BU231 Study Guide - Comprehensive Final Exam Guide - Tort, Canada, Common Law

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20 Nov 2018
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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 geerally ot liale for the orporatio’s oligatios
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
Trasatios hih are ot at ar’s legth
Lack of good faith on part of directors of the corporations
Discrimination between shareholders with the effect of
benefiting the majority shareholders or the
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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 etered ito a shareholders’ agreeet
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
leaig the usiess, ausig the ak to redue the opay’s lie 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 gie the hae 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’ agreeet etee the to
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.

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