Please keep in mind that this is not legal advice.  The information provided herein is for educational purposes only. If you would like to get in touch with a lawyer to help you draft, interpret, negotiate or resolve a dispute about a shareholders agreement or unanimous shareholder agreement, then you are encouraged to seek a professional (e.g. make a post on Dynamic Lawyers).  We have Ontario lawyers who can assist you in this regard (I would know, I’m one of them!).  If you want to get in touch with me directly, feel free to email me directly to discuss all your shareholder agreements needs!

Here, I’ll be discussing a basic template and things you should consider/pay attention to when thinking about these types of agreements.  For the purpose of this blog post, I’ll be discussing unanimous shareholder agreements in the context of the Canada Business Corporations Act.  Before diving into the nuts and bolts of the template agreement, however, I think I’ll take a step back to discuss some of the basis about shareholders agreements generally…

What is a Unanimous Shareholder Agreement?
A unanimous shareholder agreement is defined under the Act (s. 146) as a lawful written agreement among the shareholder of a corporation (some or all of them) that restricts, in whole or in part, the powers of the directors to manage or supervise the management of, the business and affairs of the corporation.  So a shareholder agreement is basically an agreement that allows the shareholders to usurp and override the powers of the directors (e.g. the shareholders become the directors or they agree to each appoint 1 director on the board of directors, etc.).

Violation of the agreement on the part of a shareholder can lead to a breach of contract claim.  If and when shareholders take over the power of the directors to manage the corporation, the Act gives them the same rights, power, duties, and liabilities as a director of the corporation.  This is important because generally shareholders’ liability is limited under the Act (in other words, unless a party can pierce the corporate veil, shareholder’s personal liability and personal assets cannot be exposed to having to pay for damages of the corporation, its representatives, agents, employees, directors, etc.).

Shareholder agreements are important to have early on in the corporation’s life because it details the rights and obligations of each shareholder, including management issues and share transfer provisions.  It puts expectations on the table early on.  Shareholder agreements are much harder to enter into between shareholders later on when progress (which carries with it political jealousies and potential infighting) has been made.

Finally worth mentioning is that the Act makes certain corporate requirements and powers subject t0 a shareholder agreement, including:

• Special majorities for director or shareholder votes (s. 6(3));
• The power to borrow and give security (s. 189);
• Issuance of shares (s. 25(1));
• Directors’ ability to manage, or supervise the management of the business and affairs of the corporation (s. 102);
• The making, amending or repealing of by-laws (s. 103);
• The appointing of officers (s. 121);
• Directors and officers compliance with a unanimous shareholders agreement (s. 122(2)); and
• Directors and officers remuneration (s. 125).

A copy of the shareholder agreement must be kept at the corporate head office (along with the other documents in the minute book).

How much does a Shareholder Agreement cost?
Shareholder agreements vary in cost (e.g. from $2,500 to $10,000), depending on the complexity of the provisions in the unanimous shareholder agreement.  For example:

• What will be the business of the corporation?  Will this be restricted?
• Who are the parties (e.g. voting and non-voting shareholders)?
• What mechanism will be used by the shareholders to elect or appoint board members?
• What mechanism will be used by the shareholders to vote their shares?
• What mechanisms will exist for shareholders to sell or transfer their shares (e.g. shotgun, put/call, consent sales, auctions, piggy back, drag a long, etc.)?
• What about compensation for shareholders who become working shareholders/directors?
• What about working shareholders who become inactive?  How will their shares be treated upon inactive?
• What about confidentiality, non-solicitation, and proprietary information provisions?  Are these needed?
• How will the agreement be terminated?  Can dissolution result from a shareholder complaining about a breach of the agreement?
• General provisions such as notice, entire agreement, currency, assignment, severability, waiver, independent legal advice, etc.

So with these things taken care of, let’s get into the real meat and potatoes of a shareholder agreement template, shall we?

Parties
Make sure to properly identify the parties.   You should have the correct spelling of the parties’ names.  Also, identifying features such as “X is a corporation incorporated under the laws of Canada with a mailing address at” is also good.  If you have too many parties, you may want to use a Schedule, where all of the parties for example are holders of a particular class of shares, etc.

