RSM225 Things to Know

What Law Does

•  It influences and controls the behaviour of individuals in society.

• It empowers, influences, and controls the actions of government.

• It influences and controls interaction between individuals.

3 Forms of Legal Liability

• Criminal liability: responsibility arising from commission of an offence against the government or society as a whole

• Regulatory or quasi-criminal liability: responsibility arising from breaches of less serious rules of public law, often enforced through specialized regulatory tribunals set up by the government for specific purposes

• Civil liability: responsibility arising from a breach of a private law, enforced through a lawsuit initiated by the injured victim

5 Steps in the Development of a Legal Risk Management Plan

1. Identify potential legal risks.

2. Assess and prioritize each legal risk based on likelihood and magnitude.

3. Develop a strategy to address each risk from both proactive and reactive perspectives.

4. Implement the plan.

5. Regularly review and update the plan.

4 Strategies to Manage Legal Risks

1. Avoid the risk: Stop the conduct or find another way to achieve the result.

2. Reduce the risk: Use quality control to lower the chance or minimize damage.

3. Transfer the risk: Accept that the risk may occur but shift consequences to someone else (e.g., insurance, contracts).

4. Absorb the risk: Accept the risk and budget for expenses (“self-insuring”), used for remote or small risks.

5 Things Courts Do

1. Determine the validity of legislation.

2. Interpret legislation.

3. Protect human rights.

4. Develop case law, creating new principles to be applied to resolve disputes without court intervention.

5. Determine disputes for the parties before the courts.

5 Features of the Charter

1. Embedded in the Constitution

2. Limited ability to change

3. Overrides other legislation except when notwithstanding clause invoked

4. Reasonable (not absolute) protection of individual rights and freedoms

5. Application limited to governments and governmental activities

Constitution Act, 1982

• The supreme law of Canada (s.52(1), “Supremacy Clause”)

• Framework for government: creates the federal system and division of powers

• Includes the Charter of Rights and Freedoms (Part I) that protects rights and freedoms against government infringement (subject to limits and overrides)

Oakes Test (from R v. Oakes, 1986)

“Reasonable limits” in a “free & democratic society”:

1. Pressing and substantial objective: The law that limits the right must serve an important goal (e.g., protecting public safety).

2. Proportionality test: The means chosen must be reasonable. This has three parts:

   • Rational connection: The limit must logically further the objective.

   • Minimal impairment: The right is restricted as little as possible.

   • Proportionality of effects: The benefits of the law must outweigh the harm to rights.

Charter, s.1

Guarantee of Rights and Freedoms:

1. Guarantees all rights and freedoms in the Charter

   • It affirms that Canadians enjoy the rights set out in ss.2–34 (freedom of expression, mobility rights, legal rights, equality rights, etc.).

2. Allows those rights to be limited in certain circumstances

   • It says rights are subject only to “reasonable limits prescribed by law as can be demonstrably justified in a free and democratic society.”

Charter, s.2

Fundamental Freedoms:

• s.2(a): Freedom of conscience & religion

• s.2(b): Freedom of thought, belief, opinion, expression (incl. press)

• s.2(c): Freedom of peaceful assembly

• s.2(d): Freedom of association

Charter, ss.7–14

• s.7: Life, liberty, and security of the person

• s.8: Protection against unreasonable search and seizure

• s.9: Protection against arbitrary detention or imprisonment

• s.10: Rights on arrest/detention (counsel, reasons, trial, etc.)

• s.11: Rights in criminal trials (fair trial, presumption of innocence, etc.)

• s.12: Protection against cruel and unusual punishment

• s.13: Protection against self-incrimination

• s.14: Right to an interpreter

Charter, s.15

Equal protection and benefit of the law without discrimination

Charter, s.28

All Charter rights are guaranteed equally to male and female persons.

Charter, s.33

The “notwithstanding clause” — legislatures may override ss.2 and 7–15 for renewable 5-year periods.

