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LAW 230 (CORPORATIONS)
Exam:
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pay attention to scope of question, stay within it.
Connect the fact pattern to your course knowledge
Make a list of issues that may arise on the exam, then compare those issues
against each question to check for their applicability.
CBCA provision re special majority votes???
Kaplan article???
AE Lepage v. Kamex 2001 SCC
Ratio: There was no partnership in this case, because partners always intended to
preserve certain rights that a partnership destroys
Partnership has three main elements:
1. business
2. carried on in common
3. with a view to profit
It also only needs to exist, there’s no minimum amount of time before partnerships are
recognized by courts.
Backman v. Canada
Facts: An agreement that looked like a partnership was arranged so that an American
company could sell a building to a Canadian company and buy it back at a reduced price.
The Canadian company’s only act in this deal was to lose that money.
Ratio: Not carried on with a view to profit, thus not a partnership in the eyes of the law.
Korz v. St. Pierre et al
Facts: Korz guilty of deceiving clients, they sue his firm.
Issue: Are his partners liable? (he definitely is)
Ratio: Partnership, firm’s clients, Korz not overstepping his boundaries, partners are all
liable.
Rochwerg v Truster OCA 2002
Facts: This dude is a partner in an accounting firm and the director of Teklogix Inc. He
got stock options from TI, but didn’t report them to his accounting partners. No formal
agreement, so partnership governed by the Ontario statute. This statute said they’ve gotta
tell partners about all things pertaining to the partnership. Rochwerg told Truster of his
directorship, but not of his stock options. There’s a statute in Ontario that requires
disclosure of all info relative to a partnership to one’s partners. If he runs a competing
firm, he must turn over profits to his partnership.
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Issue: is a partner in an accounting firm liable for disclosing facts about his other
company (a client of his accounting company) to his partners?
Analysis: Common law requires good faith and honesty in dealing with partners. Stock
options affected the partnership. Also, because he got the directorship as a result of his
work at the partnership.
Ratio: Payment for work done for a client by a partner falls under definition of
‘concerning the partnership. Thus, the partner has a duty to disclose this info.
Salomon v Salomon 1897 UK
Facts: Some guy divides his company into 40000 shares (a “limited company”), he gives
one share each to six family members and calls it a corporation. He goes bankrupt and
the corporation’s assets are not enough to cover the debt. Creditors then try to go after
the guy’s personal assets for payment on the corporate debt.
Issue: On bankruptcy, debtors challenge whether it was in fact a corporation, since it
was just like a different type of business in all but a technical way.
Ratio: A corporation is born the second the change of business format is completed, even
if it is almost exactly the same as before, it is now a corporation, which is treated like a
person in the eyes of the law and no shareholder’s liability exceeds that defined by the
statute under which a corporation is created. The statute that created corporations also
shields shareholders from personal liability.
Lee v Lee’s Air Farming 1960 NZ
Facts: A dude injured by working
Issue: Was he a “worker” as defined by the pertinent statute? This is asked because he
was the controlling shareholder of the company
Ratio: He did all the paperwork right, the statute has nothing to say against dual roles or
an overwhelming control in a company by one shareholder. He was 100% a worker b/c
he had a contract and a salary. He also did not have to report profits to the company as
per contract, so $ could go to his own personal account.
Constitution Insurance Co. of Canada et al v. Kosmopoulos et al SCC 1987
Facts: Mr K had officially incorporated the business, but all assets, bills etc were in his
name, not the business name. Insurance was in his name. Fire burned business assets,
then he tried to collect insurance
Issue: Can a sole shareholder have an insurable interest in the assets of the company?
Analysis: Sometimes, the technicality can be seen for what it is in court when it is
equitable to do so. It is possible to ‘lift the corporate veil’ when it is not possible to
imply a trust for the corporation. When a shareholder insures for more than their own
personal liability, their liability is covered and the surplus is held in trust for the
corporation.
Ratio: Precedent for letting insurance apply and no policy reasons against it.
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De Salaberry 1960s Canada
Facts: Rich families have a complex corporate structure. Mother corp, whose assets
include 100% interest in several sister corps.
Issue: This isn’t protecting personal assets, this is hiding a corporation’s assets and
ducking statutory provisions.
Ratio: You can’t do that.
Phillips v 707739 Alberta
F: P negotiated a sale of his 75% interest in a croissant company with Habib; agreement
stated payment would be made periodically; when the agreement was signed, H replaced
his name with the D incorporated company; when the payments stopped coming to P, he
seeks action holding H and the company jointly and severally liable
I: Should the corporate veil be pierced
H: Yes. Habib and 707739 acted interchangeably in all dealings. As a result, the veil
should be pierced and both held jointly and severally liable.
R: Habib was the alter ego of 707739 and used 707739 for a fraudulent purpose
The corporate veil will be lifted where:
 a corporation is formed for the express purpose of doing a wrongful act
 once incorporated, those in control expressly direct a wrongful act to be done
o intention to use the corporate form for an improper purpose
 there is fraud
 one entity acts as an agent of the other
 two seemingly separate entities are in fact one enterprise
 the corporation is a mere agent or “alter ego” on the controlling SH
The cases where the veil has been lifted are highly fact specific; they are cases which
usually involve transactions where the use of the corporate structure was a sham from the
outset or an afterthought after a deal went sour;
When a corporation is a mere puppet of another corporation the business is actually that
of the controlling corporation, and therefore the controlling corporation can be liable for
actions of the subsidiaries
In this case, 707 was incorporated to do a wrongful act
 used corporation to divert assets to his personal use
 failed to keep any records; does not appear to have been a real company; no bank
account, meeting minutes, books, tax returns, capital, annual report, share register
After incorporation, H directed wrongful acts to be done
 707 was not the original intended purchaser
o negotiations were between H and P; P knew nothing about the
corporation; it was not until the original agreement was signed that H
pasted a corporate label over his signature
 707 did not finance the purchase
o purchase funded by a personal loan from his brother-in-law’s company;
not a loan to 707
o another cheque for the purchase came from his 11-year-old son’s bank
account
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o no record that the corporation handled any of the money
Habib appears to have committed fraud
 H increased the debt of the company by borrowing from the bank and using the
line of credit (still guaranteed by P) to acquire assets, and the transferred the
assets to a company owned by his brother in law; told P borrowing would be
financed by a small business loan
 H had history of these types of wrongful acts; had criminal conviction for taking
money from his employer
Alter-Ego or Agency
 Alter Ego – the corporate veil may be lifted when the corporation is organized and
operated as a mere tool or conduit of another corporation or individual; where the
SH treats himself and the companies he controls as interchangeable
o no evidence of corporate resolution to transfer assets to brother in law
o treated corporation and himself as interchangeable
o company to which shares transferred left blank
 Agency – in some cases the principal of the corporation has been perceived as the
true vendor of the purchase property; if there is a misrepresentation and a
corporation is created for the personal benefit of the individual agent, the
individual may be personally liable
The courts clearly want to see respect for the corporate form:
 Formalities
o records, assets, cash flow must be kept separate
o complying with minimum standards for conduct of the corporation;
minute book, annual returns, resolutions for major changes
 Proper purpose
o no diversion of assets in aid of fraud, or after the fact judgment proofing
If a company is formed for the express purpose of doing a wrongful act, if when
formed those in control expressly direct a wrongful thing to be done, or where the
company is the mere agent of a controlling corporation or individual, it may be said
that the company is a sham, cloak, or alter ego or his mere agent for the conduct of
his personal business
1005633 v Winchester Arms OSCJ 2000
Facts: These people were franchisors, they were fucking clowns. They did all sorts of
ridiculous things.
Issue: Should the veil be pierced?
Ratio: Yes, all they did with their corporations was try to make them judgment proof for
the purposes of this case. For example, they declared bankruptcy for one corporation
(which would have owed plaintiffs at the end of this suit) and claimed the landlord of one
of their properties as the only creditor (which was unsubstantiated by any sort of proof).
All these actions were in bad faith and without proper documentation, thus veil should be
pierced.
B.G.Preeco v Bon Street 1989 BCCA
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Facts: This company, Bon Street Developments Ltd. makes a deal. The next day it
changes its name to Bon Street Holdings Ltd. then forms a new company and calls it Bon
Street Developments Ltd. They kept all the letterheads/phone numbers etc from the
original BSD for the new BSD. This was supposed to be a recourse purchase, ie a
purchase that was made by a company with assets to guarantee it or to cover breach of K
if it didn’t. This is because it was an attempt to capitalize on the window afforded by
Expo ‘86’s price boom.
Issue: Pierce the veil?
Ratio: No. There is one company whose assets are substantial that perpetrated a fraud.
Judgment should be against that company. Veil remains intact, judgment for fraud
against original contracting company. The amount of fraud is all that company should be
liable for since counsel argued that the veil should be lifted and, even if this was
successful, it would have done nothing to make the Original BSD liable for the nonfraudulent component of the claim.
Kelner v Baxter UK 1866
Issue: Some guy signed as agent for a company before the company was created.
Ratio: If you sign as an agent, but have no principal at the time of signing and if the
contract would be inoperative if not applied to you, you are bound by it.
Dicta: A corporation has no legal existence until everything has been done to create it.
Black v Smallwood 1966 High court of Australia
Facts: Two guys sign a contract in the mistaken belief that their company has come into
legal existence and they are its directors.
Issue: The company didn’t exist, are they personally liable?
Ratio: Not agents, their intention was that the company should be bound, not them.
Without any contrary intention, liability can’t be imputed to them.