Recitals
Here, you’ll want to put some basic information about the corporation, the parties, and the reason for their entering into a unanimous shareholder agreement.   It’s pretty common to see something in this section like:

• The authorized capital of the Corporation is X;
• The issued and outstanding shares of the Corporation is X;
• The parties want to enter into this agreement to fix and determine their respective rights, duties, obligations, etc. with respect to each other and the Corporation.

Preliminary Matters
In the first real section of the unanimous shareholder agreement, you’ll probably want the parties to confirm the truth and completeness of the recitals and define terms used throughout the Agreement.

Business of the Corporation
In this section, you may want to define the business of the corporation.  This will come in handy with respect to non-compete provisions and agreements which restrict parties’ ability to compete with the Corporation in the business (however that is defined).

Operation and Control of the Corporation
Here, it’s typical to find provisions that say that the discretion and powers of the directors to manage and supervise the management of the corporation are being restricted and usurped by the Shareholders.  Essentially, the Shareholders are relieving the Directors of their powers.

The provisions in this section go on to provide details – often akin to the Corporation’s by laws – on how the Shareholders as both the Directors and the Shareholders will conduct meetings (e.g. nominees, notice, quorum, casting votes, elections and appointments, passing resolutions, etc.).

The provisions in this section may also include specific requirements for the Corporation to enter into contracts (e.g. X number of Directors required) or for the Corporation to do things with respect to issuing shares, borrowing money, selling or leasing Corporate property, amending the Corporation’s articles, continuing the Corporation in another jurisdiction, winding up or dissolving the Corporation, etc.  These things may require special majorities (i.e. majorities which are not specified anywhere in the Act).

You’ll also find provisions in this section of the unanimous shareholder agreement dealing with things like who the officers of the Corporation will be, keeping proper books of account, appointing a banker, etc.

Restrictions on the Issue and Transfer of Shares
This is a very important part of any shareholder agreement: restrictions on share transfers.  There are many ways to restrict transfers on shares, some of which include:

• General prohibition against the Corporation and the Directors for issuing new shares.
• General prohibition against existing shareholders from transferring, selling, assigning, etc. their existing shares.
• A requirement that any party that does, through one of the permissible ways of acquiring shares, acquire shares becomes bound to and a party of the unanimous shareholder agreement.

Here are some of the ways in which share transfers are permitted/restricted:

• Consent Sale: a shareholder can transfer their shares after obtaining the consent of a pre-determined number or percentage of other shareholders.
• Right of First Refusal: a shareholder who receives an offer from a third party for the purchase of their shares must first offer the other existing shareholders the opportunity to purchase those same shares on terms, for example, that are equivalent to the third party’s offer.
• Shot Gun Buy-Sell: a shareholder can name a price at which it is willing to either buy or sell its shares.  The offer is then presented to other shareholders who have a specific amount of time to decide whether to accept the offer.
• Right to Come Along (Piggy-Back): when a shareholder who sells to a third party, the other shareholders are entitled to have their shares sold on, for example, the same terms to that third party.
• Right to Take Along (Drag Along): when a shareholder sells to a third party, the other shareholders are forced to have their shares sold on, for example, the same terms, to that third party.
• Option to Purchase (Call Option): this right gives a shareholder/Corporation the option to purchase shares in certain circumstances (these are called Triggering Events) from the Corporation/shareholder.
• Option to Sell (Put Option): this right gives a shareholder/Corporation the option to sell shares in certain circumstances from the Corporation/shareholder.
• Auction: an auction is a mechanism whereby shares are sold to the highest bidder (or on certain terms of the auction) to third parties.

In each of these circumstances, there are a few common variables: timing or an event occurring, valuing the shares, and rights/obligations affecting the other shareholders, closing provisions, identification of the buyer/seller/third parties (if any), etc.

Confidentiality
If a Shareholder receives Confidential Information (which should be a defined term) in the course of being a Shareholder, Director, Officer, employee, etc. then they should be restricted in what they can do with that information.  I’ve previously blogged about confidentiality agreements, so you can refer to that blog for more information about drafting, understanding and negotiating confidentiality agreements here.

Proprietary Rights
This section will deal with things like defining intellectual property rights (remember that there should be a definition for both proprietary rights and developed proprietary rights), who they belong to, the waiving of any moral rights under the Canada Copyright Act, and an agreement to obtain protection of intellectual property rights.

