know the company doesn't exist? if promoter knows the company doesn't exist, but contracting party doesn't, then promoter is liable if neither party knows company doesn't exist, then there's no contract. Can be ratified though. --> [Black v. Smallwood]
--> What if the 3rd party only meant to deal with the non-existent company? no promoter liability if the party only intended to contract with the non-existent party --> [Westcom Radio Group v. Mac Isaac (1989, Ont. Div. Ct.)]
Can the Shareholders be held liable?
Are the shareholders liable for acts of the corporation? shareholders are not liable for any act of the corporation [OBCA s.92(1)]
Does the majority owe a duty of care to the minority? no such duty is owed --> [Brant Investments v. KeepRite Inc. (1991, Ont. CA)] as long as there's no fraud, majority can pretty much do as it pleases -> [Goldex case]
--> What if something really unfair is happening? Oppression remedy!!! Ebrahimi v. Westbourne Galleries Ltd. (1972, HL) A/B give C 100/500 shares each, then B and C oust A. Held: it was lawful, but unjust. best interests of company are irrelevant when this unjust principles of oppression remedy imported from this case
--> What if the controlling SH won't let us sell? controlling SH, who can veto the tender, is under no obligation to sell if there's no controlling SH, directors' duty is to best interests of the corp., not to the SH --> [Pente Investment Management Ltd. v. Schneider]
Can the Corporation be held liable?
Is the corporation liable for a tort? the corporation is liable for all of its own torts, and vicariously liable for the torts of all of its agents and ostensible agents. in a tort case, the mental state of the company is usually irrelevant (strict liability) directors are liable when the corporation sells shares for anything other than money, to ensure the value is accurate [CBCA s 118(1)]
Is the corporation criminally liable? criminal liability requires mens rea (unless strict/absolute liability) --> [Canadian Dodge & Dock v. The Queen] fines are given instead of prison sentences [Criminal Code Amendment Act, 1909] if the thing is done in fraud of the corporation, and not for the benefit of the corporation, then mens rea will not be imported Identification Theory: must find the directing mind of the corporation (policy/decision maker with authority) who best represents the co. on this issue [Canadian Dodge & Dock v. The Queen] directing mind will be attributed to corporation. must be acting within scope of authority --> [Lennard's Carrying Co. Ltd. v. Asiatic Petro Co. Ltd. (1915, AC)] directing mind can be an amalgamation of multiple minds Bill C-45 – broadens corporate criminal liability beyond “directing minds” “directing minds” expanded to included “senior officers,” middle managers, contractors, agents, etc... even can import omissions to the company. fines for summary convictions increased from $25,000 to $100,000 indictable offences carry unlimited fines factors added to sentensing consideration (moral blameworthiness, public interest, prospects for rehab., restitution) can make changes to prevent future crimes and appoint officers to supervise the changes
Is the corporation vicariously liable for the actions of the agent? corp. is liable if there is a) actual authority b) usual authority c) ostensible authority can rely on the indoor management rule and assume all is as it should be --> [Sherwood Design Services v. 872935 Ontario Ltd. (1998, Ont. CA)] outsiders are not assumed to know the limits of a person's authority, even if it's in the articles --> [Even v. Nicholls (1875) rule replaced by CBCA ss. 17,18] corporation can undo any contract or transaction entered into by agent with a conflict of interest --> [Aberdeen Railway Co. v. Blaikei Bros.] Can I enforce a contract against a co. if the apparent agent lacked actual authority?
i) ... representation of authority made to other party ii) ... representation made by some person with actual authority to manage company iii) ... 3rd party must be induced to sign based on misrepresentation and rely upon it iv) ... authority to do the thing or to delegate the authority must exist --> [Freeman & Lockyer v. Bathurst Park Properties (Mengal) Ltd. (1964, QB) – able to enforce]
Can the SH get the court to reverse an act by the directors?