- For a corporation to take over a Pre incorporation contract, it must 1. exist, 2 enter
another contract, 3 show evidence that both parties intended the new contract
Heinhuis v Blacksheep Charters BCCA 1987
Facts: Some company had a pre incorporation lease on a boat, paid for a while after
incorporation and treated the boat as their own. Then one day said they don’t have to pay
any longer but also tried to sell the boat.
Ratio: If you take part in a pre-incorporation contract after incorporation, you imply
acceptance of the terms of the contract.
Digitaldoc v. Future Shop BCSC 1998
Facts: Pre Incorporation contract between D and FS before D was Inc’d.
Ratio: Contract not binding since no conduct on the part of FS indicated acceptance of
the contract after DD’s incorporation.
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Pre Incorporation Contracts summary:
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If both parties know there is no incorporation at the time of the contract’s signing,
the promoter is bound, but the corporation has formed no contract
If only the promoter knows, or if nobody knows the corporation doesn’t exist,
there is no contract since the other party’s intentions are frustrated
Sherwood Design Services Inc et al v 872935 Ontario OCA 1998
Facts: S is a company to be sold to individual persons in trust for a ‘company to be
incorporated.’ They get in touch with their lawyers who give them a ‘shelf corporation’
(a company incorporated by a lawyer for the purpose of transferring to a client who needs
a corporation fast). The lawyer sent the sellers’ lawyer a letter saying “872935 will
purchase Sherwood.” The individuals then decided against the purchase, never took over
the corporation and the corporation was transferred to another client later that year.
Issue: Is the corporation on the hook?
Analysis: OBCA says that a corporation is free to show its intent to be bound by
preincorporation contracts. The letter seems to show such intent.
Ratio: Corporation is on the hook.
Szecket v Huang OCA 1998
Ratio: In order to limit a person’s liability for a contract they negotiate on behalf of a
company to be incorporated, a contract must include a clause explicitly stating such
limitation.
Wickberg v Shatsky BCSC 1969
Facts: A new company was proposed by directors of an old company. The NC would
take over the OC’s assets etc. Although the NC was never formed, business was
conducted under its name. A director of the OC signed an employment K with the
plaintiff under the letterhead of the NC. Then plaintiff was fired. P tried to sue the
director who signed his K under personal liability, and the OC and its directors for breach
of warranty.
Ratio: No personal liability because of Black v Smallwood. Neither party meant to
make Lawrence Shatsky personally liable when they signed the K. No breach of
warranty because it should have been obvious to any reasonable person that the NC name
was not a real company. Also, the firing wasn’t a result of the misrepresentation, but
rather a result of the company closing down.
Salter v. Cormie AB CA 1993
Facts: Directors of a corporation fire the CFO. He wants to sell them his shares b/c
securities regulations make that the easiest thing to do. The lawyer wrote a letter to the
fired guy saying that he represented a group of individuals and on their behalf proposed a
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purchase agreement that was then accepted. Then, it was never carried out by the
‘individuals’ That’s why the plaintiff sued.
Issue: Lawyer said the group of individuals was not yet formed at the time when the K
was formed.
Ratio: If you want to contract anonymously, your agent is still on the hook personally,
otherwise anonymous contracting would garner no trust. Nothing in the materials
suggests that the company would be the purchaser. If you represented people, they are
liable, if not, you are liable.
Dicta: Warrant of authority is a strict liability issue. It doesn’t depend on intention.
Freeman & Lockyer v Buckhurst Park Properties UK 1964
Ratio: If a person acts as an agent for a company with the knowledge of directors, then
no internal company technicalities (ie ‘we didn’t appoint him by proper means’) can be
used in court to invalidate that alleged agent’s dealings with an external entity.
Re Taylor Ventures Ltd. BCSC 1999
Facts: Company run by Taylor family. Ralph is secretary, his wife is pres. Ralph does
all the business dealing stuff. Almost every client deals primarily if not exclusively with
him. He sells some equipment to a creditor to settle debts shortly before the business
goes bankrupt. In payment he receives a cheque with the name left blank. He fills in his
brother’s name and his brother cashes it.
Issue: Trustee in bankruptcy questions Ralph’s authority as secretary to sell equipment.
Dicta: Four things you must show in order to enforce a contract that the alleged agent
who signed it had no authority to enter into:
1. That the apparent agent represented himself as having the authority to do this
2. That the representation was made by someone who has something to do with the
aspect of the business to which the K in question relates
3. Third party relied on those representations and thus was induced into the K
4. That under the memorandum or articles of association, the company was not
forbidden from making/authorizing someone to make Ks of the type in question
Thus, if the company permits the agent to deal in such Ks they represent to all people that
the agent is allowed to do so.
Ratio: Ostensible authority is basically the same as real authority. Ralph had it, so the
sale was valid.
Friedman Equity Developments Inc. v. Final Note Ltd. SCC 2000
Facts: Sealed K rule: can’t sue an undisclosed principal. Undisclosed principals can sue
or be sued under common law doctrines, but terms of the K can limit liability to parties
who sign, or the contract can be executed under seal. Seals just make it more legit. Ks
under seal are enforceable even without consideration.
Issue: Should the SCC banish a rule that causes no apparent injustice just because the
reason it was created in the first place has become obsolete over the years? Some say it is
unjust to bind parties to others with whom they did not directly contract.
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Analysis: The sealed K rule has an exception, where the trustee or agent refuses to
enforce the K against the other party, then the unnamed 3rd party can step in and sue
directly. Should it then follow that the reverse is also true? No. This can only happen
after a separate proceeding establishes that the 3rd party was the beneficiary of the K. So
there is a separation between 3rd party and agent that is very real.
Ratio: Abolishing this one rule would call tons of rules into question and thus
necessitate a revamping of the common law. That’s of course crazy, and it can hardly be
a justifiable reason to eliminate a given rule.
Dicta: Courts should only change rules when they are unjust. To hold otherwise would
create confusion.
Sherwood Design Services In v 872935 Ontario Ltd. OCA 1998
Facts: Lawyer gives shelf corp to client, represents this corp as a purchaser in a contract,
then the lawyer takes it back when the deal doesn’t close, then gives it to another client.
Issue: Person held out to be agent, are they an agent? Is their signature on a K valid?
Analysis: s. 19 of the OBCA says that a corporation can’t deny the rights of a person held
out as an agent to act as an agent.
Ratio: All you need is to show an intention to be bound. That happened here. K is good
because the corp actually existed when the K was made. Corp viewed as a partnership
asset that can be used by agents of the partnership.
The corporation as a criminal:
R v Canadian Dredge and Dock Co. SCC 1985
Issue: What is the nature of corporate criminal liability?
Analysis: In absolute liability offences, corporations and people are the exact same, they
do it, they’re guilty. In strict liability offences, they are in the same position as a natural
person, they only have due diligence as their defence. Offences requiring mens rea don’t
generally apply to corporations at common law because the common law spurned the
idea of vicarious liability for criminal offences. Also, the act by its very nature would be
considered ultra vires. There are only three approaches in which criminality can be
attributed to a corporation:
1. Total vicarious liability for any agent acting within the scope of their employment
2. No criminal liability unless the acts in question resulted from the requests of the
board of directors
3. A rule whereby the heart and mind of the corporation (meaning the person who
essentially runs the show) is responsible criminally.
Early public law made the following 4 exceptions: Public nuisance, criminal libel,
absolute liability offences, contempt of court. Identification theory is a theory whereby
the directing mind is identified and the guilt of that mind is imputed to the corporation.
Respondeat superior: Latin for ‘let the supervisor answer’ not a doctrine known to
criminal law.
Ratio: Corporations can be liable if directing mind possesses mens rea. This depends on:
1. He was within the field of operation assigned to him
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2. Was not totally in fraud of the corporation
3. The act was by design or result partly for the benefit of the company
Contrary to what the appellants wanted, express or implied directions in employment
materials is not a defence against corporate criminal liability.
Bill C-45
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This Bill amended the CC to
o Establish rules to assign criminal liability to corporations and other
organzations
o Establish a legal duty for all persons directing work to take reasonable
steps and ensure the safety of their workers
o Set out factors for courts to consider in sentencing
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CC s. 22.1 now says that negligence is established where a representative of a
corporation acting within the scope of their authority is party to an offence and the
senior officer in charge of that part of operations departed markedly from a
reasonable standard of care.
s. 22.2 Other offences requiring prosecution Corporation is guilty if one of its
senior officers, at least in part to benefit the corp, a) acting within the scope of
their authority is party to the offence or b) Having the mental state to be party to
the offence and working within their authority; directs people to do the act or
ommision that makes the offence. Or, if they know a member of the organization
is about to be party to the offence, fails to do all that is possible to stop it from
happening.
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Ultra Vires
Director & c. of Ashbury Railway Co. v. Hector Riche 1875 HL
Ratio: Memorandum of Association of a company is essentially its Charter and defines
what it can and can’t do. The statute is very clear that anything outside of the scope of
this is ultra vires and the directors have no right to make such contracts. This is true even
if every shareholder of the company was in the room at the same time and unanimously
voted for the ultra vires act.
Communities Economic Development Fund v Maxwell et al SCC 1991
Facts: CEDF is a govt created fund to help economic development in remote parts of
MB. Maxwell and Rob and June O’Donell were the majority shareholders. Stony
Mountain, where the company was located, was not a remote part as defined in the Act
that formed the CEDF corp. This contradicts s. 9 of the act
Issue: 1. Applicability of ultra vires doctrine to a corporation
2. Liability of a guarantor to repay a loan which is ultra vires the lender
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Analysis: ultra vires argument only applies here b/c it is a corporation created by statute.
A common law corporation is free to do what they want provided it is not barred by
statute. The law really only applies any more to statutorily created corporations where
the statute expressly limits the powers of the corporation, which is the case here.
