DCC 4119 Study Guide - Midterm Guide: Gap Inc., Legal Personality, Car Rental
19 Mar 2019
School
Department
Course
Professor
DCC4119 Mid-Term
October 15, 2018
Companies
Business Law
• Three vehicles that exist for running a business – individual, group, corporation
• The “Person”
• The word person in law means 2 – the individual and the body corporate
• Can mean company or individual but does mean both
The Physical Person
• Person has to be born to exist – birth certificate is evidence
• Exists if the person has a birth certificate
• Article 1 – juridical personality – legal word that means legally they exist and have full civil rights
• Article 4 – limit to capacity - certain cases the law provides for representation – child represented by guardian
• Children have rights but they cannot exercise them themselves – must be represented
• Section 153 and 153 – 18 full age, exercise full rights
The Group
• Structure around a business – sign a contract – partnership of going into business together
• Unofficial – shaking hands; official – partnership
• Partnerships are recognized as official group – it is NOT a body corporate or company
• One person can officially speak for the other at law – speak on behalf of the group – one signature binds the entire group –
don’t need signature of every group member
• No advantage to a partnership but sometimes you have no other choice – can’t afford lawyers
• Article 2186 – creation of a partnership – it is a contract
• Article 2189 – must be registered at the court house
• Article 2201 – two obligations – must share profits and must share expenses, otherwise it is not a partnership
• Article 2198-2202 – read these
• Article 2219 & 2220 – binds the partnership – if something goes wrong, everyone is responsible
• Partnership doesn’t mean two people – could be 200 people
• Junior partners have very small shares in the partnership
• LLP – limited liability partnerships – one for all, and all for one – EXCEPT if he does something wrong, I’m not paying
• Not responsible for the negligence as a professional
• Partnerships are official groups
• You can have unofficial groups – don’t exist at law
The Corporation
• Certificate of incorporation
• Has to have a name, limited at end of name
• Body corporate
• Judicial personality
• Article 298-328 – explain the corporation
• Shareholders are not liable for anything the company does - not responsible to pay the debts of the company
• Two exceptions
o Personal guarantees – shareholder personally guarantees - put your house on mortgage in order to get a loan for the
company – if the company goes down the house goes down with it – frequent in small businesses
o Corporate veil – case law – shareholder is personally on the hook if you are using the company as a vehicle to
defraud against your own word
• Section 316 & 317 – corporate veil clauses – company doesn’t buy into shareholders – they lose their investments but they
don’t pay the debts of the company
• Section 328 - indoor management rule – once a contract is signed it is binding despite the fact that indoor rules were not
respected
• Limited, Incorporation, Corporation, etc. or another ending on the name of the company in order to be a corporation legally
• Trade names must be registered in order to be legal
• One human is allowed to have several businesses
• Can use a trade name to go into the register to discover who the real owner is – ex. GAP owned by GAP Inc. or 1234567
Ontario Inc.
• Trade name can be anything as long as they are registered and you can find out what they really are behind that name
• Income tax is expensive for individuals - if you have more than 150 thousand dollars it is taxed at 52% - for a corporation, it
would be 18% (ish)
• Selling a business to yourself
• Anyone can create a company over the internet
• Put all of your money in any share of any company – common message in the 1920s
• Blue Sky Act – first securities legislation
o Companies must publish all of their financial statements every 90 days if you are traded on the stock exchange
o Full disclosure of name and addresses of all companies directors
o Prohibited insider trading – insider is anyone who knows what’s going on with the company
• Now have it in every province to prevent abuses of selling shares
Companies Continued
• You can have a contract with a person
• Not always the wisest decision
• The more reduced your platform, the higher your risk – single person is high risk
• Sole proprietor – run their own business – pay income tax at 53% on anything over 150 profit
• Companies pay between 18-23% - varies province by province
• Sell your company to yourself, you become a shareholder, still have all of the right but at law you are not the company
• Company is eternal, you are not
• Groups do not have legal personality
• Group formally recognized – partnership; or not
• All bound by the document they signed
• The partnership – s. 2186 – it is a contract
• Contract must be registered
• Law says you must share profits and losses in order to be in a partnership – s. 2201
• S. 2219 – each partner is a mandatary of the partnership – each partner is an agent – can speak, write, etc. on behalf of all
partners
• Three vehicles you can use in business:
o Physical person
o Group – whether it is a partnership or not
o Companies
• Can you have a partnership made up of a group of corporations? Yes
• Agree to run a business together
• Highly recommended to do so when starting a business because it costs nothing
• Legal person (body corporate) –
• Incorporation by statute – legislation/contract with corporation
• Letters patent
• Theoretical problem with this – what obliges the king to issue the letter?
• Replaced with the certificate of incorporation – issued by government upon completion of the formalities
• Obligation to issue it if the formalities were adhered to
• Canada Business Corporations Act – company/corporation law
• Not for Profit Corporations Act
• Securities Act – one in each province but identical across Canada – police of shares, shareholders, boards of administration,
etc.
o Trimestral disclosure of financial statements (F/S) – has to be public – done in quarterly report
o Names of large shareholders board members
o Insider trading
• 3 sentences to add in your document of creation, this will allow you to not be a public trader on the stock exchange
• Fit company in the definition of private issuer
• Legal publicity of enterprises – act that is in the centre of the civil code
• All companies must register under this
• Just because they are registered with the act does not mean they are incorporated under the CBC
• Filing a form on Corporations Canada
o Corporate name - NUANS will tell you all the names of the businesses in Canada – want to look at this before
naming your company – or can get assigned a numbered name
o The province – where you will have your main office
o The classes and maximum number of shares –
▪ Common shares – 3 rights – Class A
o Company may issue an unlimited amount of the following shares
o Right to vote at shareholder meetings