Test: was the action bona fide and for the general prosperity of the company? --> [Park v. Daily News – keeping employees happy is a sufficient justification] directors only limited by express restrictions in the articles [CBCA s.15(1)]
Business Judgement Rule:
if no fraud or conflicts, directors presumed to have acted in good faith and best interests of corp even w/o fraud, to get business judgement directors should: i) refer to an independent committee of the board ii) get an outside valuation iii) get outside professional advice iv) put in some time/consideration --> [Smith v. Van Gorkum (1985)] applied in Brant Investments v. KeepRite Inc. (1991, Ont. CA) they got business judgement b/c they relied on consultant's report
What if the director had a conflict of interest?
transaction is voidable/reversible, even where shares are held in trust --> [Transvaal Lands Co. v. New Belgium (Transvaal) Land and Development Co. (1914, CA)] if a director has an interest in a transaction, the company is not bound and the director must account for profits [Graw v. New Augusta Porcupine Mines Ltd.(1952, PL)] a director is not allowed to vote on a transaction in which he has a conflict [CBCA s. 120(5)] such transactions can be ratified by SH, but conflicts of interest must be disclosed [CBCA s. 120] the exact nature of the conflict must be disclosed --> [The Liquidators of IMCA v. Edward John Coleman & John Watson Knight (1873 HL)] contract must be approved by the board [CBCA s. 120(2)] contract must appear to be fair and in the interest of the corporation [CBCA s. 120(3)]
--> What if the director is a director of another company too?
people are allowed to sit on two boards would owe same strict duty to both boards... so make sure you don't allow for any conflicts and share no info. and don't act unfairly --> L&M Exploration Co. Ltd. v. New Mashonland Exploration Co. Ltd. (1891, WN)
Did the directors delegate too much of their authority away?
directors can delegate power to act, not govern. Must retain ultimate control. --> [Kennerson v. Burbank Amusement (1953)] Not all powers can be delegated. delegates cant i) issue shares ii) adopt bylaws iii) declare dividends iv) approve takeover bids --> [Hayes v. Canada Atlantic ... now CBCA s.115] you can't completely delegate out your management responsibilities --> [Sherwood, Kennerson cases]
Can a corporation give a gift to charity?
test of reasonableness: directors are limited only by best interests of corporation and express restrictions in the articles --> [Theodora Holding Corp. v. Henderson (1969, Del. Ch.) - small cost to SH outweighed by benefit] a chemical company was allowed to give gift to scientific university because it benefits corp. which can hire the top students [Evans v. Brummer, Mond & Co. Ltd.]
Can the SH get the directors to do something?
directors can't ignore an arms-length transaction assented to by SH --> [Eisenberg v. Bank of NS]
Can I bring an action against the directors?
There must be a breach of a duty to bring an action Directors have a duty to act honestly, and in the best interests of the corporation. Issue is the process at which they arrived at their decision Charity Equitable Fire Insurance Co. Ltd. (1925) emphasis on due diligence: did the director as the right questions? director should be aware of industry standards, and should review reports. can rely on reports to find a duty owed, must look at what is reasonable in those circumstances. different levels of diligence and skill expected from each profession directors are not liable for mere errors in judgement directors need not exhibit any more skill than reasonable person in their circumstances it would be a breach to confer a benefit upon employees without regard to the SH --> [Park v. Daily News] any big decision will lead to enhanced security (sale of control, defensive measures in a takeover bid). Issues will be: 1) were correct processes followed, 2) was decision reasonable --> [Paramount Communications Inc. v. QVC Network Inc.]
What if the shareholders ratified the breach?
unless some provision to the contrary exists in the co.'s charter, any resolution passed by majority of SH is binding on the company [Northwest Transportation Ltd. v. Beatty] in Canada now, we don't count conflicted directors' votes on the matter a voidable transaction can be set right by SH ratification [Bamford v. Bamford (1970, CA)] SH must be properly informed --> [Winthrop Investments Ltd. v. Winns Ltd. (1975, NSCA) – issuance of shares to defeat a takeover bid. ratified by SH. Injunction granted b/c no full disclosure to SH] works even if there's a malpurpose SH cannot ratify waste, fraud or overreaching [Schreiber v. Bryan, 1978]
What if the director's didn't pay enough attention?
directors have a duty to follow through on delegated authority and ensure that it's done correctly --> [R. v. Bata Industries] they also have duties to review environmental compliance reports, become aware of industry standards, and become aware of emergencies --> [R. v. Bata Industries]
What if directors considered a party other than the shareholders?
considering parties other than the SH is not necessarily a breach. The duty is to the company, and directors may consider SH, creditors, employees, consumers, the government and the environment --> [People's v. Wise] The issue is going to be whether to decision was reasonable (not correct) --> [Kerr v. Danier Leather (SCC, 2007) – report was missing key info., so no Bus. Judgement] it would, however, be a breach to confer a benefit upon employees without regard to the SH --> [Park v. Daily News]
Should the directors have questioned management? if there's a reason for directors to question management, then they have a duty to do so. --> [Standard Trustco Ltd. Re. - even applies to outside directors]
Were corporate opportunities used privately (breach)?