Ratio: It was an ultra vires loan and thus does not need to be paid back.
Lei v Noble China OCJ 1996
Facts: Some dude has a fight with a company he owns 33% of. He used to be the
director. The new director resigns the night before the annual shareholders’ circular is
printed. The managers decide not to rewrite the thing because that would take lots of
effort, the old manager objects and applies for an injunction demanding that they publish
an updated version in time for the annual meeting.
Issue: Should they give an injunction?
Ratio: No injunction, the court can do so if its in the public interest, but they think its
more of a dispute between the two parties, they choose not to waste time on it.
Capitalization of the Corporation
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Berle and Means say that the trend was toward owners of shares surrendering
control to professional directors
Directors under no obligation to declare dividends.
Shares can be of different classes carrying different voting rights. If only one
class of shares, they all must have:
o The right to vote
o The right to any dividends that will be paid
o The right to a share of assets on dissolution of the corporation
In the case of more than one class, each of these rights must belong to at least one
of the classes.
Can’t give dividend payment priority to one series over a series that was created
earlier. When dividends can’t be paid, people get proportional payments of
whatever is available
Directors can offer more shares from authorized capital. They must be in return
for cash, property or services equal in value to the shares.
Creditors get priority over shareholders upon bankruptcy
Sparling v Caisse de depot et placement SCC 1988
Issue: Some company (Caisse) is trying to claim that they didn’t have to make an
insider’s report as specified in the CBCA. They say that since they would have been able
to purchase shares as a result of its founding charter, they didn’t need the CBCA. Since
they didn’t need its advantages, they shouldn’t be liable for its burdens.
Analysis: The real question should be whether the benefit was intended to be conditional
on the burden. A share is not a piece of property so much as a bundle of rights and
obligations.
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Ratio: Without seeking the benefits of an act, it is possible to not bring a crown entity
within its burdens (Because of Interpretation Act s. 16. Also, see Murray SCC).
However, buying shares is taking advantage of the CBCA. Thus, you have to accept its
burdens.
Re Bowater Canada Ltd. OCA 1987
Facts: A company issued common shares and special shares, stipulating that in the hands
of a particular owner, the special shares were worth 10 votes each, but if transferred to
other owners, only worth one vote each.
Issue: Purchaser of special shares from the overly-privileged owner submits that you
can’t do this.
Ratio: s. 24 of Alberta BCA expresses the relevant principle of business law [why this is
in Ontario courts is a mystery not expanded upon] saying that all shares of a class will be
equal in every way. Thus, you can’t remove rights of a share by transferring ownership.
Benefits/burdens are part of the share, not part of the shareholder.
Atco v Calgary Power Ltd. SCC 1982
Facts: Parent company and subsidiary (a public utility). Parent company tries to make
takover bid for another public utility. Some act says that an owner of a public utility
trying to join another utility must get board approval.
Issue: Is the parent company the ‘owner’ of the subsidiary? What is the difference
between controlling a company and controlling the assets of a company?
Ratio: Atco, the parent company, had control of the subsidiary’s assets.
Dickerson Committee 1971
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employees, unions and creditors have an interest in the directorship of a
corporation.
This interest should be met by general legislation
Directors’ Liability to 3rd Parties for Corporate Actions
Barnes v Addy 1874
Ratio Breach of trust can be shown where a stranger to the trust participates in a
dishonest and fraudulent breach of it.
Horsman Bros Holdings Ltd v Panton & Panton 1976 BCSC
Ratio: An innocent breach of trust may be sufficient to attach personal liability.
Air Canada v. M & L Travel Ltd. SCC 1993
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Facts: Partners in a business, things go bad. They close the business down during a spat
and at that time they owe Air Canada $25G and their bank $15G. Their bank, authorized
to withdraw directly from the business account, withdraws their money. AC sues the
company and the directors personally. OCA allowed judgment against the directors
personally.
Issue: Is this an issue of trust, or a debtor-creditor relationship?
Analysis: A trust must have three characteristics:
1. Certainty of intent to make a trust
2. Certainty of subject matter (what is to be held in trust)
3. Certainty of object/beneficiary
So it was a trust. Now to determine whether there is personal liability. Two ways to
determine liability of a constructive trustee:
1. Trustee de son tort: takes upon themself administration of trust property. They
become liable upon breaching the trust. This doesn’t apply to M&L.
2. Personal liability for a breach of trust if you knowingly participate in a breach of
trust. This is the only basis for personal liability in the M&L case.
Agents for trustees are not held to the same standard. For a corporation, this is harder to
diagnose. The test is whether a risk was taken that was not a right of the person who
took it, and that risk prejudiced the rights of another.
Ratio: The money was held in trust. By putting it in an account where it was subject to
the bank’s withdrawal, the directors subjected AC’s $ to risks. Thus, they are liable.
Trustee de son tort: A person who, without legal permission, administers the property of
the trust in a way detrimental to its owner.
Besta International Corp. v Watercraft Offshore Canada Ltd. BCSC 1994
Facts: Agreement btwn Besta and Watercraft that Besta, as agent, would receive
commission from sales on behalf of Watercraft, within 5 days of W’s receipt of payment
for those sales. W had 2 contracts, one for one craft, and one for two, both with the same
company, both procured by Besta. Performance and funding became issues for these
contracts and Watercraft paid other creditors before Besta. W didn’t receive the profits it
anticipated, and was unable to pay B. B launched this action.
Issue: Are Quinn and Seligman personally liable to Besta?
Analysis: A trust existed, as per the lower court this was an equitable trust based on
commissions for future contracts.
Ratio: The trust was equitable, thus in addition to not knowing, there was no wilfull
blindness regarding the existence of a trust. Thus, there was no personal liability for the
assignment of assets as there was in Air Canada above. Unlike in that case, they didn’t
take “a knowingly wrongful risk.”
Said v Butt UK Old
Facts: Dude denied access to an opera house. Went to buy ticket from agent, comes back
with it and still denied. Sued for breach of K
Ratio: Directors are not liable for inducing breach of K if K is with another party.
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ADGA Systems v Valcom Ltd et al OCA 1999
Facts: ADGA has a big contract with govt, up for renewal and retendered. Companies
need to submit a list of employees with bid to show they have adequate staff. V.
convinces members of A’s staff to come work for them if the bid is successful. It is
successful. If they induced breach, it wasn’t to a K they were a party to.
Issue: A suing V for inducing a breach of fiduciary duty.
Analysis: Representatives of a company are subject to liability for their own tortious
actions except in the Said v Butt exception: If you act bona fide in the best interest of
your employer, and in doing so breach a contract, you are not personally liable for that
breach (unless the breach was itself assault, trespass, nuisance etc.). Sullivan v
Desrosiers 1986 NBCA affirmed that a manager can be liable and acting for a company
doesn’t shield him/her from liability. This was confirmed by the SCC in London Drugs
v Kuehne & Nagel
Ratio: Corporate liability does not preclude personal liability. A director should be able
to breach K if its in the corporate interest, this is their role. Other torts are not waived.
Immocreek Corp v Pretiosa OCA 2000
Facts: Immocreek let Pr. invest on its behalf using an investment tool developed by Pr’s
director (Stoll). It made two investments, both of which tanked and Im sued Pr and Stoll
for the losses. Im did not really argue Stoll’s personal liability at trial, now seeks to do so
Issue: Did the trial judge err in finding Stoll personally liable?
Analysis: Case law has generally required someone who is to be held personally liable to
have claims made against him in the statement of claim.
Ratio: A claim against an individual cannot follow automatically from a claim against a
corporation. Claims against individuals are separate, and must be clearly made if they are
to be successful.
ScotiaMcleod v Peoples Jewellers OCA 1995
Facts: There was a misrepresentation in a prospectus about People’s. The misrep
induced the purchase of debentures, but that investment didn’t pan out and now the
investors are suing.
Issue: Two of the directors are personally sued, but they claim that all the directors
should be liable since directors’ negligence leads to corporations’ liability.
Ratio: Personal liability doesn’t follow from actions that make a corporation liable.
Personal liability depends on behaving outside of a director’s capacity. In other words,
directors’ agency for a corporation does not imply the converse. That must be separately
established. 2 directors liable for negligent fraud, other directors exonerated.
Director and Officer Liability in Corporate Insolvency Ron Davis, Janis Sarra.
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bona fide actions of directors within the scope of their authority causing a breach
of contract between the corp and a 3rd party don’t result in director’s own liability.
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Said v Butt rule doesn’t allow claims against a director when claims against the
corporation are the appropriate remedy.
Directors can direct non-compliance if its in best interest of a corp to simply pay
for the breach.
This does nothing to guarantee immunity from other torts.
employees may also owe duty of care in performing their job.
One line of reasoning in Ontario is that absent faud, deceit or want of authority,
directors will rarely be held liable for tortious conduct.
directing mind doctrine was developed to hold the corporation liable as a nonnatural, but legally recognized, person
Standard of care and duty:
ask: is it a close or public company? Inside or outside directors? Officers or directors?
What specialized knowledge? Involvement/relevance of day to day operations? See s.
122
Breach of Contract
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Acting bona fide for a company usually protects a director. Especially in breach
of contract cases.
Other factors like fraud, deceit, dishonesty, lack of authority can create liability.
ADGA established that personal liability is possible even when directors act
withing the scope of their duties so long as it is properly pleaded
Shareholders Statutory Rights
Corporation as a Symphony: Are Shareholders First Violin or Second Fiddle? J. Sarra.
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Do SHs have an adequate voice? There are barriers to holding officers/directors
accountable for their actions.
Dissatisfied SHs can exit the investment or act on their dissatisfaction, but few
have time to adequately monitor and rely on these abilities.
