Unit 6: The Structures of Issuers

Corporation

A separate legal person created by law that can own property, enter contracts, sue and be sued, and pays its own taxes.

Shareholder

A person or entity that owns shares in a corporation and therefore owns an interest in the company.

Limited liability (corporation)

The principle that shareholders are only liable up to the amount they invested, not for the corporation's debts personally.

Perpetual existence

A feature of corporations where the company continues to exist despite changes in shareholders, directors, or officers.

Centralized management

The structure where a corporation is managed by a board of directors and officers, not directly by shareholders.

Articles of incorporation

The founding document of a corporation that sets out its name, share structure, number of directors, and other basic details.

Articles of amalgamation

Documents that combine two or more corporations into a single new corporation.

Articles of arrangement

Documents used to implement complex corporate reorganizations or transactions approved by a court or shareholders.

By-laws

The internal rulebook of a corporation that governs directors, officers, meetings, share issuance, and other procedures.

Unanimous Shareholder Agreement (USA)

An agreement among all shareholders that can re-allocate powers from the board to shareholders and change normal governance rules.

Board of directors

The group elected by shareholders to manage or supervise the corporation's business and affairs at a high level.

Officer (e.g., CEO, CFO)

An individual appointed by the board to manage the day-to-day operations of the corporation.

Fiduciary duty (directors)

The duty of directors to act honestly, in good faith, and in the best interests of the corporation.

Annual general meeting (AGM)

The yearly meeting where shareholders elect directors, appoint the auditor, and receive financial statements.

Special resolution

A shareholder resolution that usually requires at least two-thirds (66 2/3%) approval, used for major corporate changes.

Oppression remedy

A legal remedy that allows shareholders to ask a court to intervene if corporate actions are oppressive or unfairly prejudicial.

Derivative action

A lawsuit brought by a shareholder on behalf of the corporation when the corporation's rights have been violated.

Class vote (shares)

A separate vote by just one class of shares when a change specifically affects the rights of that class.

Common shares

Basic equity securities representing ownership in a corporation, usually with voting rights and residual claim on assets.

Preferred shares

Shares with special rights such as priority for dividends or liquidation, often with limited or no voting rights.

Corporate bond or debenture

A fixed-income security issued by a corporation that represents a loan by investors to the company.

Double taxation (corporation)

When income is taxed first at the corporate level and then again when paid out to shareholders as dividends.

Dividend tax credit

A tax credit given to Canadian individual shareholders to recognize corporate tax already paid on dividend income.

Capital gain

The profit when an asset is sold for more than its adjusted cost base (purchase price plus certain adjustments).

Partnership

An unincorporated business carried on by two or more persons with a view to profit.

General partnership

A partnership where all partners manage the business and have unlimited personal liability for the partnership's debts.

Limited Partnership (LP)

A partnership with at least one general partner and at least one limited partner, where limited partners have limited liability if they stay passive.

General Partner (GP)

The partner in an LP who manages the business and has unlimited personal liability for the LP's obligations.

Limited partner

The passive investor in an LP whose liability is limited to the amount they invest, as long as they do not control the business.

Declaration of Limited Partnership

The filed document that officially creates the limited partnership under provincial LP legislation.

Record of Limited Partners

The internal record that lists each limited partner's name, address, and contribution.

Limited Partnership Agreement (LPA)

The contract between the partners that sets out the business, rights and duties, profit-sharing, and governance of the LP.

Limited partnership unit (LPU)

A unit that represents a limited partner's ownership interest in an LP, including their share of income, losses, and rights.

Flow-through taxation (LP)

Tax treatment where the partnership itself is not taxed and income or losses are allocated directly to partners.

At-risk rules

Tax rules that limit a limited partner's deductible losses to the amount they have at risk in the partnership.

Trust

A relationship where a trustee holds property for the benefit of one or more beneficiaries.

Business trust

A trust established specifically to carry on a business for the benefit of its beneficiaries.

Trustee

The person or entity that holds legal title to trust property and manages it according to the trust terms.

Beneficiary

The person or entity for whose benefit the trust property is held and who is entitled to trust income or capital.

Declaration of Trust (Trust Agreement)

The document that sets out the terms of a trust, including powers of the trustee and rights of the beneficiaries.

Three certainties (trust)

The requirements of intention, subject matter, and objects that must exist to create a valid trust.

Mutual fund trust

A trust that pools money from investors to invest in a portfolio of securities, with investors holding units as beneficiaries.

Fund

An investment vehicle that pools capital from investors to invest in a portfolio of assets, such as stocks or bonds.

Investment fund manager

The person or firm responsible for the day-to-day management and administration of an investment fund.

Portfolio manager

The registered person or firm responsible for making investment decisions and managing the fund's portfolio.

Trust beneficiary liability

The potential liability of trust unitholders; unlike shareholders, they do not automatically have statutory limited liability unless granted by specific laws.

Trust taxation

Tax treatment where the trust is a separate taxpayer but can deduct amounts paid or payable to beneficiaries, who then report that income.

Asset-backed security (ABS)

A security backed by a pool of income-producing assets such as mortgages, car loans, or credit card receivables.

Securitization

The process of pooling financial assets and issuing securities backed by the cash flows from those assets.

Special purpose vehicle (SPV)

A separate entity, often a trust or company, that holds the asset pool and issues ABS to investors.

Originator

The institution (e.g., bank) that creates the original loans or receivables that are later securitized.

Servicer

The party that handles day-to-day administration of the asset pool, including collecting payments from borrowers.

Waterfall (priority of payments)

The agreed order in which cash flows from the asset pool are distributed to different ABS tranches and expenses.

Tranching

The creation of different layers (senior, mezzanine, junior) of ABS with different risk and return profiles.