Non Competition
This section will deal with the repercussions, if any, of a Shareholder who starts competing with the corporation in the Business (which should be a defined term).  To make these provisions enforceable, they should be specific enough (e.g. by identifying parties, the Business, a time line, etc.).  I’ve written a lot about restrictive covenants such as non-compete and non-solicitation clauses and I’d encourage you to check them out here (but make sure to contact a lawyer to have them properly drafted!):

• Introduction
• General Overview
• When to sign ‘em (employment context)
• Too vague / unclear
• Justification Test
• Traps to watch out for (employment context)

Dispute Resolution Clauses
If you want to avoid the cost, time, headache, and uncertainty of litigating disputes in respect of the Shareholder Agreement, you might want to include a dispute resolution clause.  These clauses can say something like: the parties agree that any and all disputes and questions that arise between any of the parties in connection with the Shareholder Agreement (or construction or interpretation or application thereof), any section of the Shareholder Agreement, or any document, act, omission, etc. related to the Shareholder Agreement shall be resolved by mediation or arbitration (or perhaps mediation fist, and then arbitration).  In either case, you should specify how many mediator(s) and arbitrator(s) will be appointed, who will pay for them, where the mediation or arbitration will be held, how the procedure will be determined (by the parties or by the mediator or arbitrator?) and whether an appeal is available from the decision of the arbitrator (mediator decisions are generally non-binding).

Termination
Here, provisions may be put in place to initiate termination of the agreement where:

• There is only 1 shareholder left.
• A shareholder dies, becomes disabled, or goes bankrupt, etc.
• There is a breach of the shareholder agreement.
• A specific number or percentage of shareholders mutually agree to terminate the agreement.

General Terms
Here are some of the general terms that I’ve typically found in Shareholder Agreements (and other agreements for that matter):

• Notice (how do the parties give notice under the agreement for things like termination).
• Further Assurance (sometimes, you need the parties to the agreement to give additional representations and warranties such that they say they have all the requisite power and authority to do everything they’ve promised to do under the Agreement and that they will do those things as promised).
• Assignment (e.g. is this to be done by the parties having to consent in writing?).
• Survival of terms (i.e. if a term is found by a court to be void, should the rest of the agreement survive?).
• Governing Law (which jurisdiction governs the interpretation and enforcement of the agreement?).
• Amendment (how is this to be done?).
• Entire Agreement (i.e. this agreement supersedes all other agreements – whether oral or written – relating to the same subject matters in the agreement)
• Waiver (e.g. no failure or delay of a party to enforce or exercise its rights under the agreement constitutes a waiver, etc.).
• Interpretation (singular vs. plural; masculine vs. feminine, section headings, etc.)
• Power of Attorney (shareholders sometimes require that, if any shareholder neglects or refuses or is unable to execute or deliver any document required to be delivered, then they shall be deemed to have appointed the Corporation as his or her lawyer attorney and agent for such purposes).
• Independent Legal Advice (an acknowledgment by the parties that they have been told to and have received independent legal advice concerning the nature and substance of the Shareholder Agreement).
• Severability (in case one provision is struck down and rendered invalid doesn’t mean the rest of the agreement is).
• Currency (in which currency do dollar amounts referenced in the Shareholder Agreement pertain to?).

Please keep in mind that there are many other kinds of terms and conditions you can find in the general terms section of this agreement.  You should consult with a lawyer to address these general terms.

Execution
The final section of the agreement (other than any schedules or exhibits) requires that the parties, or duly authorized representatives of the parties with the power to bind, execute the agreement.  It is sometimes a requirement that witnesses be present and sign their names alongside the parties’.

In conclusion, this blog has discussed a basic unanimous shareholder agreement template.  You should note, however, that the particular details of a unanimous shareholder agreement vary depending on the needs of the shareholders and the business.  These documents should be put together by lawyers (such as myself) who are trained, knowledgeable, and experienced professionals.

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To finalize this set of blogs about the Plaintiff’s Claim in the Construction / Renovation context, I thought it would be worthwhile to give some information about that all-important Schedule A!

Schedule A
The Plaintiff’s Claim includes space for you to give reasons as to why you think you’re entitled to damages from the Defendant(s). The space provided in the government form is not normally enough for you to tell your side of the story. That’s why you can simply state “See Attached Schedule A” and then give your story on a separate document which you attach to your Plaintiff’s Claim. Make sure to title this document “Schedule A”.

In what follows, we’ll be going over some of the various factors which you should consider when drafting your own Schedule A.