Constitution Act (1867), s.91

Federal Powers:

• Peace, order, and good government (residual power)

• Trade & commerce

• Postal service

• Census & statistics

• Banking, currency, coinage

• Bankruptcy & insolvency

• Patents & copyrights

• Indigenous peoples and lands reserved for them

• Citizenship & naturalization

• Marriage & divorce

• Criminal law & procedure

• Defence & military

• Navigation & shipping

• Penitentiaries

• Any matters not assigned to the provinces

Constitution Act (1867), s.92

Provincial Powers

• Direct taxation within the province

• Management & sale of provincial public lands

• Hospitals, asylums, charities (healthcare)

• Municipal institutions

• Property & civil rights in the province

• Local works & undertakings (except federal ones like interprovincial railways/telecoms)

• Administration of justice (courts, civil procedure)

• Generally all matters of a local or private nature

Constitution Act (1982), s.52(1)

Supremacy Clause: The Constitution of Canada is the supreme law of Canada, and any law that is inconsistent with the provisions of the Constitution is, to the extent of the inconsistency, of no force or effect.

Common Law vs Civil Law

• Common Law: Judge-made law based on precedent (stare decisis). Flexible, evolves through court decisions.
  Used in England, Canada (except Quebec private law), U.S., Australia.

• Civil Law: Code-based system rooted in statutes. Judges apply comprehensive legal codes with less reliance on precedent.
  Used in continental Europe, Quebec private law, Latin America.

Substantive Law vs Procedural Law

• Substantive Law: Defines rights, duties, and obligations (what the law is).
  Example: criminal offences, contract terms, property rights.

• Procedural Law: Governs methods and processes for enforcing rights (how the law works).
  Example: court procedures, rules of evidence, trial process.

Public Law vs Private Law

• Public Law: Governs relationships between individuals and the state.
  Includes constitutional, administrative, criminal, and tax law. State is always a party.

• Private Law: Governs relationships between private individuals or organizations.
  Includes contracts, torts, property, family, corporate law. State not a party unless acting as a private actor.

3 Ways to Challenge a Statute

• Subject matter of the legislation is not within the jurisdiction of the relevant government.

• Legislation violates the Charter of Rights and Freedoms.

• Statute does not apply to the particular conduct.

Solicitor / Notary

An “office” lawyer in England who interviews clients, carries on legal aspects of business and family affairs, and prepares cases for trial.

Barrister / Advocate

A lawyer in England who accepts cases from solicitors, presents them in court, and also acts as a consultant in complex legal issues.

National Mobility Agreement

It’s an agreement among provincial law societies that allows lawyers to move or work across provinces.

Permanent practice: must meet the standards and pay the fees of the new province

Minor temporary work can be done without licensing.

Any provincial lawyer may appear before the Supreme Court of Canada.

Paralegal

A non-lawyer who provides some form of legal service to the public.

Super-Governmental Organizations

Non-profit associations of governments from around the world working to find common approaches to international issues, such as the World Trade Organization (WTO) or the United Nations (UN).

Retainer

The contract between a lawyer and client that describes the work to be done and the fee charged.

In-House Counsel

A lawyer who provides legal services to a business as a full-time employee.

Outside Counsel

Self-employed lawyers who work alone, in small partnerships, or in large national firms, and bill businesses for services rendered.

Compliance Officer

An employee who monitors regulatory and legislative requirements applicable to the business and ensures compliance.

3 Domains of CSR

Legal, Ethical, Economic

3 Types of Codes of Conducts

• binding: license revoked if breached

• voluntary: reputation at stake

• self-imposed: employment may be terminated

3 Sources of Law

1. Consitution (basic law): the supreme law that governs all other laws.

2. Legislation/statues: passed byParliament and by provincial legislatures pliance with Canada’s Constitution

   1. Subordinate legislation/regulations: passed under authorization of a statute by a body designated in the statute, such as the federal or a provincial cabinet

   2. Administrative rulings—rulings handed down by administrative regulatory bodies created by the legislation to hear complaints and applications by individuals and groups, according to the terms of the legislation. 

