BU231 Study Guide - Winter 2018, Comprehensive Midterm Notes - Tort, Canada, Common Law
BU231
MIDTERM EXAM
STUDY GUIDE
Fall 2018
BU231- FORMS OF BUSINESSES
• Introduction
o Sole proprietorship- an unincorporated business owned by one individual.
The individual enjoys the rights to make all decisions concerning the business
▪ However, because the law does not distinguish between a sole
proprietor and the business, he/she is personally liable for any debts
incurred by the business
▪ Sole proprietorships tend to be small and localized.
o A partnership consists of two or more persons (partners) carrying on the
business with a view to profit.
▪ Like the sole proprietorship, the partners in a partnership are
personally liable for all debts incurred by the business, with exception
of special types of partnerships
o A corporation is a separate legal entity
▪ The owners (shareholders) and management (directors and officers)
are geerally ot liale for the orporatio’s oligatios
▪ A shareholder has certain rights to information of a corporation
▪ Furthermore, the law has created three remedies available to a
minority shareholder who feels he/she has been unfairly treated
• Internal Affairs of Corporations
o One tool often used by directors to avoid liability is an indemnification
agreement from the company.
▪ The purpose of this agreement is to ensure that the corporation pays
for the costs or expenses that a director faces should he/she be sued
in their role as director
▪ Before agreeing to act as director, a person should also ensure that a
corporation carries sufficient liability insurance to protect claims
against directors
▪ With respect to the rights of shareholder, courts have considered the
following to be conduct, which will trigger an oppression remedy:
• Lack of valid corporate purpose for conduct
• Trasatios hih are ot at ar’s legth
• Lack of good faith on part of directors of the corporations
• Discrimination between shareholders with the effect of
benefiting the majority shareholders or the
find more resources at oneclass.com
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exclusion/detriment of the minority
• Lack of adequate and proper disclosure of material
information to minority shareholders
• A plan or design to eliminate minority shareholders
o On page 625 of the text, the 1992 case of Tilley v Hailes is mentioned → good
example of the oppression remedy.
▪ In 1980, Tilley founded a corporation, Tilley endurables, of which he
was the sole shareholder.
▪ In 1987, the corporation became indebted to a corporation owned by
Hailes, and Tilley subsequently transferred half of his shares to Hailes
• They also etered ito a shareholders’ agreeet
▪ In 1991, relations between the two deteriorated seriously and they
refused to speak to each other.
▪ Hailes took steps were openly hostile to Tilley- including having him
criminally charged for storage of an unregistered handgun and
publishing a catalogue without any pictures of Tilley or his family in it
▪ In retaliation, Tilley told the employees and the bank that Hailes was
leaig the usiess, ausig the ak to redue the opay’s lie of
credit
▪ Tilley applied for a winding-up order
• Since this would be a drastic remedy, especially for a
corporation with 100+ employees, courts instead ordered that
Tilley e gie the hae to uy out Hailes’ shares
▪ The court also took into consideration that Hailes was the cause of
the hostility between the two parties
• Including causing Tilley to be criminally charged → a direct
violation of the shareholders’ agreeet etee the to
o The Canadian model of Company law is based (as are the American and
British models) on a concept of corporate democracy
▪ Owners/shareholder meet periodically in order to appoint directors,
who in turn appoint officers to run the corporation on a day-to-day
basis and in order to give them instructions on how to important
matters of policy
▪ Reality is different: Publicly held corporations usually have thousands
of shareholders; i that ase there’s o stadiu i Canada that could
accommodate all the shareholders should they choose to attend
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Document Summary
Introduction: sole proprietorship- an unincorporated business owned by one individual. In 1980, tilley founded a corporation, tilley endurables, of which he was the sole shareholder. In 1987, the corporation became indebted to a corporation owned by. Hailes, and tilley subsequently transferred half of his shares to hailes: they also e(cid:374)tered i(cid:374)to a shareholders" agree(cid:373)e(cid:374)t. Tilley (cid:271)e gi(cid:448)e(cid:374) the (cid:272)ha(cid:374)(cid:272)e to (cid:271)uy out hailes" shares: the court also took into consideration that hailes was the cause of the hostility between the two parties. Including causing tilley to be criminally charged a direct violation of the shareholders" agree(cid:373)e(cid:374)t (cid:271)et(cid:449)ee(cid:374) the t(cid:449)o: the canadian model of company law is based (as are the american and. In ontario, the legal system is known as the common law; it"s o(cid:374)e of the systems that was developed in feudal england and is still used in english- speaking countries, and some non-english speaking countries alike.