Large institutional SHs have a lot more control than smaller investors in the new
regime.
Fiduciary obligations developed b/c the contract of share purchases was not
complete.
Votes are on capital changes, but not day to day stuff, but if that bothers you,
withdrawing won’t necessarily convey that message.
Statutes don’t account for de facto control (50% of voting power)
Canadian corps usually closely held, thus minority SHs usually play second fiddle
to controlling shareholder(s)
USAs give power to SHs if they all unite to oust director.
Institutional SHs  2nd violin to controlling SHs’ 1st
Assumption for small investors is that they have diverse enough portfolios that
they don’t really need to monitor any given company. True for many, but not all.
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Another problem is that beneficial, but not registered, owners may face
limitations on ability to be heard by corp.
Lack of power means voice might be little guys’ only recourse, but large SHs
control reeclection of directors, who thus have little time for smaller SH concerns
SH proposals rare in Canada, thus not well-defined by the courts yet.
Many proposals dismissed as being purely political in nature, but this doesn’t do
justice to SHs who try to invest in environmentally sustainable or socially
conscious organizations. These types of complaints should be heard.p419
Peso Silver Mines Ltd. v Cropper SCC 1966
Facts: Offer made to Peso, BOD turned it down. Dickson then approaches Cropper, on
of the members of the board, about buying it. He does.
Issue: Did Cropper breach his duty of loyalty?
Ratio: “Dickson’s offer was considered by the full board of directors of the appellant in
March 1962, and was rejected. On the facts of the case at bar I find it impossible to say
that the respondent obtained the interests he holds in Cross Bow and Mayo by reason of
the fact that he was a director of the appellant and in the course of the execution of that
office . . . There are affirmative findings of fact that he and his co-directors acted in good
faith, solely in the interests of the appellant and with sound business reasons in rejecting
the offer . . . When, later, Dr. Aho approached the appellant it was not in his capacity as a
director of the appellant, but as an individual member of the public whom Dr. Aho was
seeking to interest as a co-adventurer.”
Canadian Aero v O’Malley SCC 1974
Facts: O’Malley and Zarzycki negotiated a contract on behalf of Canaero but took it for
themselves in the end.
Issue: Can they do this? They are senior officers, not directors. OCA thought this made
them not liable in the same way directors are. No duty, but what contracts stipulate.
Analysis: They were far from obedient servants, lots of responsibility, independent
decisions. This leads to the conclusion that they were in a fid duty relationship.
Ratio: the fiduciary relationship goes at least this far: a director or a senior officer like
O’Malley or Zarzycki is precluded from obtaining for himself, either secretly or without
the approval of the company (which would have to be properly manifested upon full
disclosure of the facts), any property or business advantage either belonging to the
company or for which it has been negotiating; and especially is this so where the director
or officer is a participant in the negotiations on behalf of the company.
People’s Department Store v Wise 2004
Facts: People’s to be sold to Wise from M&S in early 90s. June ’92 agreement July
16 ’92 closing. P and W did not merge smoothly, problems right away. M&S didn’t like
the situation, wanted their money paid immediately, initiated bankruptcy proceedings
against M&S. Decisions were made as P and W approached bankruptcy that M&S would
argue screwed their interests as creditors.
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Issue: Do directors owe a duty to creditors of the corporation
Holding: They owe a duty, but not a fiduciary duty. See s. 122(1) of CBCA
Ratio: s. 241 of CBCA already gives creditors enough of a claim against insolvent
corporations. No need for further remedies in form of court imposed duties. The identity
of the beneficiary of the duty of care as defined in s. 122 is open-ended. Thus it can
include creditors, and does so in this case given the Quebec civil code provisions. BJR:
Courts look to see that dir. made a reasonable decision, not a perfect decision. Not on the
court to cast its own judgment re what should have been done. BJR kicks in here, they
made prudent decisions to try to save the corporation, even though these decisions may
have screwed creditors in the end, they were made for the corp’s best interests.
Duha Printers (Western) Ltd. v Canada SCC 1998
Issue: Is the Unanimous Shareholder Agreement a constitutional or contractual
document?
Analysis: s. 111 of the Tax Act says that where an amalgamation takes place, and where
there is new ownership, the new corp can only claim capital losses on income tax if
throughout that year and thereafter, the business in question was run with a reasonable
expectation of profit. ‘Control’ when used in statutes, has commonly been held to mean
de jure control. Although CEO has right to control corp, majority shareholder controls
the CEO and thus the company. When there is ambiguity, courts analyze constating
documents in order to determine who has de jure control, but this is a rarity. External
documents in general should not be considered.
Ratio: USA is a constating document for the purposes of determining de jure control of a
corporation. Majority shareholder enjoys effective control over affairs and fortunes of a
company. Determining whether this control exists involves analyzing the corporation’s
founding documents, share register any limitations on power derived from the constating
documents. Other documents are not generally used in this determination.
Eckberg v MTW Solutions Online Inc OSC 2000
Facts: Over 5% of shareholders wanted to order a shareholder’s meeting to elect a new
board. If it is only based on their own self-interest, the motion should fail. But it is not,
in this case.
Issue: Board wants to sell an asset, lots of shareholders don’t want it, claim they didn’t
vote for it.
Ratio: The board was elected under misleading/fraudulent info, that’s enough to invoke
s. 106 of the OBCA to allow the court to call a meeting. Which they do. The applicants
want an order barring the board from using its power, court says the only real potential
for harm is the one asset and the board must be able to run the business still. As a result,
there are heavy restrictions placed on dealing with that asset pursuant to a shareholder’s
meeting.
Garvie v Axmith et al Ont High Court 1962
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Facts: A proposed merger outlined the worth of shares in the two companies. The
assessment was dubious.
Issue: Should the methods have been outlined in the explanatory letter addressed to
shareholders re the proposed merger?
Ratio: The right to make an informed decision belongs to every shareholder. With the
letter given, that was not possible for many of the shareholders. The decision made by
the shareholders is overturned.
New Quebec Raglan Mines Ltd. v Blok-Andersen OCJ 1993
Facts: OBCA says you’re entitled to a ‘fair price’ buyout of your shares after a
resolution passes that you vote against. This buyout should reflect the price at the close
of business day the day before the resolution passed.
Issue: What was the ‘fair value’ of shares held by dissenting voters in QRM who wanted
to sell after the resolution they voted against was passed?
Analysis: Try to determine market value, meaning the greatest value a person could get
from another freely-trading, arm’s length person (as opposed to the price listed in the
paper).
Oppression: A remedy available if a corporation does something that screws a SH,
director, officer or creditor. SCC calls it the most far-reaching claim type in the world
since remedies have basically no limit. Thus, remedies should be treated with extreme
caution.
Joncas v Spruce Falls Power and Paper Co. 2001 OCA
Facts: OBCA establishes that in a case where an officer acts to oppress a certain
interested group, the court can order that action be undone.
Ratio: In this case, the group claiming oppression was a group of employees denied
access to a new employee SH plan. Consequently they had no shares and as such were
not interested parties.
Clitheroe v Hydro One Inc. OSCJ 2002
Facts: Plaintiff fired by corporation, she didn’t believe it was for a valid reason.
Analysis: Claims are to be struck if it is plain and obvious that they disclose no
reasonable cause of action. Oppression remedy is not intended as a backdoor wrongful
dismissal motion. The defence under the OBCA can only be used to rectify oppression,
and only in the cases of interest holders, creditors, directors or officers (ie not employees)
Ratio: Oppression claims can’t result from being both a SH and an employee if the claim
itself was based on your role as an employee. Same with the other categories (director,
officer, creditor). If you hold one of these positions, and were you not to hold it you
would be forced to pursue a remedy other than oppression for your claim, then you
should pursue a remedy other than oppression. Security holders include debt holders if
the debt can be secured. Oppressive actions: Harsh, burdensome, wrongful, lacking
probity, lacking fair dealing.
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Lyall v 147250 Canada Ltd. BCCA 1993
Facts: Duke, Klenman and Lyall had companies that controlled Western Approaches Ltd.
Western Approaches owned a tv station, CKVU. DKL agreed to sell their shares in
Western Approaches to Canwest. Duke was director of 147250, a company formed to
gather the shares then sell them to Canwest. In that capacity, Duke told Lyall that the
Canwest agreements were no longer in effect. L opposed this, but D and K made it the
company’s position. D&K responded to a Canwest demand for specific performance by
declaring the contract was invalid, Lyall did not approve this motion, in fact he wanted
the sale to go through. A unanimous SH agreement was drafted saying that any action
out of the ordinary course of business must have unanimous SH approval.
Ratio: The company was only formed for the purpose of selling assets. Not selling
assets is therefore such a fundamental change that it should have had unanimous approval
under the USHA. By ignoring this, D&K were unfairly prejudicial to L’s rights.
Mahoney v Taylor BCSC 1996
Facts: Taylors found a company, their partner leaves, Mahoney comes in as a silent
partner. M asks to be bought out in 1994, Ts offer refused by M. After that, Sportscan,
the company in question, takes a dramatic downturn in financial situation. M alleges this
is fraud by Ts. Part of new problem is a massive debt to a company owned by a T family
member.
Analysis: 224 of the Company Act (BC) provides that where there is unfair prejudice to
a member [SH], the court may order the purchase of shares such that that member no
longer has to be involved financially with the prejudicial party. In Scottish Co-Op
Wholesale v. Meyer, the court defined oppressive conduct as “burdensome, harsh and
wrongful” or “lacks probity and fair dealing in the affairs of a company to the prejudice
of some of its members.” It seems that recent case law demands no mala fides if an act
was unauthorized in order to rule that act oppressive. However, if an act was legal, mala
fides must be shown. Malice does not have to be shown to establish that something is
unfairly prejudicial either.