Diversion: manager intercepts opportunity for himself Secret Profits: manager uses info./property to make secret income --> [Zwicker v. Stanbury, 1953 – must account for secret profits even without bad faith] both lead to a breach of fiduciary duty applies to officers as well as directors [Canadian Aero Services Ltd. v. O'Malley (1973, SCC)] resigning doesn't release you from your fiduciary obligations [Canadian Aero...] accountable even without proof of conflict (just needs apparent conflict [Canadian Aero...]
any property entrusted by X's principle, used by X for profits, profits will be turned to principle --> [Shallcross v. Oldham] information is property in that if person uses company info. to make money, he must account if an agent/trustee uses his position of authority to earn profits, he is accountable to the corp. --> [Reading v. Attorney General] liability does not require proof that the company could have gotten the contract --> [Canadian Aero Services Ltd. v. O'Malley (1973, SCC)]
--> Is this opportunity protected?
needs to be an opportunity that the corporation was actively seeking or the person needs to have had the duty to actively seek opportunities for the corporation --> [Burg v. Horn – depends on circumstances. in Burg they were already in the business]
--> What if the shareholders ratified the diversion/secret profits? can be ratified by SH, but court must approve if action brought (cant be ratified by conflicted ppl) majority shareholders cannot ratify a gift to themselves, or let themselves divert an opportunity --> [Cooks v. Deeks – can bring an oppression action if they try]
--> What if the company couldn't take on the opportunity? can't take on an opportunity that a co. is financially limited from. there must be a rejection. --> [Irving Trust Co. V. Deutsch (1934, 2nd Circ.)]
--> What if the company didn't want the opportunity in the first place? an out-and-out rejection of the opportunity means that it's not a breach to use the opportunity --> [Penso Silver Mines Ltd. v. Cropper (1966, BCCA) – but rejector can't be same person]
--> What if the person really really tried to avoid the conflict? look at factors to determine good faith avoidance of conflict Location, ripeness of opportunity, nature of opportunity, amount of knowledge possessed, specificness of opportunity, circumstances of how info was obtained, special/private info, time factors, resignation vs. termination --> [Canadian Aero Services Ltd. v. O'Malley (1973, SCC)]
Defensive Tactics: has the duty been breached?
its ok to try to stop a takeover bid if its on the advice of a committee with no conflict of interest --> [Pente Investment Management Ltd. v. Schneider Corp. (1998, Ont. CA) - Bus. Judgement) any big decision will lead to enhanced security (sale of control, defensive measures in a takeover bid). Issues will be: 1) were correct processes followed, 2) was decision reasonable --> [Paramount Communications Inc. v. QVC Network Inc.] knowing that sale is immanent does not mean that they must take the best price/go to auction. can look at other factors about the bid like acquirer's values etc. --> [Pente Investment Management Ltd. v. Schneider Corp. (1998, Ont. CA)
--> is the company selling shares to try to thwart the bid? if a company sells shares, the only relevant question is whether it was in the best interests of the corporation . improper purpose doctrine + fiduciary duty. --> [Teck Corp. Ltd. v. Millar (1973, BCSC) – honestly, best interests of corporation] codified: issuance of shares must be in the best interest of the corporation [CBCA s. 122(1)(a)] replaces rule from Hogg v. Cramphorn that its only ok to issue shares to raise capital onus is on plaintiff to show directors acted unreasonable [Teck...] can look broadly at interests of corporation (here, to not upset employees)
--> is the company using a SH rights plan and other tactics? OSC will likely get involved issue is: when has the rights plan achieved its purpose? when is it time to stop it? pill can only be used while directors are actively seeking alternatives, and there's a real/substantial possibility that the board can increase SH value by doing so [Chapters Inc. Re] Factors: • was shareholder approval for plan obtained? • when was the plan adopted? • what other tactics were implemented? • will a better bid likely be found? • how long ago was the bid made / announced? • do shareholders support continuing pill? • how big/complex is target co? • what steps taken by co. to find another bid? • is the bid fair to shareholders? • will the SH rights plan terminate the bid? --> [Chapters Inc. Re] Winthrop Investments Ltd. v. Winns Ltd. (1975, NSCA) – issuance of shares to defeat a takeover bid. ratified by SH. Injunction granted b/c no full disclosure to SH
What if this case is American? in America, the test is for “reasonableness and good faith investigation” [Cheff test] next, Unical test (proportionality of response) [Unical v. Mesa (1985)] next, Revlon test (must auction when sale is imminent) [Revlon v. MacAndrews & Forbes Inc.]
