LAW 601 Lecture Notes - Lecture 2: Transfer Tax, Canadian Business, Financial Statement
19 Feb 2017
School
Department
Course
Professor
LAW 603
Legal Rules for Corporate Governance → Chapter 22
Typically, corporate structure for medium and large corporations are determined by the Canadian
Business Corporation Act (CBCA); nearly 235,000 companies are incorporated under the CBCA.
Management & Control of the Corporation
Shareholders
Directors
Officers
(i) elect directors
(ii) select an auditor
(iii) vote on proposals
Responsible for managing or
supervising managers (i.e.
officers)
Appointed by the directors,
officers exercise management
power
How Shareholders Exercise Power
Every 15 months directors are responsible for holding an annual meeting for shareholders to (i)
elect directors, (ii) appoint an auditor, and (iii) review financial statements. Annual meetings give
shareholders the opportunity to criticize/question management and make resolutions. Smaller
corporations may not necessarily need to have an annual meeting and a signed resolution is sufficient in
its place.
Public Corporations are corporations that have issued their shares to the public. Shareholders
that a’t ake it to a eetig a appoit a proxy to represent them during a meeting and vote
on their behalf.
Management Proxy Circular is a document sent to shareholders, containing management
proposals and other info (makes proxy/shareholder more engaged)
Dissident Shareholders are those who disagree with management proposals and try to convince
others to go against management. D.S. like all S.H. have access to the share register of all owners
of shares → good info for recruiting people to your cause
Dissidets’ Ciula document sent to other shareholders asking for their cooperation in going
against management
Shareholders have access to certain information including:
Topics
• Management + control of the corporation
• How shareholders exercise power
• Share Transfers
• Shareholder remedies
• How directors + officers exercise power
• Maageet’s duty to the corporatio
find more resources at oneclass.com
find more resources at oneclass.com
LAW 603
Legal Rules for Corporate Governance → Chapter 22
o Articles
o By-laws
o Minutes of meetings of shareholders and shareholder resolutions
o A share register showing all the owners of shares
Shareholders do not access to the meeting minutes of directors and neither do creditors.
SHAREHOLDERS’ AGREEMENT
1. Voting & Management
o Unanimous shareholders agreement: an agreement typically made at the beginning of a
business relationship in which shareholders agree to make all major decisions be
unanimous (despite % of ownership each S.H. might have)
2. Transfer of Shares
o In small business this is difficult to do because there is no mkt for this so you can not
assign a precious dollar value to shares. Also with smaller companies business
relationships are based on personal ones, S.H. might not what to want to do business
ith soeoe the do’t ko.
o Right of first refusal the right for shareholders to offer their shares to other shareholders
at the same price they would sell I to the public. (limited times)
o Shotgun buy-sell share transfer mechanism that usually causes on shareholder to buy the
other out. Typically this is only done during large disputes
**NOTE** when you make a shareholder agreement, some aspects of the contract could only be relevant
to a few of the shareholders
→ considered a breech of contract if you do not follow through??
Shareholder remedies
1. Derivative action is an action by a shareholder on behalf of a corporation to seek relief for a
wrong done to the corporation. The law suit is usually against a director or an officer and if the
suit is successful, the proceeds of the suit go to the corporation and not the shareholder. Usually
the directors or officers are being sued for a breach in their fiduciary duty or any other wrong.
Example → XZY and ABC form a business agreement and XYZ breeches the contract but because some of
the directors in the in ABC are also involved in the management of XZY they decide not to go through with
a law suit. Therefore, in the interests of the corporation the shareholders seek derivative action. If the
case is won, all proceeds go to corporation.
2. Oppression allows a shareholder to claim relief when an act by the corporation oppresses its
shareholders. Relief is available when reasonable expectations of shareholders of management
behavior are not met (pretty general tbh).
Examples of Oppression:
o Benefits of transactions favor majority shareholder to the detriment of minority
o Inadequate disclosure to minority shareholders
find more resources at oneclass.com
find more resources at oneclass.com
Document Summary
Topics: management + control of the corporation, how shareholders exercise power, share transfers, shareholder remedies, how directors + officers exercise power, ma(cid:374)age(cid:373)e(cid:374)t"s duty to the corporatio(cid:374) Typically, corporate structure for medium and large corporations are determined by the canadian. Business corporation act (cbca); nearly 235,000 companies are incorporated under the cbca. Officers (i) elect directors (ii) select an auditor (iii) vote on proposals. Responsible for managing or supervising managers (i. e. officers) Appointed by the directors, officers exercise management power. Every 15 months directors are responsible for holding an annual meeting for shareholders to (i) How shareholders exercise power elect directors, (ii) appoint an auditor, and (iii) review financial statements. Annual meetings give shareholders the opportunity to criticize/question management and make resolutions. Smaller corporations may not necessarily need to have an annual meeting and a signed resolution is sufficient in its place. Public corporations are corporations that have issued their shares to the public.