Ratio: The facts don’t match the definition of oppressive or unfairly prejudicial. Orders
the sale of M’s shares for money to be held in trust pending a review of the worth of
shares.
Naneff v Con-Crete Holdings Ltd. et al OCA 1995
Facts: Mr N founds company, grows to multi-millionaire, shares equitable ownership
with his two sons, maintains control. Has falling out with elder son, Alex. Now how to
divide up business?
Analysis: A court must consider equitable situations, especially in cases of family
business. Court is only authorized to rectify oppression, not punish it.
Ratio: Alex couldn’t have reasonably expected to gain partial control of the business in
his lifetime. Expectation of eventually getting part control depended obviously on
continued favour with his father. The lower court could not, therefore, make an order to
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allow control to go to Alex. The right remedy is to order Mr N and Boris (son #2) to buy
Al’s shares at fair market price and pay back company debt to Al.
Pasnak v Chura BCSC 2003
Ratio: For Oppression claims, plaintiff must show a specific harm was done to them that
wasn’t the same as the harm done to the corporation.
UPM Kymmene Corp v UPM Kymmene Miramichi OSCJ 2002
Facts: Berg takes over Repap Inc. Directors can’t agree on compensation, want an indep
analysis. Then board members and compensation committee changes lots of different
ways. Next board meeting, new board approves generous recommendations of adviser.
Board and adviser don’t know the previous meeting was contentious. Two major
shareholders in Repap (TD and 3rd Avenue) start a proxy fight to replace board. TD
assigned shares and rights to UPM. UPMKM (defendant) is the successor of Repap. A
couple of people from Repap expressed concern when they discovered Berg was
demanding compensation and pension etc. They warned him this was dangerous because
Repap was short of cash, also it would cause union problems. Also, the number of shares
requested would dilute current shareholders further than they already had been. Board
did not want the new powers to be given to Berg or the terms he set to be approved. He
appointed Sifton to the compensation committee. Sifton was a son of Berg’s friend.
Witnesses say Berg actually threatened legal action if he didn’t get things his way.
Issue: Did Berg breach fid duty? Did compensation committee fail to be prudent? Does
agreement disregard interests of Repap SHs? Did Berg knowingly make false misreps?
Dos the business judgment rule shield the agreement from judicial scrutiny? Repap
wants rescission of the agreement based on misrepresentations. UPM wants to invalidate
the transaction based on s. 120 of CBCA which allows a court to do so in instances of
failure to disclose. Berg says UPM knew of agreement before buying, thus has no claim.
Analysis: There was no need for another executive at Repap (Berg was nominated as
chairman) why then was he made executive? The Compensation committee had no time
to review the deal, the independent analyst didn’t have access to enough info to make an
informed judgment. Chairman must fully inform other members of his own interest.
Berg falls well short of this. Furthermore, he made no effort to ensure they had
independent advice for the negotiation. Another issue was that Berg proposed a market
capitalization-based bonus. This was problematic, because market capitalization could
increase with paper price, and completely independently of Berg’s performance or
Repap’s ability to pay him in cash. This is especially telling since Repap was hurting for
cash.
Ratio: The directors did not make an informed decision by any stretch of the
imagination. Therefore, the business judgment rule does not apply. Some material he
knew other people to have, thus concealing it doesn’t amount to fraud because he
couldn’t control what they did with it. Not Berg’s fault that the board didn’t review
compensation committee’s level of diligence. In short, no solid proof that Berg tried to
deceive Repap.
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Re s. 120 of the CBCA, was the deal fair to the corporation? American
jurisprudence asks to examine fairness of dealing and fairness of price. Neither is present
in this case. Not enough material information, no arm’s length to negotiations etc.
Oppression also present here. Berg compensated more than generously for his
work, should not be entitled to the massively unfair severance components of his
contract.
Claim that contract was obtained in breach of fid duty is granted.
One can rely on professional advice if it is based on adequate information. The
time spent on a discussion must reflect the weight of the decision. BJR inapplicable
where the decision is uninformed.
Same case at OCA 2004
Ratio: The oppression remedy can’t be relegated solely to those persons not having
voting control, doing so fails to address the heart of the reason for the existence of that
defence: abuse of power in a corporate context. The trial judge also properly judged the
reasonableness of the board’s decision without substituting her own opinion.
Proxies
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Filling out the date on a proxy form is the only way they can tell whether its still
valid at the SH meeting
You can always appoint a proxy holder to vote on your behalf
Corporation sends stuff to intermediaries, who then get the permission of
beneficial holders in order to be able to vote.
Guest Lecture Guy
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Differences between federal and provincial incorporation:
o Federal registration protects your name for future expansion
o Prestige
o Financial disclosure rules
o Fees
Nationwide, 11.5% incorporate federally. Quebec much higher federal rate
because the province doesn’t allow for continuance into other jurisdictions.
EU introduced the BRITE system, which is a worldwide registry #
Federal corporations are required to register in each province where they have a
physical presence.
NUANS Newly Updated Automatic Name Search
Same day incorporation quite possible. Most people do it online
They now have pre-approved charters for corporations that you can just adopt as
your own.
You can also incorporate for a future date.
Proposals are allowed form SHs, see CBCA s 46, 137.
Proposals are submitted to a SH vote at corporation’s expense
Nomination of director takes 5% of shares
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These rights extend to beneficial owners
Management can reject a proposal if:
o It doesn’t relate much to the business
o Clearly intended to enforce personal grievances
o Being abused to score publicity
In these cases, you can still apply to courts to have your proposal enforced.
If the proposal gets majority support, the directors are not bound except in the
case of amending bylaws.
If director nominees are supported by the majority, they become the new director.
Proxy solicitation leads to possible liability for non-complete disclosure.
No circular is required if fewer than 15 SHs are solicited
Canadian Council for Good Governance: An association of large funds trying to
promote good governance
Directors bound to fulfill fiduciary duty even if it is likely to lead to non-reelection.
This fiduciary duty is what makes SH resolutions non-binding
A director’s decision making power can be vetoed by 1/3 of SHs.
Only fundamental changes trigger certain SH rights, other than that, they’re at the
mercy of directors. These changes include (See CBCA s. 173):
o Changes to the organization
o Changes to the capital structure ie creation of a new share class
s. 176 mandates a specific class’ right to a separate vote if the resolution affects
them differently form other classes
s. 182, 183 set out conditions of amalgamation. Must set out the terms of
amalgamation for SH approval
Also, if you want to continue in another jurisdiction or sell substantially all
corporate assets.
Basically anything that changes the basic deal the investor made needs more
scrutiny.
Dissenters in a situation of special majority passing a resolution have the right to
get out of the investment at a fair price without dissolving the corporation
CBCA s. 190: SH gives board notice of objection before meeting, corporation
sends notice of resolution after it passes to all who dissented, dissenter sends
payment demand, corporation makes an offer, dissenter accepts or sues.
Ford Motor Company of Canada v Ontario Municicpal Employees Retirement Board
OCA 2005
Facts: Ford Canada had a transfer pricing system that made payment to the American
company and ended up in losses to the subsidiary every year. OMERS had some shares,
but the US Ford had 94% of Canadian Ford. Price transfer scheme deals with how much
Ford Canada pays for cars, more than they sell them for. It was set up to take a loss.
Ratio: Price transfer scheme not fair, b/c Ford US got all profits, stuck other investors
with the losses every year.
Does Ford or UPM pass Pasnak test?
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Issues to watch:
- Standing
o Defined/discretionary SH class?
o Protected interest?
- Unfairness
o Sources of reasonable expectations
o Personal relationships of corp
o Bad faith/improper purpose
o Duties of directors and officers
o Promises, implicit or expressed
Dealing with Unfairness by Raymond Crete.
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Most commentators on oppression remedy have focused on how to evaluate
fairness.
Often the results of cases can unfairly favour one party or the other. This paper
tries to suggest a method for judges to evaluate such cases.
s. 241 of CBCA allows for equitable remedies acc. to judge’s evaluation
courts are supposed to evaluate what akind of deal the parties would have
negotiated under ideal conditions in situations where contracts don’t specify what
to do.
In reconstructing the agreement, the court should look at implicit terms and
actions; the ability of dynamics to change with the passage of time; the idea that
maybe the parties never had the same thing in mind at the beginning of the
agreement; the fact that parties might lie in order to advance their own claim
This type of analysis leads courts away from the traditional win-lose type of
finding and instead leads them to a fair/equitable finding
We must remember that oppression etc aren’t intended as punitive measures,
rather, they are restorative/equitable.
The adversarial nature of the court system tends to polarize a debate and lends
itself to the wrongdoer being punished once a finding against them is made.
The court also tends to want to restore the status quo, but this often doesn’t solve
the conflict.
ADR might be a much better medium for these cases.
DERIVATIVE ACTIONS
Derivative actions originated from the separate legal personality of corporations and the
fact that directors control the litigation. This action allows for situations in which the
director fails to litigate due to self-interest. Bringing an action requires leave of the court,
which is a regulation aimed at defeating ‘strike-suits’ a practice where lawyers get a SH
on their side, settle out of court on a bullshit claim. This screws other SHs. See CBCA
s. 239 for conditions for leave. Good faith, Notice to directors of desire for change, intent
to benefit corporation. Rational apathy a problem, not enough $ incentive to discipline
directors.
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Foss v Harbottle
Ratio: The only plaintiff re harm to the corporation is the corporation. Those who bring
the action represent the corporation.