Can the directors be held liable for the poor performance of the company? not if they did their best and honestly believed it was in the best interests of the corporation --> [Re Brazillian Rubber Plantations and Estates Ltd.] directors who blindly do what they're told will be held liable --> [Selangor United Rubber Estates Ltd. v. Craddock (1968)] directors are liable if they fail to identify misstatements in the prospectus [OSA s. 130] defence of due diligence applies it would, however, be a breach to confer a benefit upon employees without regard to the SH --> [Park v. Daily News]
What if my SH voting rights aren't fair? CBCA can deal with unfair distribution of voting rights 1) can Enfranchise all shares ... at time of amalgamation (CBCA s. 183(3)) ... at sale of all or most assets (CBCA s. 189.6) ... at continuance in another jurisdiction (CBCA s. 188(4)) 2) fundamental transactions must be approved by all SH ... amalgamation (CBCA s. 183(9)) ... sale of all or most assets (CBCA s. 189.7) ... amendments to the articles (CBCA s. 176) all shares must hold the same rights no matter whose hands they're in if voting rights change, a new class of shares must be created --> [Jacobsen v. United Canso Oil & Gas Ltd. (1980, Alta QB)] if co. gives shares different voting rights in different hands, court can just enfranchise all shares equally. [Bowater Canadian Ltd. v. R.L Crain and Craisec Ltd. (1987, CA) – all shares get 10 votes]
--> is there a coattail provision? Coattail Provisions enfranchise shares upon a takeover bid doesn't become a voting share forever since Canadian Tire the OSC has refused to list companies without coattail provisions
What if the meeting wasn't held fairly? don't have to let everybody speak, but it must be fair --> [Wall v. London and Northern Assets Corp. (1898, CA)] chairman cannot just stop the meetings at his own will and pleasure --> [Natural Dwellings Society v. Sykes] SH are entitled to discuss any relevant matters at the meeting [CBCA s. 173(1)(b)] if it's a federal corp., dealing with a special meeting, this rule comes from Bomac Batten Ltd. v. Pozhke (Ont. HC) Blair v. Consolidated Enfield Corp. (1993, CA) need more info SH can't just call meetings whenever they like. SH meeting requisition is an extrordinary exp. --> [Airco. v. Air Canada]
What if management didn't distribute my SH proposal? management can decide not to circulate something, and SH can fight it company has to respond with reasons to the SEC SEC can ask co. to include it, but this is not binding SH can't make co. pay for circulation if primary purpose has nothing to do with the corp --> [Varity Group v. Jesuit Fathers of Upper Canada (1987, CA) purpose was to end apartheid]
Could there be a problem with the way the directors solicited proxies?
need to follow procedures to solicit proxies. need to give SH enough information to make an informed decision [CBCA s. 147] not enough to say 'this is not a solicitation. will look at facts. [Brown v. Duby (1980, SCC)] simply stating who you vote for is not necessarily a solicitation [CBCA s. 147]
--> can the company be made to pay for managements' solicitation of proxies? management can make the company pay as long as its bona fide and in the best interests of the company [Rosenfeldt case] dissident shareholders must pay their own costs to solicit proxies
If there's a breach, what action should I bring?
