Chpt 17 & 19

Question 1

What is a corporation?

Answer 1

type of legal entity created by the
state -
 Principal use is vehicle by which large amounts of
capital may be accumulated
 A person in the eyes of the law with similar rights
and responsibilities to that of an individual

Question 2

Name 3 important characteristics of corporations:

Answer 2

a) Corporation is separate and distinct from its shareholders, and acts not through them but
through authorized agents

b) Properly authorized agent may bind corporation in contract with third parties

c) Shareholders possess limited liability for debts of corporation, and creditors may look only to assets of corporation to satisfy their claims

Question 3

Who are the 4 main peoples in a corporation?

Answer 3

• Shareholder
• Director (person elected by the shareholders to manage its affairs)
• Officer (person elected or appointed by the directors to fill a particular office (president,
  secretary, etc.)
• Employees

Question 4

Who can bind the corporation into contracts?

Answer 4

Only officers and directors

Question 4

In the event of loss, what can creditors come for from a corporation?

Answer 4

Only assets (shareholders’ losses limited to investment in
corporation - no personal assets)

Question 5

Can shareholders transfer interest?

Answer 5

Yes, freedom to transfer shares in a public or private company

Question 6

What are two ways corporations can accumulate large amounts of capital?

Answer 6

Issuing shares or by issuing bonds

Question 7

What is the Unanimous Shareholder Agreement?

Answer 7

Contractual rights and duties can be imposed in addition to statutory rights and duties, but cannot
replace them

Question 8

What is the difference between a royal charter corporation and a special act corporation?

Answer 8

Royal Charter - Original method used to permit a monopoly or own land (e.g. Hudson’s Bay Company), gave entity all rights at law of a natural person
(AB)Special Act - corporation created by an Act of Parliament or a legislature for a specific purpose

Question 9

What is a letters patent?

Answer 9

A government document that
creates a corporation as a legal entity (corporation acquires all powers of a royal charter corporation)

Question 10

What is Ultra vires?

Answer 10

If corporation or director attempts to perform an action beyond the scope of their power (would be void)

Question 11

What are General Act corporations?

Answer 11

Form of incorporation whereby a
corporation may be created by filing specific information required by statute

Question 12

What is the indoor management rule?

Answer 12

A party dealing with a corporation may assume that officers have the
valid and express authority to bind corporation

Question 13

Why have a shareholder’s agreement?

Answer 13

Clearly defines the rights, responsibilities, and obligations of each shareholder, provides a framework for managing the company and mitigating potential disputes by outlining how key decisions will be made. Sets “ground rules”. Protects minority shareholders by guaranteeing long-term employment for minority shareholders

Question 14

Name 3 types of shareholder agreements

Answer 14

1. Shareholders and corporation
2. Shareholder and other shareholders
3. Agreement where shareholders decide who act as directors

Question 15

Value of corporation: What are shares/stocks/securities (used synonymously)?

Answer 15

Common or preferred
**All corps must have some voting shares

Question 16

What is a floating charge?

Answer 16

Debt security issued by a
corporation in which assets of the corporation, such as inventory, are pledged

Question 17

What is a mortgage bond?

Answer 17

Financial institutions can bundle mortgages into a pool and then issue bonds backed by that pool, allowing them to raise capital and freeing up their funds for new loans.

Question 18

What is a debenture?

Answer 18

A debt instrument issued by a company or government to raise capital, essentially a loan from investors.

Unlike bonds that are backed by collateral, debentures rely on the issuer’s promise to repay the principal and interest.

Question 19

What is fiduciary duty?

Answer 19

Directors must act in the best interest of the corporation and disclose any conflict

Question 20

What are the duties and responsibilities of directors?

Answer 20

ensuring the company’s legal compliance, setting strategic direction, and overseeing its operations, while also prioritizing the interests of shareholders

Question 21

What can directors NOT do?

Answer 21

act in ways that conflict with the best interests of the corporation, use their position for personal gain, or engage in activities that could harm the company. They also have a duty of care to exercise the diligence and skill that a reasonably prudent person would in similar circumstances

Question 22

What is the Business judgment rule?

Answer 22

It provides a director of a corporation immunity from liability when a plaintiff sues on grounds that the director violated the duty of care to the corporation (so long as the director’s actions fall within the parameters of the rule)

Question 23

4 options for resolving a dispute

Answer 23

Arbitration: A neutral arbitrator hears arguments and makes a binding decision
Mediation: neutral third party (mediator) helps parties reach an agreement
Litigation: Formal legal process in court, where a judge or jury makes the decision.
Negotiate: attempt to reach a mutually agreeable resolution

Question 25

What does a contract of employment entail?

