Chapter 26 & 27 Lecture
Fduciary duty - Shareholders take priority to bondholders.
Conflict of interest – even in perceived conflict of interest – should resign.
Proxy Battle is good news for CP shareholders.
o BOD seeks proxies, authorization to represent shareholders.
o Proxy battle – shareholder does not agree with BOD.
o Acme soliciting proxies on its own behalf.
Proxy battle – Telus
o Posing to have non-voting shares exchanged for voting shares.
o Reconsitute shareholders.
Rights and Duties Directors and Officers have
How those people are put in place
Rights that Shareholders have
Types of Recourse
Securities law in public markets
The Structure of the Modern Busines Corporation
BOD- oversee management of the corporation.
o Ontario Business Corporations Act = CBCA
o USA is used to take powers away from directors to shareholders.
Shareholders are liable to directors would if that capacity.
o Affairs = internal corporation matters.
o Business = external matters.
Shareholders – own the corporation.
o May compete with the corporate.
Offering corporation = public corporation
o 2/3 – independent directors – the securities law requires that the
audit/compensation committee should be independent.
o Shareholders are sometimes directors.
o Sub-groups may be set up in large corporations (e.g. audit committee).
o Issue shares of the corporation at reasonable price, for proper business
practice. Cannot issue shares to shareholders to change voting power.
o BOD disclares dividends
o Adopts by-laws; eg creating new officer positions.
o Call shareholder’s meetings – more frequently if shareholders need to
o In case the BOD die, Directors must call special shareholders meeting to
elect new BOD.
o Majority, minority and future shareholders. o Community (eg environmental, emplyoees, ㄷㅅㅊ.)
BOD’s Personal Liability (strict liability)
o Shares are bought back.
o Dividend makes corporation insolvent – BOD owed to 6 months of
employee’s back wages.
o You may seek indemmification secure by an asset or parent company
before going insolvent.
o Failure to remit income tax when the corporation goes insolvent.
o Obligation to act in the best interest of the corporation.
o Fundamentally avoiding conflict of interest.
Court – not complying with conflict of interest.
o Disinterested directors can recind the contract.
o Affirming the contract.
o Damages can be payable.
o Injunction can be ordered.
Laws that prevnet insider from obtaining information and disclosing it to others.
Designed to create a level field.
Insider is responsible for losses when the announcement have been made to
Shareholders accountable – acting consultant for the company, finds out
something has happened, increased share value – he/she should be paid in
shares in cash. Share value skyrockets – engaged in insider trading.
The first tipee is liable.
Public corporation – upto 10 years of imprisonment and/or $5 million fine or 3x
profit made, whichever is greater.
o Must file