What avenues should I try before I bring an action? the court can... ... order a meeting [CBCA s. 144] ... review the decision of a director ... order a supervisor [CBCA s. 229] ... order rectification of records [CBCA s. 243]
3 types of actions for breaches of duty:
1) Derivative Action [CBCA s. 239]
effects all SH equally benefits go to co. (or all shareholders) real plaintiff is corp., but directors won't take action for some reason s.242 – SH ratification of directors' action is evidence, but not decisive
--> will the court allow my DA? CBCA s.239(2) – conditions precedent for DA (a) notice to directors of intention to do this (so they have time to dispute it) (14 days) (b) complainant must be acting in good faith/best interests of corp/clean hands (c) need a prima facie case to get leave must be prima facie in the interests of the corporation that the action be brought --> [Northwest Forest Products case – whats bad for SH is not always bad for corp.] needs permission of the court test for leave: where applicant is acting in good faith and the action doesn't appear frivolous and could reasonable succeed ... where the action is reasonably in the interests of the corp. --> [Mark-Jay Investments v. Levy] can't proceed until SH has recommended action to board, and been rejected (rejection could be lack of response) [CBCA s.239(2)]
--> can I get the court to pay the costs of my DA?
court can order that corp. pay legal fees of complainant [CBCA s. 240(d)] court can order interim costs to the corporation [CBCA s. 242(4)] when a minority SH gets leave for an action, he has a prima facie right to get money/costs --> [Turner et. al. v. Malihot et. al. - owns 30%, will benefit a lot, gets some $ and must come back for more]
Personal Actions
SH has some sort of grievance personal / unique to himself brought in shareholder's name. remedy goes to them personally (not all SHs) costs are to SH himself don't need leave from the court personal & derivative claims can be merged once the DA has leave [Goldex Mines. Ltd. v. Revill] where a co. hires someone, and the person screws up, and SH's lose money as a result, the correct plaintiff is the corporation (derivative action) --> [Hercules Management v. Ernst & Young – auditor error is wrong to corporation ]
3) Oppression Actions
available to any shareholder, creditor, director, officer and maybe more (proper person/standing) substantial ground for the complaint is unfairness can potentially get into court much faster than personal, and relief/discretion is broader. individual SH's need to join to become parties, as opposed to with DA no need for evidence of bad faith (but it helps) [Ford v. Omers] look for possible indicators of oppression (no clear definition) [Ford v. Omers] • Lack of a valid corporate purpose for the transaction • Failure on part of corp. to take reasonable steps to simulate an arms-length transaction (blatantly non-arms-length) • Lack of good faith on the part of the directors • Discrimination between shareholders (benefits majority w/ exclusion of minority) • Lack of disclosure • Plan or design to eliminate minority shareholder
Test is usually reasonable expectations of SH have they been “nourished by word and deed”? [Westfair Foods v. Walt] were they led on by the nature of the classes of shares? [Westfair Foods v. Walt] Ferguson v. Imax tried to squeeze wife out. Omers factors: lack of valid purpose, lack of good faith, plan to eliminate minority SH
--> am I a proper person to bring an oppression action?
available to any shareholder, creditor, director, officer and maybe more (proper person)
it's a question of equity that comes down to the discretion of the court
--> [First Edmonton Place v. 315888 Alberta Ltd.]
will look at SH expectations
EjnniV <a href="http://bhuufwawtjyp.com/">bhuufwawtjyp</a>, [url=http://hrudevjjtayo.com/]hrudevjjtayo[/url], [link=http://tetogmzlbwyc.com/]tetogmzlbwyc[/link], http://ynoqgmjetlzy.com/
Can I get the court to investigate?
may apply for an order ex parte (no notice to other side) for the court to order an investigation --> [CBCA s. 229] only shareholders can apply (and maybe directors) must show evidence of fraudulent intent you do not have to post costs if you convince the court that investigation is needed court has various powers: ct. can authorize entry of any premises/docs, conduct a hearing, order persons to attend a hearing and give evidence under oath, require an interim or final report, and order the co. to pay the costs of the investigation Ferguson v. Imax – investigation report used in oppression remedy
Can I make the majority buy me out at a set value?
appraisal remedy: gets triggered if there's a reason to believe SH will lose their value
What are my shares worth if I'm bought out as a remedy?
market value: only really an issue with closely held corporations, b/c no public market to tell us FMV asset approach: net valuation of the assets of the corporation divided by number of shares. Relies heavily on “book value” earnings approach: quantify earnings, and base value on this combination of above
Can I get the court to wind up the company?