The Claim
The first thing any Schedule A should have is a paragraph that sets out who you are suing and for how much. For example: “The Plaintiff is suing the Defendant, Jeremy Smith, for breach of contract and for negligent performance of services rendered for $5,000.”

The Parties
Next, Schedule A should identify the parties to the claim. Here are some examples:

“The Plaintiff, John Doe, is an individual residing in Toronto, Ontario.”

“The Plaintiff, X Corp., is a corporation with an office in Mississauga, Ontario.”

“The Plaintiff, ABC Partnership, is a partnership with an office in Oakville, Ontario.”

“The Defendant, Jane Smith, is an individual residing in Newmarket, Ontario.”

“The Defendant, 123456 Ontario Inc., is a corporation incorporated under the laws of the Province of Ontario.”

“The Defendant, Jeremy Smith, is an individual operating a sole proprietorship under the name Acme Suppliers”.

The Story
After having identified who you are suing and for how much and having identified all the parties to the action, it’s now time to tell your side to the story. In short and simple sentences and numbered paragraphs, tell the court the chronology of how the parties came together, what they agreed to, what actually happened, and how you suffered damages as a result of the Defendant’s acts or omissions. Dates, places, and the nature of the occurrences are important. Also, be sure to explain how you came to (if applicable) the nature and amount of the damages. You do not need to use “legalese”. Just write in everyday language.

Here are some examples:

Example #1:

The Plaintiff hired the Defendant to paint the Plaintiff’s house.

On January 1, 2010, the Plaintiff and Defendant signed an agreement.

The agreement said that the Defendant would paint the Plaintiff’s house for $5,000.

The Plaintiff had to provide a $1,000 deposit as part of the agreement, which the Plaintiff did.

The Defendant did not paint the house, but kept the Plaintiff’s deposit.

Example #2:

The Plaintiff hired the Defendant to renovate the Plaintiff’s kitchen.

On January 1, 2010, the Plaintiff and Defendant made an oral agreement.

While the Defendant was renovating the Plaintiff’s kitchen, the Defendant damaged the Plaintiff’s floors.

Despite the Plaintiff’s demands, the Defendant did not fix the damaged floors.

The Plaintiff had to hire a third party to fix the floors, which cost $5,000.

The Defendant should reimburse the Plaintiff for the cost of fixing the floors.

Example #3:

The Plaintiff hired the Defendant to repair the Plaintiff’s leaky roof at a cost of $10,000.

On January 1, 2010, the Plaintiff signed the Defendant’s contract for work.

The Defendant was supposed to repair the leaky roof to make the house air and water tight.

3 months after the Defendant allegedly repaired the leaky roof, the roof began to leak again.

The Plaintiff suffered extensive water damage because of the leaky roof amounted to $5,000.

The Plaintiff hired a third party to fix the leaky roof at a cost of $5,000.

The Plaintiff wants the Defendant to return the original $10,000 and pay an additional $10,000 to compensate the plaintiff for the damages.

Please note that the above are simplified examples provided for informational purposes only. Your story may have a lot more detail and complexity (e.g. parties, facts, legal issues, etc.). You should contact a lawyer if you have any concerns about the legal claims you’re raising or how to properly draft your story in a clear and convincing manner.

Remember: this isn’t legal advice.  It’s simply legal information.  If you’re looking for a lawyer, make a post on Dynamic Lawyers.

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Please note that the information provided herein is not legal advice and is provided for informational and educational purposes only.   If you need legal advice with respect to your offer or agreement of purchase and sale (or wanting to back out of one) you should seek professional assistance (e.g. make a post on Dynamic Lawyers).  We have Toronto, Ottawa, Hamilton, Brampton, Mississauga and other Ontario lawyers registered to help you with your offer or agreement of purchase and sale.

In this blog, I’ll be discussing what happens if you change your mind after singing an offer or purchase agreement?

Once an offer or counteroffer has been made, it cannot be withdrawn unless there is a time limit on the offer or counteroffer which passes without being accepted.

An Agreement of Purchase and Sale may also be terminated if it becomes impossible to perform through no fault of either party (lawyers say such a contract is “frustrated”).  An example is property destroyed in a flood or a fire before the buyer has taken possession.