Answer 25

*must have essential elements of a contract Payment of wages/remuneration in return for service of the employee

Question 26

What is the four fold test to determine if someone is an employee or a contractor??

Answer 26

1. Who owns the tools?? (low) 2. Who has control?? (high) 3. Chance is profit?? (low) 4. Risk of loss?? (low) If these are not met, the person may be an independent contractor

Question 27

What is a restrictive covenant in a contract?

Answer 27

Limitations on what an employee can do during and after employment (used when there is access to trade secrets/confidential information)

Question 28

What is the OH&S Act?

Answer 28

create a safe and healthy work environment by identifying, assessing, and controlling workplace hazards

Question 29

What are the two classes of employment law?

Answer 29

- Employee safety and working conditions - Terms of employment contract (employment standards)

Question 30

What is Employment Standards Legislation?

Answer 30

outlines the minimum legal requirements that employers must follow regarding employee rights and obligations. It covers areas like minimum wage, overtime, holidays, vacation time, leaves, and termination of employment.

Question 31

What is Human Rights Legislation?

Answer 31

A set of laws and policies designed to protect individuals from discrimination and ensure equal treatment, especially in areas like employment, housing, and services. It aims to prevent discrimination.

Question 32

What are duties of the employer?

Answer 32

Primarily focused on ensuring a safe and fair workplace, protecting employee health and safety, and fulfilling contractual obligations.

Question 33

What are duties of the employee?

Answer 33

Completing tasks outlined in their job description, achieving performance standards, and working efficiently. They also have a responsibility to maintain a positive work ethic, follow employer instructions, and ensure their actions don't endanger themselves or others.

Question 34

Terminations with cause vs. without cause

Answer 34

"With cause" termination means the employer has a legitimate reason, like serious misconduct or poor performance, to end the employment without notice or severance. "Without cause" termination, on the other hand, requires the employer to provide notice or severance pay, or a combination of both

Question 35

What is constructive dismissal?

Answer 35

Employer termination of a contract of employment by a substantial, unilateral change in the terms of the conditions of employment

Question 36

What are the 3 establishments in employee misrepresentation (wrongful hiring)?

Answer 36

○ Employer clearly misrepresented position ○ Statements made fundamental to accepting position ○ Suffered some loss as result of misrepresentation Companies should not exaggerate the job or position at time of hiring**

Question 37

What does the Workers’ Compensation Act state?

Answer 37

➢Provided compensation to workers injured on job ➢Insurance scheme – all employees covered by Act entitled to compensation without need to take legal action to prove fault if injured in course of employment i.e. no-fault system ➢Employees covered by Act entitled to compensation but have no right to sue employer •Employer’s required to contribute to fund from which compensation is paid

Question 38

Disparate impact and disparate treatment?

Answer 38

Disparate treatment is intentional discrimination, where someone is treated differently based on protected characteristics like race or gender Disparate impact is unintentional discrimination, where a seemingly neutral policy or practice disproportionately harms a protected group

Question 39

On what grounds is termination with cause justified?

Answer 39

when an employee's conduct is so serious it irreparably damages the employment relationship, making it impossible for the employer to continue employing the individual. This usually involves serious misconduct, such as dishonesty, theft, fraud, or violence, or gross negligence.

Question 40

What is the corporate veil?

Answer 40

a legal principle that shields shareholders from personal liability for a company's debts and obligations.

Question 41

What are other factors of the four fold test?

Answer 41

Initiative to do work. -How work is done. -Do they employ others? -Organization Test: test for employment based upon an examination of the services in relation to the business itself. Examine services of employee and ask if they are integral to business or something adjunct or accessory.

Question 42

What are the 5 methods of incorporating?

Answer 42

1. General Acts: This is the current and primary method for incorporating companies in Canada. It encompasses: 1a. (most common **Articles of Incorporation: A document outlining the company's name, purpose, and structure) 1b. Letters Patent: A document granted by the government authorizing the creation of a company. 1c. Memorandum of Association: A document outlining the company's objects, powers, and limitations. 2. Special Acts: Previously used for entities like railroads and telecommunications, now primarily used for crown corporations. 3. Royal Charters: The oldest form of incorporation, used to incorporate monopolies like the Hudson's Bay Company.

Question 43

Directors of a corporation have a fiduciary duty. What is that?

Answer 43

relationship of utmost good faith in which a person, in dealing with property, must act in the best interests of the person for whom he or she acts, rather than in his or her own personal interest.

Question 44

What is "pierce the corporate veil" or "lift the corporate veil"?

Answer 44

a legal concept where a court disregards the separate legal personality of a corporation and holds its shareholders, directors, or officers personally liable for the corporation's debts or obligations. This typically happens when the corporate entity is used for illegal, fraudulent, or improper purposes