Winding Up [CBCA s. 214] rare, drastic, all-or-nothing issue: is it feasible for the enterprise to continue?
Will the parent corporation be held liable for acts of the subsidiary?
Will the subsidiary be linked to the parent? (veil lifted)
may lift veil to respect picketing and collective bargaining right [Nedo Ltd. v. Canada] P/S may be looked at together for tax purposes (subs had no free will) --> [DeSalaberry Realties Ltd. v. Minister of National Revenue (1974, Fed TD)] to pierce the veil, sub. must be under complete control of parent and must be used as a shield for fraudulent conduct [Trans America Life (SCC)] Factors to decide whether to pierce the veil: [Smith, Stone and Knight v. Birminham Corp.] are profits considered profits of parent? are persons conducting business appointed by parent? was parent corp. head/brain of venture? was parent corp. in effectual and constant control?
Can this extra-provincial corporation operate in Ontario?
if registered in a different Canadian province, you don't need to re-register to operate in Ontario
--> [Ontario Extra-Provincial Corporations Act, R.S.O. 1990]
if registered outside Canada, must register and follow Ontario laws
if registered federally, there is no need to re-register in Ontario
Can a public company restrict trading to comply with Canadian ownership rules?
yes.
What if I'm worried about other party being able to pay costs?
When can a party get the court to make the other side put up a deposit? i) when the company is outside Ontario ii) when the company has a bad reputation iii) when the company is believed to have insufficient funds --> [Rule 56, Ontario Rules of Civil Procedures]
Will a contract that goes against the company by-laws be upheld? court will likely uphold individual contract over company by-laws --> [Realty Acceptance v. Montgomery – court uphold employee contract over by-laws] co. can alter articles to remove someone, but may be liable for employment related damages --> [Southern Foundries Case]
When will securities regulators step in?
Chapters Inc., Re OSC ended pill because Chapters stopped looking for better bids
What can they do?
... cease trader order (CBCA s.127(1)(2))
--> Cease trade order does not require a breach of fiduciary duty [Chapters Inc., Re]
... order “denial of trading exceptions” (CBCA s. 127(1)(3) – person can't trade their stocks)
... deny access to securities law exceptions
... examine practices and order changes
... order that a person or company be reprimanded
... order a person prohibited from being officer/director of any company
... fine $1 million for each failure to comply with securities law
... order a person disgorged of commissions
i.e. Standard Trustco Ltd. Re. denial of trading exemption ordered b/c directors failed to disclose important info. to public if there's a reason for directors to question management, then they have a duty to do so.
What if I'm upset because a corporation adversely effects my community?
corporations are not legally obligated to provide assistance to a community adversely affected by its actions [The CRN “Run Throughs” Report]
What rights does this type of share hold?
Unless otherwise stated... all shares carry the right to: i) vote at meetings, ii) receive dividends, iii) surplus on dissolution [CBCA s. 24(3)] if silent about voting rights, each share carries one vote [CBCA s. 140(1)]
“Common Shares” - Each share gets equal voting rights
“Non-Voting Shares” - Only can vote in certain circumstances
“Preference Shares” - Attached a genuine and non-specious preference or right over any class of residual equity shares in the company
“Residual Equity Shares” - Have residual right to share in earnings and assets upon windup
“Restricted Shares” - Residual equity shares, but not common (can't vote)
“Restricted Voting Shares” - Restricted shares with a limited right to vote
“Subordinate Voting Shares” - Less right to vote, on a per-share basis, than another class
Rights:
“Pre-Emptive rights” - Right to buy any shares the company issues: --> Protection from Dissolution – if co. issues more shares, you can buy them. Otherwise, majority is allowed to issue itself more shares if its in the best interests of the co. [Teck]
Re: Sabex Int. Ltee (1979, Que. SC) weird case. court didn't let maj. issue shares even with pre-emptive rights plan b/c it had the effect of making people buy shares or dilute their interests