If there is no relevant termination clause in the Agreement of Purchase and Sale, a party cannot claim frustration if the supervening event resulted from a voluntary act of the buyer or seller.  Furthermore, frustration is not available if the parties contemplated the possibility of the supervening event arising during the term of the agreement and provided for in the agreement. In Dinicola v. Huang & Danczkay Properties, 2 R.P.R. (3d) 267, a condominium developer failed to develop 3 buildings and returned all deposits and down payments. The condominium unit purchasers, however, sued for breach of contract. In its defence, the developer argued that the municipal council’s refusal to approve the site plan for the development of the buildings frustrated its agreements with the purchasers. The Ontario Court of Justice (General Division) rejected that defence and found the developer liable to pay damages assessed at $4.9-million.  The court reasoned that frustration was not available as a defence because the developer and the purchasers had contemplated the possibility of the municipal council’s refusal at the time the purchase and sale agreements were entered into. That possibility was also provided for in the agreements.  Frustration was also not available because the developer relied on its own refusal to negotiate terms of the approval with the municipality to excuse itself from liability under the agreements.

Purchasers of new condominium units in Ontario have a cooling-off period of 10 days to back out of their purchase agreements.

Once the offer or counteroffer has been formally accepted, the buyer and seller are bound legally by its terms. If you walk away from a deal you may not only lose your deposit, but may also be liable for any damages suffered by the other party, such as the lost opportunity to sell to someone else, expenses arising from a delayed move, or the seller’s loss of deposit on another home intended for purchase. The legal remedy, called “specific performance” (making you complete the purchase), is an unlikely event, but a court could still hold you responsible for the entire purchase price, plus expenses and court costs.

written by admin \\ tags: brampton, breach of contract, condominium unit, counteroffer, court of justice, dinicola, down payments, educational purposes, legal advice, mississauga, ontario court of justice, ontario lawyers, party lawyers, professional assistance, termination clause, time limit, voluntary act

There are many avenues for average Torontonians to find not only a lawyer, but the right lawyer for their particular case.  Unfortunately, most of these avenues are inconvenient and sometimes very costly (e.g. an initial meeting with a lawyer could run you a few hundred bucks!).

More often than not, people find a lawyer through word of mouth referrals from family, friends, colleagues, or other professionals they do know (e.g. bankers, accountants, consultants, real estate agents, insurance agents, paralegals, other lawyers they know, etc.).  This, in fact, is how most lawyers find their clients.

Alternatively, people may turn to the Yellow Pages and simply pick an advertisement and make a phone call.  I’ve been told that people tend to pick the biggest advertisement because they somehow believe that the bigger the ad, the more successful the lawyer or law firm.

They may even turn to the Law Society of Upper Canada’s Lawyer Referral Service, which charges users $6 for a 30-minute conversation with one lawyer.

The point here is that finding the right lawyer for you is an important undertaking.  You don’t want to have the lawyer who drafted your will or acted on your house deal to represent you in a criminal case: they may not be up-to-date on court room procedure or have experience cross-examining adverse parties.

Torontonians generally only need a lawyer for a limited time and have a limited budget for such engagements. Yet it is hard for these people to distinguish lawyers and law firms from each other, especially given that many small and medium law firms have a general practice. It may also be intimidating for them to approach lawyers with their legal issues, given that doing so may cost money (e.g. $500 for the initial hour visit) and ultimately retaining a lawyer could be very expensive given the uncertainty of hourly billings.

These factors make ordinary Torontonians shy away from seeking or hiring lawyers. Those sophisticated Torontonians who surf the Web looking for a lawyer are hungry for more information than what is provided in the YellowPages or a newspaper advertisement. They are doing a Google or Yahoo search to seek out a particular type of attorney in a particular field in a particular area. They are also looking for testimonials and looking for the experience of a lawyer.

All in all, it makes perfect sense for users facing these challenges to turn to Dynamic Lawyers as a way of finding the right lawyer for the right price.  Making a post is free and anonymous, posts remain on the website for up to 45 days, and users have the opportunity to receive information and multiple quotes from local lawyers specializing in the area of law requested.  Comparing answers and then following up with the lawyer of your choice is just plain smart – particularly in a field where it is hard to compare one service provider from the next.  All in all, a very good deal…

So now that you have found the right avenue to find a lawyer in a convenient and cost-effective manner: what next?  Well, let’s talk about legal fees.  Many lawyers will charge you a fixed fee for the first consultation.  At this meeting, they’ll ask you questions about yourself and your situation.  The lawyer is trying to understand the legal issues so that he can offer you some type of recommendation on how to proceed.  If the meeting goes well, you may end up signing the lawyer’s retainer agreement, which stipulates the services that are going to be offered and the fees that are going to be charged.  The fees are typically hourly fees ranging from $200 to upwards of $1000 / hour, depending on the size of the law firm, where it’s located (and it’s physical appearance and amenities), and the particular lawyer’s expertise and reputation.