3. Common Law: (judge-made law/case law/precedents): court decisions

stare decisis

“to stand by things decided”; judging based on precedents

Lifting the Corporate Veil

Removing the separation between shareholder and corporation.

1. A shareholder must control the corporation (50%+1% in “ordinary” cases, but might be > 66% in “special” cases);

2. that control exercised to commit a fraud, a wrong or breach of duty; and

3. the misconduct must cause the plaintiff’s injury.

statutory interpretation

Determining the meaning of words in a statute by considering:

• Legislative intent

• Purpose and object of the statute

• Definition of terms

• Entire context of the language

statutory interpretation

Determining the meaning of words in a statute by considering:

• Legislative intent

• Purpose and object of the statute

• Definition of terms

• Entire context of the language

Who May Sue?

• Natural persons

  • Special cases: minors, undischarged bankrupts, mentally incompetent persons

• Corporations

• Trusts, Partnerships, Unincorporated associations

class action

An action in which an individual represents a group of possible plaintiffs, and the judgment decides the matter for all members of the class

res judicata

A case that has already been decided by a court and cannot be brought before a court again

7 Steps of a Trial

1. Statements of claim, defence, counterclaims

2. Pleadings

3. Discovery

4. Motions & procedural matters

5. Pre-trial conferences & settlement

6. Trial

7. Appeals

Key Pre-Trial Processes:

• Statement of Defence: Defendant admits facts not in dispute, denies others, and may add facts/law in defence

• Reply: Plaintiff may dispute added facts and provide further necessary facts

• Counterclaim: Defendant may bring a related claim; plaintiff then defends; both claims tried together

• Pleadings: Collective documents telling the full story—only information in pleadings can be raised at trial

• Discovery: Examination of the other party’s evidence, witnesses, and documents (including ediscovery of electronic records). Helps assess strength of case and encourages settlement

• Pre-Trial/Settlement Conference: Judge or mediator helps settle or narrow issues to shorten any eventual trial

Alternate Dispute Resolution (ADR)

• Arbitration (enforceable)

• Mediation (non-enforceable)

Pros and Cons of ADR

Pros

• Speed: cases are resolved by mediation or arbitration much more promptly than through the courts.

• Cost: speed in itself saves money; parties do have to pay the ADR fees themselves.

• Choice of adjudicator or mediator: unlike the courts, the parties can choose a person especially suited to resolve the issue because of their experience and expertise in the area of the dispute.

• Privacy: the parties can agree to keep the dispute private to minimize harm to their business through disclosure of confidential information or encouraging others to bring similar complaints.

• Preservation of ongoing relations: since ADR is usually less adversarial than litigation, it is less likely to foster antagonism between the parties, and will allow them to continue working together afterward.

Cons

• No precedent: ADR doesn’t establish binding case law, so it won’t clarify uncertain legal questions.

• Possible power imbalances: Without judicial safeguards, a stronger party may dominate.

• Restricted appeals: Arbitration awards are very difficult to appeal, even if the arbitrator makes a mistake.

• Voluntary nature: Mediation/negotiation only works if both parties are willing to compromise.

Thin-Skull Rule

The defendant must “take the victim as they find them” and is fully liable for all injuries caused, even if the victim’s pre-existing condition makes the harm much worse than would be expected.

Crumbling-Skull Rule

A defendant is only liable for the harm they actually caused, not for the inevitable deterioration of a plaintiff’s pre-existing condition. It limits damages when the victim was already bound to suffer loss or injury regardless of the defendant’s actions.

Contract (K)

A legally binding agreement requiring offer, consideration, acceptance, and intention to create legal relations.

Written vs. Verbal Contracts

Written: Clear record, easier to enforce, prevents disputes; but more formal, time-consuming.