Primex Investments Ltd v Northwest Sports Enterprises Ltd. BCSC 1995
Facts: Northwest: a company owning Canucks, starts building new arena, then starts
making a pitch for an NBA team. Griffiths, who runs NW, pitches NBA idea to McCaws
brothers, who agree to get in on it, only if they can control the arena owning company.
Griffiths gets his company to sign over NBA franchise progress to himself. A bunch of
transactions, upshot is ownership of arena goes from NW to G and Ms. A member of
NW asks directors to sue, they refuse, this member does it himself. G didn’t let other
SHs know that Ms interest was based on owning arena. Thus, they expected profits for
rent from the Grizzlies when they waived their pursuit of NBA franchise.
Analysis: A member or a director can start an action on behalf of a company on four
conditions:
1. He has made reasonable efforts to make the company’s directors start/defend an
action.
2. He acts in good faith
3. It is prima facie in the interests of the company to bring this action
4. If a member, he must have been a member at the time of the impugned act.
Issue: Does the action comply with 2 and 3? (1,4 not challenged)
Ratio: Ridiculous to assert that acting in self interest implies bad faith. The two are
often interwoven. Interests of the company don’t have to be shown conclusively, it only
must be arguable that the action was in the interests of the company. In Canadian Aero
Service Ltd v O’Malley, the court ruled that a director’s fiduciary duty compels him/her
not to take a business opportunity from the company they are in charge of. CBCA s 127,
142, 151 define why directors can’t do the kind of stuff Griffiths did. Although there are
potential defences, none of them are guaranteed, so it should be reviewed by the court. It
is fine for a trial judge to say directors shouldn’t sell an asset for less than fair market
value in exchange for a better takeover bid, since otherwise dissenting voters own part of
a company that no longer has the asset. A derivative action should be allowed to
commence since the claim is not ‘bound to fail.’ This action will pit NW against its
directors, most of whom voted against resolving the issue, and also stand to be personally
liable should the claim succeed.
Pasnak v Chura BCSC 2003
Facts: See above. Now they want to settle the price.
Issue: P alleges C breached duties such that he diminished the value of their co-owned
companies.
Analysis: s. 200 of the Company Act allows for a ‘member’ to apply to the court for an
order on the ground that either the company is doing something oppressive to one or
more members or that is unfairly prejudicial. s. 201 says a member can, with the leave of
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court, bring an action in the name of the company to either enforce a right that the
company could enforce or to obtain damages for the breach of a right. Some actions are
only actionable by the company, but must be brought by a member since the company
refuses to do so. Two lines of jurisprudence:
1. Oppression only available if plaintiff can show they suffered special damages
beyond what the company suffered. Otherwise, a derivative action is their
remedy option.
2. Oppression can be a remedy even when the loss is incidental to the company’s
loss
Ratio: The two lines aren’t fully exclusive. It is possible that an action may be both a
breach of fiduciary duty which the company can sue for and the basis of an oppression
claim. In this case, P must show that he suffered some loss other than what his company
suffered in order to bring the oppression claim. Otherwise, it is a company claim for P’s
holding company to bring. Up to court’s discretion who can bring derivative actions.
Discovery Enterprises Inc. v Ebco Industriess Ltd. BCCA 1998
Facts: Discovery brings a derivative action against Ebco b/c Eppich brothers, directors
of Ebco, paid for arbitration of a dispute they had from Ebco funds. Discovery contends
they needed SH approval for this action.
Issue: What is the role of the company in derivative actions? Is it adversarial to
claimants? What are the rules concerning disclosure to a party representing a company?
Analysis: If documents are sensitive, yet must be disclosed in the derivative action, they
are not to be used in another proceeding such as an oppression case. Disclosure has to be
based on real applicability of the private documents to the case at hand.
Ratio: The disclosure of documents must be necessary to the proceedings. A SH does
not have automatic rights to such documents, having no property interest in the property
of the corporation. It may become necessary to order new counsel for Discovery in the
oppression trial, or even order that a new party replace Discovery in capacity as plaintiff.
In the present matter, neither of these measures are necessary as nothing too material has
been exposed.
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leave to bring a derivative action does not equal a right to corporate $ to pay for it.
Court can order a corporation to either pay after the case is settled, or on an
interim basis, subject to repayment if the director wins the suit.
Directors’ personal liability provides incentives toward duty of care etc, but not
taking risks. This isn’t a good thing. Solution:
INDEMNIFICATION OF DIRECTORS
CBCA s. 124 allows for indemnification clauses but only under the condition that no bad
faith has been exercised, and there was a reasonable belief in the legality of the acitons.
124 (5) specifies entitlement to indemnity if the court finds no fault. (note allowed in one
case, entitled in the other). For permissive rights, corporation votes. For entitlement,
demand it, sue if refused. Insurance is also a good idea, since indemnity is only worth the
corporation’s assets, and these suits often occur when a corp is nearly bankrupt.
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Blair v Consolidated Enfield Corp. SCC 1995
Facts: Two factions on Enfield board: Blair faction, Canadian Express faction. Blair
was winning 6-5 on the nominees for the 11 member board, then CE forwarded a 12th
candidate and necessitated a formal election. CE formed alliance with Ravelston Corp to
make a majority of shares voting at the election. Blair voted off board, now 6-5 favours
CE faction. Blair’s legal counsel, when consulted, thought long and hard about it and
finally concluded that the votes were misused, because the proxy authorization was only
to vote for the 11 slated in the proxy circular. Blair declares himself elected, CE starts an
action. Court ruled in CE favour, Blair’s appeal unsuccessful. CE then took Blair to
court to recover costs of legal battle. Blair claims indemnity against charges as per
OBCA s 136(1) (which has equivalent provisions in all provincial and the federal BCA).
Lower court: for Enfield. Appeal court: for Blair. Enfield is appealing. s. 134 of OBCA
says a director isn’t liable if he relies in good faith upon (among other things) the advice
of a credible lawyer. s. 136 says corporations may indemnify directors of costs incurred
while performing directorly duties in good faith. The corporationon’s charter says it shall
indemnify if the director has acted in good faith.
Analysis: Good faith is presumed unless bad faith is proven. Three conditions to
indemnification in corporation’s charter: 1. Party to litigation as a result of being director
2. Costs reasonably incurred 3. Honest, good faith, best interests of corporation. Court
below said the costs were reasonably incurred, with consent of board and conduct
implying compliance with rules etc.
Enfield says it was a dispute between two SHs, as a result, the costs should be
born by the loser in the vote, not the corporation. Court disagrees, saying the integrity of
Enfield voting process was in question, thus Blair was entitled to Enfield’s counsel. Thus
the only source of this appeal is the ‘good faith’ question. Because the SHs decided the
director should be the chairman, they have no right to argue conflict of interest. Of
course a director will have a stake in the outcome of a vote pertaining to him, but the SH
bed is made by them, they must lie in it. If they wanted an impartial 3rd party, they could
have specified that, but they didn’t. His interest in the outcome of proceedings does not
automatically disqualify him from presiding over them. Getting legal advice and
following it seems like exactly what a chairman should do. Allowing debate on a
complex legal issue in a SH meeting does not seem so. Counsel took their time
considering it, Blair was no legal expert, he was right in relying on their advice. The
appellant cited some case law for the proposition that relying on legal advice doesn’t
automatically indemnify directors. That wasn’t relevant here, b/c there were more factors
at play in proving Blair’s good faith. Also, those cases required mala fides to rule out the
advice as a defence.
Ratio: Blair fulfilled all three conditions listed above. Though his decision did not
withstand judicial scrutiny, it was not mala fides. He is entitled to all costs except in
appealing the other issue, that was not justified.
Catalyst Fund General Partner I Inc. v Hollinger Inc. OSCJ 2006
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Facts: CBCA s 124(4) says a corporation may, with the approval of a court, indemnify
directors (among others) if: Costs incurred in fulfillment of their duties to the corp.
Directors argue that they should be advanced money for their defence, then need to pay it
back if found to be mala fides. They set up indemnity trust. Conflict of interest that
under s. 120 of CBCA can be overturned.
Ratio: In serious charges of dishonesty and bad faith, directors probably shouldn’t be
entitled to advances for their defence. Only when the charges are serious.
There is another Hollinger case on WebCT. Read it!
Catalyst Fund General Partner I Inc. v Hollinger Inc. OSCJ 2006 (same case,
different issue)
Facts: White  only elected member of Hollinger board. His continuance as director,
when all other directors were removed, was left up to the court appointed new board of
directors. Counsel says there is no basis for removing White, since no findings against
him were made, with the exception of an oppression conviction against the old board, his
part in which was ruled ‘accidental.’
Analysis: White did have findings against him. His involvement in oppression claims
was characterized in a previous trial as ‘accidental’ but that still means he did bad stuff.
The new directors were in the best position to determine how helpful White would be.
He was useful for an interim adjustment period, then he ceased to be useful. He says the
only claim against him was the oppression claim, so removal later doesn’t make sense.
Judge says if that is a valid reason, it only means he should have been removed at that
time.
Ratio: Indemnity does not extend to defending against removal from the company if
they have deemed you no longer fit to sit on their board.
Manitoba (Securities Commision) v Crocus Investment Fund MBQB 2006
Facts: Receiver is applying for an order allowing it to: Pay unpaid legal bills predating
receivership, refrain from paying legal bills after receivership, refrain from paying
indemnity claims for former officers etc. until completion of these proceedings. This
follows on the heels of allegations against the Crocus board and a mass resignation of the
board’s members. Prior to the resignation, the directors had set up payment to legal
counsel in the matter. The receiver asked these counsel to prepare a report of costs to
date, these were significant. SHs told receiver they intended a class action lawsuit to stop
further payments. MB statute, basically same as in above two cases re director
indemnity. They had insurance, but MB statute prohibits insurance by corporation of
directors acting in bad faith. Other sections of the act hold directors personally liable to
the SHs for any difference between money received and fair market price in the sale of
stock by the company. Corporate charter guarantees indemnity with the usual caveats.
