MANA MIDTERM 2

Simplest form of business
you are liable for debts
business income= your income
cannot sell business, only assets

if you have a "proper name"- not your personal name

2 or more people carrying out a business
soldiary liability
No division between partnership assets and personal assets

identify partners
name of business
type of business
term(duration)
contributions
remuneration
jobs/duties
clause about if buy/sell/transfer/dissolve

every partner is 100% liable to the payment of business debt

have little liability- basically investors

generas partners are soldiary liable for debts while special partners are only liable up to a certain extent

based on geography- where is the business located and will it do business in more than 1 province

Will end with: Inc., Ltd./Ltee., Corp., S.A.R.F
can be in either (federal) and french in Quebec

Where the name of the company is ex: 123456 Canada inc
From legal no different from companies with a ‘real’ name
Reason for it: is there a trademark? Are you attracting a clientele? If not it's easier and cheaper not to have a proper name

gov approves names
around 500$ process

Any one over 18 who is mentally sound and not bankrupt

Form to fill out to incorporate

certificate you get back from gov saying you're incorporated
date of incorporation

Any natural person who own
Any general or limited partnership in quebec
Any located outside quebec but operate business in quebec
Other legal person (include federal) must register

If it's online (if you operate outside quebec), but to have actual business you need to register

must work in FRENCH
scandalous/ obscene
reserved for someone else
incorrectly refers to juridical form (can not use inc if your a sole proprietorship, incorporations need inc at end, etc)
falsely suggests you are non profit
Falsely imply you are affiliated with public authority
Falsely imply you are affiliated with another person
If its is confusingly similar to another business

the defacto owners of the company; buy shares/invest, do not manage the company , can be legal persons or human beings

business corporations

shareholders vote to elect the directors at annual shareholder meeting

legal person/ human being
can be a director and/or an officer of the company if the shareholder is a human being

mandataries (agents) of the company
Have full power to manage all affairs of the company: issue shares, issue dividends, raise or borrow money
must be human beings

responsible for the day-to-day running of the company. They are mandataries (agents) of the company
must be human beings

President (CEO), Vice-President (i.e. COO ), Treasurer (CFO), Secretary (Corporate Council- in house lawyer)

someone can be a shareholder, director and officer

generally 1 share= 1 vote

Right to vote- elect directors
Rights to receive dividends- surplus profits that are not needed
Receive remaining property- if company is sold off, once all of the debt have been paid,, whatever is left over is distributed to shareholder based on amount of shares

surplus profits that are not needed that are distributed among shareholders

Directors issues share- to whom they are sold and at what price
You have to pay for them up front

Shares are issued to generate working capital for the company.
If business fails then shareholder do not get money back

Choose to keep power, but have to repay the bank every month and not be able to grow fully or more shareholders you must deal with, but not have to pay back money.

vote
recieve Dividend and Residual property
"no-par" value- no price is set by the company

Usually no right to vote
So shares do not affect equity position
So almost like borrowing money but using an equity model and offering a dividend
guaranteed a certain dividend to be paid 1st

taxed twice

dividend is a fixed amount in preferred shares
Only issued when director decides to and only when there is surplus profit- but even then they don’t have to
paid first (before common- A shares)
"convertable"

Cumulative: shares are issued in year 1 and if you don't get a dividend in year 1 it will double year 2, and triple year 3 etc

because of fixed rate while they are paid first and it is a lot less

Since the Preferred (Class B) shares are participating; they will share in the dividend that is payable to the Common (Class A) shareholders.
when participating they receive 2 seperate dividends

shareholder has option to convert Preferred shares to Common shares

company can force shareholder to sell shares back to the company
When times are good , you want to get rid of preferred share holders

where the persons running the company (directors / officers) are defrauding the company / misappropriating company assets for their personal benefit

any interested person (a person with a legitimate legal right/stake in the business) can petition the court to authorize said interested person to represent the company in a lawsuit against those who are running the company and defrauding it

a director, an officer, a minority shareholder, a representative of a union/employee group

one cannot hide behind a corporation to commit fraud on the general public/customers/creditors
Lifting the corporate veil means that the court will look behind the “corporate entity” and can hold the “directing mind” of the company personally liable for frauds committed in the name of the company

before setting up a company, you can sign a contract, as a mandatary (agent or representative), on behalf of a company not yet incorporated. You, the mandatary, must stipulate when signing (on the contract) that you will not be personally liable and that the company has not yet been incorporated, may never be incorporated and may never ratify the contract. If you follow the provisions of CCQ 319 and 320, you will not be personally liable

persons dealing with a corporation, in good faith, can assume that the directors, officers and managers have the usual powers associated with their positions to represent the company in contractual undertakings

Distributing (public) / non distributing (private)

if a director disagrees with a decision of the Board of Directors, he/she must file a formal statement of disagreement (dissent)
Directors can be held liable if not
Can not just vote against, or refuse to vote you have to formally say you vote against and say you object in writing

directors

Even in a 1 person company the person is separate from company for liability

shareholders restrict the power of the directors
if they manage then they are held liable like directors are

If you have restricted power of the director then you are acting as a director and are deemed to be one so you will have the same liability they have
Statutory liability: directors are personally reliable

Each director is liable up to the full amount of the debt even when there is more than 1
So someone will sue whoever is in quebec and has the money
But whoever pays 100% can go after other to pay equal shares
Standard for all commercial transactions

If they vote/consent (did not file dissent) in the issue of shares for a consideration other than money (property, past services) you are solidary reliable for amount if they had sold the shares

Personally reliable for 6 months wages
Only liable for time you are director and can be sued for 2 years after

officers and directors must act in best interests of company

Must act as a reasonable director
Read contracts, etc

Obligation to comply with law and documents of company

You can not issue dividends that will make the company insolvent (not pay debts)

Wise department stores saw Walmart as a threat so they big a comparable chain People’s Dept Stores to strengthen supply chain and compete against Walmart
They were unable to make enough profits to remain solvent- petitioned into bankruptcy

there was no fraud or dishonesty so there is no personal liability, so liability is owed to company itself not directors or shareholders
So as long as they can prove they were reasonable then they are not at fault

did they act reasonably? If recommendation was reasonable and based on research, just because it didn't do well you are not at fault.