Verbal: Flexible, quick, informal; but hard to prove, risk of misunderstanding, weak in court.

Discrimination

Unequal or unfair treatment based on protected grounds (e.g., race, sex, religion, disability), prohibited by human rights codes and employment law.

IRAC

• Issue: identify legal question;

• Rule: state the law;

• Application: apply law to facts;

• Conclusion – outcome.

Assault & Battery

• Assault: creating reasonable fear of imminent harm;

• Battery: intentional, unauthorized physical contact.

Defamation

Libel: written/permanent form.

Slander = spoken/temporary form.

Defences: Truth (justification), fair comment (public interest), qualified privilege (statements made in good faith), absolute privilege (statements made in legal settings).

Legal Structure of Sole Proprietorship

1. 1 Person carrying on business

2. No formalities required in setting up; laws in operation apply to the business licensing and regulation (e.g. business name, trademark, LCBO, income tax/GST number)

3. No special advantage or special requirements

4. No legal separation… = Unlimited financial + legal liabilities.

4 Part Test to Partnership

1. a relationship

2. between two or more persons

3. carrying on business in common

   • Not just co-ownership

   • All partners take part in management

   • Differences are solved by majority vote, but any change in the nature of the partnership business must be approved by all partners

   • Partners can all inspect the books

4. with a view to profit

Codified in Partnership Act 

Advantages & Disadvantages of a Partnership

Advantages: Two or more persons (individuals or corporations) can pool knowledge, skills, and financial/physical resources. Shared effort and collaboration.

Disadvantages: Disagreements can cause stalemate; dishonesty or incompetence of one partner can harm all; decision-making can be slow.

Partnership: Profit Motive

A partnership requires carrying on business “with a view to profit.” Sharing gross revenue or costs is not enough. Sharing profits is strong evidence but not conclusive.

Generally, profits will be shared pro rata based on each partners’ degree of involvement and/or

capital contribution

5 Exceptions (sharing profits does not create partnership if):

• repayment of debt;

• payment to employee/agent;

• annuity to widow/child of deceased partner;

• repayment of loan with interest linked to profits;

• payment for goodwill tied to profits.

Liabilities of Partners

• Personal liability: Partners are personally liable for the debts of the partnership

• Joint liability: Partners are jointly liable for other partners’ debts rised form the partnership

A person is liable only for the obligations of a partnership incurred while he is a member of the firm. 

Partnership by Holding Out

If a person allows themselves to be represented as a partner (e.g., name on firm letterhead), they can be treated as a partner and held liable for firm obligations.

Liability only applies if a third party relied on that representation when deciding to deal with the firm.

2 Implied Terms in Partnerships

• Partnership Property

  • All property “brought into” the partnership is partnership property, to be used only for the partnership business

  • Intent to be used for the partnership only; liable if misused.

• Financial Arrangement

  • Profits & capital shared equally (not based on contribution).

  • Indemnity: partners reimbursed for proper business expenses/personal liabilities.

  • Interest: no interest on capital, but loans/extra contributions earn 5% (unless agreed otherwise).

  • Remuneration: no salary for managing partnership business; payments to partners are not deductible expenses.

  • Partners may take draws (advances) against expected annual profits.

3 Fiduciary Duties Between Partners

1. Partners must render true accounts and full information

2. Partners must account to the firm for any benefit derived from the business or property of the partnership

3. Partners must not compete with the partnership business

Can be void if consent from partner was obtained.

Limited Partnerships

• At least one general partner

  • Manages the business for the partnership

  • Has standard unlimited liability

• One or more limited partners

  • Do not participate in management

  • Has liability limited to amount of contribution

Limited Liability Partnerships

• New creation of statute

• A partner is not liable for

  • Negligent acts only (in Ontario) of other partners, employees or agents acting in the course of the partnership business

• A partner is liable for

  • His or her own acts

  • The acts of those supervised by such partner

  • The partnership is liable for the acts of any partner

• In Ontario, limited liability applies ONLY to negligent acts

Only available for law & accounting firms.