Analysis: Receiver has stated that advances are not guaranteed, money is only owed
after court matters are settled and good faith etc is established. They propose
compromising and allowing payments up to the date of receivership, but subject to
repayment should directors be shown to not be entitled to them. Directors’ counsel note
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that there are charges from Attorney General, MSC and SHs, but only one of these
groups raise a question of directors acting in their own interest, and that allegation does
not say this action was intentional on the part of the directors. Consequently, they argue
there is not mala fides.
Ratio: Court has discretion in determining whether defendants are entitled to ongoing
payments or only entitled upon eventual redemption in the outcome of the proceedings.
In this case, the officers might not otherwise be able to afford their defence, Crocus can
afford it, and no evidence shows bad faith on the part of the directors. With no evidence
to suggest bad faith, the directors are entitled to payment from the company, which will
cease if bad faith is later revealed. The position of an insurer is not relevant to
entitlement to indemnification.
Ronald Daniels article Must Boards go Overboard?
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Article asks why not just have corporate liability? Why bring directors into it?
First, its hard to get the right penalties in place to compensate for low
apprehension/conviction rates.
Second difficulty is the risky moves shareholders in troubled corporations will
take.
Third, rational apathy suggests that SHs will not do the amount of monitoring
they should.
Since institutional liability is not enough on its own to ensure optimal social
outcomes, director liability must occur.
M&As
For exam, can you:
1. Describe the legal requirements for the three types of M&As?
2. Identify the valuation problem in each and fiduciary duty issues?
3. Illustrate the directors’ control over each type?
Asset Sales: Can’t transfer liabilities w/o consent of creditor
Amalgamation: Merged as per corporate law
Share purchase
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Amalgamation and Share purchase liabilities are unchanged
In amalgamations, it must be okayed by directors of both companies, then voted
on by SHs.
Asset sale only requires SH vote of vendor, resolution by bothe directors.
Share purchase requires no votes or director’s resolutions
For public corporations, you communicate the purchase offer publicly, private
corporations, you’ve gotta figure out how to contact owners.
Defences to takeovers justified if in the interests of SHs.
Teck Corporation v Millar et al BCSC 1972
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Facts: Millar et al directors of Afton. Afton owns an undeveloped mine. Teck tries to
buy the mine, Afton issues new shares in itself to Canex, this dilutes Teck’s portion and
disallows takeover. Teck claims Afton directors acted improperly. Before takeover of
Afton was attempted, Afton showed preference to Canex over Teck b/c of greater track
record/reputation.
Analysis: Directors are not agents of SHs, SHs have no right to demand that a director
do something in their interest. Controlling interest is not a right, it’s a circumstance.
Some say acting in interests of company = acting in SH interests. Not so, directors can
also consider employees, the surrounding community etc.
Ratio: Thinking Canex was a better call was the directors’ decision and they were
entitled to it. This is true even though they knew it defied the majority SH’s wishes since
it was intended to serve the best interests of the corporation.
Unocal Corp v Mesa Petroleum Co. Delaware SC 198?
Facts: Unocal made a move to block Mesa from buying it. Mesa offered to buy enough
stock to make it a majority SH and any stock after that would be exchanged for junk
bonds. This means, for those who are risk averse, you want to sell right away after this
offer was made. Unocal made a selective stock purchase offer to counter this threat,
offering to buy outstanding shares, but not from Mesa. Also, deal where if Mesa gets
64m shares, remaining shares get $72 owed to them from U. A company can own shares
of itself in Delaware.
Issue: Can this selective bid be valid?
Analysis: The board met for almost ten hours listening to presentations by financial
experts who told them the Mesa offer was inadequate and suggested Unocal incur debt in
order to purchase more of its own shares in order to thwart the Mesa bid. Two-tiered
offer, making selling early seem attractive for fear of what will happen if SH doesn’t is
referred to as greenmail.
Ratio: Board had right to make the call. Good business judgment to exclude Mesa from
their offer, since they protected the interests of the corporation. The decision to exclude
Mesa was made in the good faith belief that their tender bid was inadequate. There is an
enhanced scrutiny in these cases because of potential conflicts of interest. The board
must show good faith and reasonable investigation.
Revlon Inc v MacAndrews and Forbes Holdings Inc Delaware SC 1985
Facts: Revlon tried to have Forstmann as its new owner instead of MacAndrews and
Pantry Pride. They employed a couple of defensive techniques. This case analyses the
validity of those techniques. One technique was a note purchase program, this allowed
SHs to exchange their shares for a 65% note from Revlon which would pay 12% per
year. This would be available on anyone acquiring 20% or more of the stock unless the
purchaser acquired all company stock for $65/share or more. Later they issued notes
worth $47.50 at 11.75% interest per annum. Forstmann was privy to privileged financial
data, PP was not, this was not fair. PP said they would beat any offer F put forward.
Issue: To what extent can directors consider the impact on things other than SHs of
takeover bids?
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Analysis: The poison pill defence must be analysed in terms of reasonableness to SHs.
“bust up takeover” takeover where the bidder hopes to sell off the target in pieces.
Since PP’s last bid exceeded the offer accepted from F, price is not a valid excuse for
rejecting PP. As soon as the directors started looking for another buyer, the indication
was clear that Revlon was for sale. Consequently, they could no longer use the desire not
to sell as an excuse. Their duties changed from preserving the company, to maximizing
the sale price. Lock-up options grant certain rights to the white-knight bidder. These
aren’t strictly illegal. They can be illegal if they preclude competitive bidding. In the
present case, there was nothing making the F bid superior such that PP should have been
excluded. F was favoured from the start and the lock-up in this case made bidding
irrelevant, thus it was a breach of duty. Excluding one bidder from info/opportunity is
okay when their bid is potentially harmful. If their bid is the same as another company,
they should get the same chances as that company.
Ratio: Deal with F was not valid.
RE CW Shareholdings Inc and WIC Western International Communications Ltd et al
Ontario Court General Division 1998
Facts: Canwest and Shaw are trying to buy WIC. Shaw recently acquired a 49.96%
voting interest in WIC, Global is also a big SH. Canwest makes a $39 bid that gets
turned down. Shaw negotiates, gets a $43.50 bid and entitlement to a $30m break fee and
an irrevocable option to purchase radio assets (CW’s target) for $160m. Canwest claims
oppression. WIC class A voting shares aren’t traded, class B non-voting shares are.
Cathton holds 49.96% of Shaw’s 49.96% of class A shares. Canwest argued that its
takeover bid was in order to give it a voice that the new owners of the voting shares
couldn’t ignore. Canwest’s Class B shares carried ‘coat tail’ rights to transfer to class A
shares upon change in control of the company.
Issue: CW claims oppression as SH and bidder, WIC counters that it maximized
purchase price, thus no oppression.
Analysis: Adopts claim from Revlon that, if a sale is contemplated, maximization of sale
price is the new obligation of the board. Break fees are acceptable when a) They induce
competitive bids, b) That bid represents a better value for SHs, and c) There is a
reasonable balance between its auction-promoting, and auction-ending potential. Asset
options are fine too, subject to similar provisos. WIC properly organized a committee to
assess the respective bids, this was the proper thing to do in order to minimize their
conflict of interest. The composition of that committee, was not appropriate, it included
members whose interests were at stake.
Ratio: Inappropriateness of committee was not enough to invalidate the board decisions
based on its recommendations. The minutes of the meeting indicate that the board duly
considered the pertinent questions. The decision can ultimately be said to have passed
the maximization of SH value test. Oppression remedy only available in capacity as SH,
not as bidder. Every part of the deal was reasonable, thus as an SH Canwest profited, and
has no remedy.
Maple Leaf Foods Inc. v Schneider Corporation OCA 1998
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Facts: ML tries taking over S. Offer $19, $22, both rejected. S says they’ll accept $25
from Smithfield. After they lock up this deal, ML offers $29, but too late, $25 accepted.
ML alleges prejudice to S family to detriment of SHs, resulting from family influencing
independent advisory committee to accept Smith offer without giving ML a chance to
beat it. Also, there was a ‘coat-tail provision’ [provision for non-voting shares to be
converted to voting shares if a TOB is made], ML says this provision was enacted by its
offer, now non-voting shares should be converted.
Analysis: If there was any financial interest for Dodds [the director] it was in favour of
the ML bid, so conf of int can’t be shown. Giving info to Smith and not ML was valid
b/c Smith knew nothing of S, ML did as a competitor. Formation of a special
committee was in SH interests. Revlon is not the law in Ontario, auctions need not be
held with each turnover of control. Making this an auction may have made canvassed
bidders likely to withdraw their offers.
Ratio: No reason not to accept Smith bid. It was, at the time, the best guaranteed bid
available. Good decision by the private board, not based on loyalty to S family. Offer
made was not an ‘exclusionary offer.’ EO is defined in incorporation articles of S. If it
isn’t exclusionary, it doesn’t trigger coattails.
Sole proprietorship:
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one natural person (ie not a corporation)
no limited liability protection
responsible for employees actions in carrying out their duties
Partnership
-
Unless partnership agreement allows for the addition of new partners, adding one
will involve dissolving the old partnership
liability of partners only for events that occur after they join the partnership
joint and several liability
fiduciary duty: you must inform your partners of anything pertinent to the
business
Firms:
-
replace contracts with a definite command and control structure, contracts take
time, not efficient
Limited supervision is the drawback to this
You must quantify the work expected, then put that into a contract, then measure
the performance.