Joint Ventures

Two or more parties, often corporations, contribute assets and expertise to a specific project. Mostly contractual.

Sequence of Payments on Dissolution

1. payment of the debts of the firm owed to non-partners

2. repayment of loans made to the firm by partners

3. repayment of the capital contributed by partners

4. sharing any surplus among the partners according to their entitlement to share in profits

3 Advantages of LLPs Going Limited

• Limits partners’ personal liability when claims are very large

• Helps attract new partners

• LLP status is seen as a mark of success (all big firms are adopting it)

4 Disadvantages of LLPs Going Limited

• May signal to clients that partners do not trust each other

• Conversion from unlimited to limited requires unanimity among partners

• Disclosure requirements reduce privacy and confidentiality

• Unclear how much legal protection LLP status truly provides

Income Trusts

Business structure where income-producing assets are transferred from an operating company to a trust.

The trust owns the profit; distributed to unitholders and taxed once at their level (major tax advantage removed 2008–2011 by new rules).

Governed by declaration of trust + trust law, and securities law if units are public.

Liability/governance: historically under trust law, but proposals suggest treating them like corporations (unitholders limited liability, right to elect trustees, same remedies as shareholders; trustees same duties/liability as corporate directors).

5 Levels of the Structure of a Corporation

1. Shareholders (traditionally, the “owners”, but this identity alone doesn’t give them the right to make decisions)

2. Corporation (a “legal person” with rights and duties carried out by natural persons)

3. Board of Directors (traditionally, the “directing minds”)

4. Officers (“the bosses”, C-suite)

5. Employees (“everyone else”)

3 Key Aspects to the Nature of a Corporation

• Formed by incorporation according to prescribed

• Legal separation between the corporation and its “owners” → shareholders

• Shareholders’ liability is limited to the amount they invest in the corporation

7 Partnership vs Corporation Differences

• Separate legal entity: Partnership = No, Corporation = Yes

• Personal liability of owners: Partnership = Yes*, Corporation = No

• Duty of good faith: Partnership = Yes, Corporation = No

• Transferability of ownership: Partnership = No, Corporation = Yes

• Participation of owners in management: Partnership = Yes*, Corporation = No

• Continuity of business: Partnership = No, Corporation = Yes

• Taxable entity: Partnership = No, Corporation = Yes

(*with exceptions)

2 Cases on Narrow Limits on Limited Liability for Shareholders in Corporations

• Improper distributions (e.g., dividends paid when no profits).

• Canada Business Corporations Act and Bankruptcy and Insolvency Act require repayment of improperly received amounts.

Basically they can’t abuse their limited liability

By-laws

• “operational rules”

• The internal working rules of the corporation

• Set of procedures governing how affairs of corporation are to be conducted

• Statute now sets out many defaults, so by-laws either change the defaults or add extra provisions

6 Key Aspects of Private Corporations

“Closely-held”

1. Fewer than 50 shareholders

2. Directors often also shareholders and officers

3. Fewer statutory requirements than public corporations

4. Can issue shares without meeting securities/stock exchange rules

5. Governed by unanimous shareholders’ agreements

6. Risk of majority domination

5 Key Aspects of Public Corporations

“Widely-held”

1. Corporate statutes: treated as distributing corporations → extra rules (e.g. proxy rules)

2. Securities law: reporting issuers → prospectus to go public, continuous disclosure, stock-exchange rules

3. Shares publicly traded (TSX/other), many dispersed shareholders

4. Shareholders with 10%+ equity must file special disclosures

5. Collective action problem (coordination among many dispersed shareholders)

3 Types of Share Capital

• Authorized capital

  • Total number of shares the corporation is allowed to issue

  • In Ontario, articles can set a limit or leave it open-ended

• Issued capital

  • Number of authorized shares that have actually been issued

• Paid-up capital

  • Number of issued shares for which the corporation has received full payment

  • Since statutes require shares to be fully paid when issued, issued capital = paid-up capital in practice