The law uses the concept of fiduciary duty to corporations to define
diversion/misappropriation etc.
Corporations:
-
Must fill out a simple form in order to be created according to CBCA
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formed by one or more people (corporate entity can count as a person in this sense
of the word)
Individuals can be the sole shareholder
Shareholder has no right to profits, but does have the right to vote and the right to
share in the assets on dissolution of the corporation
Corporations allow for easy assembly of/use of capital
Directors get full control over investors’ money
Shareholders’ liability is limited
Corp has the powers of a natural person
Partnership Act (BC)
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Sharing assets alone is not a partnership
Share of profits creates a presumption of partnership
Partners’ actions within normal business operations make all partners liable unless
those actions are not sanctioned by the other partners
Joint and several liability
Limited partnership:
o One or more general partners
o One or more limited partners
o Created by registering a document with the registrar
o Document must define their rights in the partnership etc.
o Name must end in “limited Partnership” and can’t contain the surname of
any limited partner unless it was previously called that.
o General partner same as a partner in a partnership, but no right to:
 make conducting business impossible
 consent to a judgment against the partnership
 Possess/dispose of LP property
 Admit a new partner (unless permitted by the agreement)
o limited partner only liable for their share of the partnership, not liable in
general unless they participate in managing the business.
Part 1 — The Nature of Partnership
2
Partnership defined
3
Persons who are not a partnership
4
Rules for determining partnership
5
Creditors priorities after loan or sale of goodwill
Part 2 — General Partnerships
6
Definitions
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7
Liability of partners
8
Acts or instruments in firm name
9
No pledge of credit for nonfirm business
10
Notice of restriction of power of partner
11
Liability of partners for firm debts
12
Liability of firm
13
Liability for misapplication
14
Liability under 2 preceding sections
15
Liability for trust funds
16
Person representing himself or herself as partner
17
Partner's evidence
18
Notice to partner
19
Liability of partners
20
Effect of change in constitution on guaranty
21
Variation of rights and duties by consent
22
Fairness and good faith
23
Application of partnership property
24
Property bought with firm money
25
Partnership property treated as personalty
26
Execution against partnership property
27
Rules for determining rights and duties of partners in relation to partnership
28
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33
Majority cannot expel partner
29
Ending the partnership
30
Continuation of partnership after expiry
31
Partners must render accounts
32
Partner must account for benefits
33
Profits of partner carrying on similar business
34
Assignment by partner of a share
35
Dissolution of partnership
36
Dissolution by bankruptcy, death, dissolution of partner or charging order
37
Dissolution by event making business unlawful
38
Power of court to decree dissolution in certain cases
39
Change in firm
40
Dissolution
41
Authority of partners after dissolution
42
Application of assets on dissolution
43
Return of premium
44
Rescission of partnership for fraud
45
Rights where partnership dissolved by death or retirement
46
Debts at date of dissolution or death
47
Settlement of accounts on dissolution
s. 6, 23-5
- Can’t assign common property to heirs
- dissolution of partnership leads to equal division between partners
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- heirs can get profits, but no assets or control.
s. 7-10, 16-17
- Partners are agents for each other [this rule ensures that dealing with a partner forms a
binding agreement]
s. 8
- Any document exercised by an authorized person is binding
s. 22
- Partners must act in good faith and in the interests of their partners
s. 27
- Default rule: partners share equally if not otherwise specified in agreement.
s. 31
- Partners must render full, true accounts of all things affecting the partnership
s. 32
- Partners must account for all benefits they derive from the partnership including all
benefits for using the business name etc.
s. 33
- If a partner runs a business that competes with the partnership, s/he must pay all profits
from that business into the partnership
s. 91
- Common law rules still applicable except where they conflict with this act.
BCBCA
s. 20
- different from CBCA because when an agent signs a K on behalf of a yet to be
incorporated company, there is no K.
- He is then deemed to have warranted that the company will come into existence. This
warranty is not a K, but breaching it still carries penalties. Signatory is liable for breach
of warranty.
- K can be adopted by resolution or by actions signifying intention to be bound.
- If K doesn’t materialize, warranty becomes the basis of claims.
- Facilitator not liable if K expressly states so.
s. 142 Duties of directors and officers
(1) Duty to (a)act in good faith, (b)reasonable prudence...
(2) This in addition to any common law rule
(3) K can’t waive this duty.
s. 146: A company or representative can’t assert against a third party that the company
misrepresented something unless they can show the person knew of the misrep.
s. 147 Disclosable interests
s. 148 Obligation to account for profits. General statement to company is sufficient.
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s. 149 A K which general disclosure has been made in regards to can be approved, but the
person who stands to benefit can’t vote on the resolution.
s. 150 Court can veto 147-9 if in public interest
s.151 K not always invalid automatically b/c of undisclosed interest.
s. 153 Director obliged to disclose conf of int.
s. 160 permissive indemnification
s. 161 mandatory indemnification
166
Location of general meetings
167
Requisitions for general meetings
168
No liability
169
Notice of general meetings
170
Waiver of notice
171
Setting record dates
172
Quorum for shareholders' meetings
173
Voting
174
Participation at meetings of shareholders
175
Pooling agreements
176
Date of resolution
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177
Subsidiary not to vote
178
Election of chair
179
Minutes
180
Consent resolutions of shareholders
181
Rules applicable to general meetings apply to other shareholders' meetings
182
Annual general meetings
183
First annual reference date for pre-existing companies
184
Pre-existing reporting company meetings
185
Information for shareholders
186
Powers of court
187
Definitions and application
188
Requirements for valid proposals
189
Rights and obligations arising from proposal
190
No liability
191
Refusal to process proposal
s. 227 SH oppression
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s. 232 SH derivative actions
Canada Business Corporations Act
s. 5
- can’t incorporate if you’re a. bankrupt, b. legally of unsound mind, c younger than 18
- this applies if even one person in the group trying to incorporate meets even one of
these conditions
s. 6
- Incorporation articles must define
1. corporate name
2. province of the registered office
3. classes and max number of shares the corp is authorized to issue
a. two or more types of shares, must stipulate conditions of each type
b. rights of the director to assign duties/privileges to shares
4. Statement re any restrictions on transferring shares, if applicable
5. number of directors
6. restrictions on the businesses the corp can carry on
If a greater # of votes than this act requires is required by this particular
corporation, that’s okay, this can’t apply for votes for removal of a director
s. 9
- incorporation is effective immediately
s. 10
- must have corp. or Inc or whatever in its name
s. 11
- can reserve a name for 90 days if you plan on taking it.
s. 12
- deceptive names not allowed
s. 14
- people are bound to contracts they sign as agents of yet unincorporated
corporations. This is not true if they had no authority to act.
- A corporation can, within a reasonable time after its formation adopt a contract
formed on its behalf before creation
- Contracts exist where both parties believe the corporation to exist and it was
signed by the corporation, ie not by a representative.
s. 15 corporation has the same rights as a person to conduct business in Canada
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s. 16 Corporations can’t violate their articles, but by-laws aren’t necessary for all
things
s. 18 Authority of directors etc. Can’t claim corp articles violated when dealing with 3rd
person
s. 24 (2) Shares will have voting rights, dividend rights (if any exist), property on dissol.
s. 25 Shares can be issued for fair value by directors at any time, payment must come
first
s. 26 Stated capital account
(1) separate capital account
(5) corp can add to stated capital account by special resolution
s. 27 Shares in series
s. 30 Corp can’t hold shares in itself. exceptions in 31.
s. 42: Corp can’t pay dividends if it is reasonable to expect that
a. The corp can’t afford it
b. The value of assets would dip below the value of liabilities.
s. 45 Shareholders no liable for defaults etc of the corporation.
- corporations can make liens on shares which haven’t been paid off. These are
registrable and enforceable.
s. 102: Subject to any USA, directors manage and supervise business affairs of
corp.(1) corp 1 or more dirs. Distributing corp w outstanding shares  3 or more
s. 103 repealing bylaws
s. 104 calling meetings
s. 109 removing directors by resolution
s. 110 directors’ rights to oppose their own firing in a circular
s. 115 dirs can appoint committees
s. 118 dirs liable for resolutions they vote for
s. 120: Disclosure must be made in a timely fashion regarding conflicts of interest.
Failure to comply can result in a court order to make director liable for the result.
s. 122: (1) Duty of care: Act honestly and in good faith with due diligence.
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s. 123 dirs deemed to consent to resolutions they are present for unless theyclearly dissent
s. 124 Indemnification of directors. May advance monies. Must have good faith,
non-criminal unless reasonable belief. Also available in derivative actions. Entitled
to indemnity if vindicated in trial.
s. 133 dirs must call SH meetings
s. 137 SH proposals
138 list of SHs entitled to notice
140 right to vote
s. 143: SHs can requistion SH meetings in certain circumstances. Courts can order
meetings.
s. 146 USAs
s. 148 Appointment of proxies
s. 149: distributing corps must distribute proxy forms.
s. 150 circulars required (as dissident or director)
158- 172 financial disclosure
s. 173 start of fundamental changes section
s. 176 Class vote
s. 181 amalgamation allowed
s. 182 amalgamation approval
s. 183 Shareholder approval of amalgamation. (2) (b) dissenters allowed to FMV.
(3) all shares vote. (5) special resolution
184 short form or vertical amalgamation
s. 190 right to dissent
193-205 going private transactions
206-228 liquidation etc
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s. 239 Derivative actions: need leave of court based on
- proof of appealing to dirs
- good faith
- Corps interests appear to be being served
s. 240 Courts can make orders relating to 239 like control of action, payments
s. 241 Oppression: Person can apply to court for orders if oppressed.
s. 242 SH approval not decisive, persuasive.
252-270 General provisions
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