  • Reflected in the stated capital account in the corporation’s minute books

Basic Financial Structure of a Corporation

Basic types of shares (equity)

• Issue shares → Equity financing

• Selling a “share” in the company

  • Common shares

  • Preferred shares

  • Hybrid shares

Bonds/Debentures (debt)

• Issue bonds/debentures → Debt financing

• Borrowing money

3+1 Rights of Shareholders

1. Right to vote at shareholders’ meetings (Directors must give notice of the meeting, and must notify shareholders of all business planned to be conducted at the meeting; or can requisition a special meeting)

2. Right to declared dividends

3. Right to residual claim

At least one class of shares must have at least one of the rights. No classes need to have all rights. 

4. Right to Information (financial statements at the annual general meeting, appoint an auditor, responsible to them, to report on the financial statements; May apply to court to appoint an inspector if shown serious mismanagement; minutes of shareholder meetings, articles and registers)

2 Tests for Dividend Payouts

BOTH TESTS MUST BE MET.

Solvency test: Corporation must still be able to pay its liabilities by maturity

Maintenance of Capital test: Realizable value of the corporation’s assets must ≥ Liabilities + stated share capital

No right to dividends

Rule on Bonds’ Interests

Interest paid regardless of profits; deductible expense for tax purposes

Shareholders’ Rights

Common shareholders

• Vote to elect directors

• Right to approve major changes

• 50% in ordinary resolutions; 2/3 in special resolutions.

Preferred shareholders

• May have entitlement to fixed dividends (if corporation able to pay them); solvency and maintenance of capital tests must be met, otherwise entitlement accumulates

• Preference to be paid dividends before the common shareholders

• Usually have a preference to return of capital

Bondholders’ Rights

• No right to vote

• No right to manage business

• Often have ability to exert considerable influence over business (look at terms of the bond…)

• Right to appoint a trustee if terms of bond not honored

3 Ways to Become a Shareholder

• by being one of the original applicants for incorporation

• by buying shares issued by a corporation subsequent to its incorporation

• by acquiring (by purchase or gift) previously issued shares from another shareholder

par value

a nominal value attached to a share at the time of issue

pre-emptive right

the right of a holder of shares to protect his percentage ownership in the company by buying the same percentage in any new issue of shares

cumulative right

the right of a preferred shareholder to be paid arrears from previous years before any dividend is paid on the common shares

Priority of Payment on Liquidation of a Corporation

1. secured creditors

2. unsecured creditors

3. preferred shareholders

4. common shareholders

Note that bondholders are creditors—and usually they are secured creditors.

2 Roles of Corporate Directors

Responsible in law for the “business and affairs” of the corporation:

● Business – external relations of the corporation (inc. government, regulators, employees, other business entities, the “public”)

● Affairs – the internal workings of the corporation, including relations between the corporation and its shareholders

5 Specific Powers of Directors

1. Issue shares

2. Declare dividends (remember, only when able…)

3. Adopt by-laws (internal rules)

4. Call shareholder meetings

5. Appoint the officers and supervise them

   • Officers = “management” of the corporation

   • Often, shared role (e.g. CEO often a director too)

Often (esp. in large corporations) committees of the board are delegated certain functions (e.g. governance, compensation, audit)

5 Requirements When Electing Directors

• 1st within 18 months; within 15 months thereafter

• Initial director(s), named in the incorporation documents, sit until the first shareholder meeting, and cannot resign unless a successor is appointed

• Vacancies filled by board until next shareholder meeting

• Resident Canadian requirement for > 25% of board

• If public (a “distributing” corporation), need at least 3, 2 of whom must be “independent” under applicable corporate statutes (i.e. not also officer or employee)

5 C-SOX (Bill 198) Recommendations

• A majority of directors should be independent.

• The CEO should not also hold the position of chair of the board.

• The corporation should establish separate, independent committees of the board to address executive compensation and nomination of board members.

• The corporation should adopt and publish a “code of ethics.”

• The board should perform regular self-assessments.

3 Duties of Directors

Fiduciary: “Act honestly, in good faith, with a view to the best interests of the corporation”

Duty of Care: “Exercise the care, diligence and skill that a reasonably prudent person would in comparable circumstances”

Comply with the governing statute, the articles, the by-laws and any Unanimous Shareholder Agmt

8 Fiduciary Duties of Directors

• Contracts with the corporation

• Disclose interest to board; refrain from voting to approve

• Misappropriation of a corporate opportunity

• Corporate information

• Competing with the corporation

• Can disclose and obtain permission

• Related party transactions

• Insider trading

Directors’ 3 Duties to Shareholders

• Deliver financial statements and call annual meeting

• Submit by-laws for approval

• Submit other business to shareholders

No duty to individual shareholders

business judgment rule

courts will defer to the business decisions of directors and officers provided they are arrived at using an appropriate degree of prudence and diligence.

KEY DEFENCE to breach of duty of care/fiduciary duty.

Two Types of Shareholder Meetings

1. Special resolution:

   1. Alterations to the articles of incorporation (s. 173),

   2. Approval of certain other fundamental changes, such as amalgamation with another corporation (s. 183) or the sale of all, or substantially all, of the corporation’s property (s. 89),

2. Ordinary resolution:

   1. the approval of any amendments made by the directors to the bylaws (s. 103),

   2. the election of the auditor (s. 162),

   3. and the election or removal of director (ss. 106, 109).

Voters vote For/Against/Abstained

Proxy

a person appointed to vote for a shareholder; Usually appointed to vote in specified manner and appointed by proxy form, which is usually included with the notice of meeting

What happens if shareholder rights breached?

Shareholders cannot try to recover lost investments from the corporation

Shareholders may try to sue directors for breaches of duty

4 Statutory Protection of Minority Holders

1. Appraisal remedy: the right to have one's shares bought by the corporation at a fair price under FUNDAMENTAL CHANGES:

   • changing any restriction on the issue, transfer, or ownership of shares;

   • changing any restriction that the business that the corporation may carry on

   • amalgamating or merging with another corporation

   • selling, leasing, or exchanging substantially all the assets of the corporation;

   • and “going private” or “squeezing out” transactions

2. Derivative Action: Shareholder may apply to court to bring action in name of corporation if

   1. directors refuse (if benefit from opportunity/corporation is suffering)

   2. shareholder acting in good faith; and

   3. appears in best interest of corporation or its shareholders

3. Winding up: the dissolution (or liquidation) of a corporation

   • Only wound up if it is “just and equitable” to do so → No wrongdoing is required

   • Typically used when relations between the participants have broken down, or where a “partner” has been frozen out.

4. Oppression remedy: Individual shareholders can seek a personal remedy if they have been unfairly treated (CBCA s. 238: a “complainant” = any person the court approves, not necessary to prove wrongdoing).

   • s. 241: (1) complainant’s expectations about how their interests would be managed must be reasonable, (2) complainant must then show that the conduct in question “‘oppressively or unfairly disregards or prejudices the interests.”

3 Liabilities of the Corporation

• Civil liability

  • In tort for acts of agents

• Contract liability

  • Indoor management rule: Outsiders dealing with a company are entitled to assume that the company’s internal procedures have been properly followed, without having to investigate them.

  • Pre-incorporation contracts

• Criminal liability

  • Traditionally, who is the “directing mind”?

  • Criminal Code amendments expanded potential corporate criminal liability

Purpose of regulation (Securities Act s. 1.1)

• Protect investors

• Foster efficient capital markets

• Foster confidence in capital markets