At the first meeting with the lawyer, you should ask some basic questions related to:

1. What services will the lawyer specifically provide;
2. Billing, costs and budget;
3. Time line;
4. Communication (e.g. by phone, e-mail, etc. and how regularly);
5. Past Experience in a particular field;
6. Strategy;
7. Style (e.g. aggressive trial lawyer or alternative dispute resolution lawyer); and
8. Terminating the retainer (e.g. failure to pay, failure to act, breakdown in the relationship, loss of confidence, etc.).

written by admin \\ tags: breach of contract, charity status, Civil Litigation, commercial agreements, company intellectual property, criminal case, criminal offence, divisional court, employment agreement, family friends, finding the right lawyer, government action, government need, human rights and freedoms, landlord and tenant, law firms, law firms toronto law office toronto, law society of upper canada, lawyer referral service, lawyers, lawyers in Toronto, legal claim, legal toronto, notarize, referrals, small claims court, support government, toronto law firms, toronto lawyer, toronto legal services, Wills and Estates

Toronto law firms can help answer your legal questions, facilitate your transaction (e.g. business, real estate, wills and estates, family, etc.) or even represent you in court.  To find a Toronto lawyer or law firm, go to Dynamic Lawyers and make a post.  It’s free and anonymous and Toronto lawyers and law firms will respond to you with information and quotes for you to compare.

Here are some of the different types of legal services that Toronto law firms can offer:

• Accidents and Injuries: Involved in an accident where you suffered personal injury?
• Business: Need corporate or commercial agreements? Need to have a lawyer help you do a transaction?
• Charities and Not-For-Profit: Need to establish a Not-For-Profit corporation or obtain charity status?
• Civil Litigation – Higher Court: Have a serious legal claim that needs to be litigated in the Superior Court, Divisional Court, etc.?
• Civil Litigation – Small Claims Court: Have a legal claim (e.g. breach of contract, negligence, etc.) for less than $10,000?
• Constitutional / Human Rights and Freedoms: Challenging a law or government action / inaction?
  Criminal: Charged with a criminal offence? Appealing a conviction?
• Employment and Labour: Need an employment agreement? Unjustly terminated? Need to know your rights?
• Family: Going through a separation or divorce? Fighting to get custody or access? Dealing with spousal and child support?
• Government: Need to lobby the government? Need to resolve a dispute with a government agency?
• Highway Traffic Tickets: Charged with speeding or DUI? Need to fight traffic tickets?
• Immigration: Need to immigrate to Canada? Fighting against deportation?
• Insurance: Having difficulties with your Insurance company?.
• Intellectual Property: Need to register a copyright or trademark? Need help with a patent?
• Landlord and Tenant: Need a resolve a dispute? Need to know your rights?.
• Notary Public / Commissioner: Need to notarize or commission your documents?
• Real Estate: Need someone to facilitate your residential or commercial purchase, sale, or lease?
• Tax: Need help structuring your tax affairs? Need help resolving tax disputes with the Canada Revenue Agency?
• Wills, Estates and Trusts: Need a will? Need to update your will? Find out why having an up-to-date will is a must.

Try to consult with a couple of Toronto law firms and Toronto attorneys until you’re comfortable with whom you’re speaking with.  Toronto law firms differ in size, location, expertise, and reputation.  Go to Dynamic Lawyers and save time and money finding the right Toronto law firms and Toronto attorneys who specialize in the legal area you require!

written by admin \\ tags: breach of contract, charity status, Civil Litigation, commercial agreements, company intellectual property, criminal offence, divisional court, employment agreement, government action, government need, human rights and freedoms, landlord and tenant, law firms toronto law office toronto, lawyers in Toronto, legal claim, legal toronto, notarize, small claims court, support government, toronto law firms, toronto lawyer, toronto legal services, Wills and Estates

Please note that the information provided herein is not legal advice and is provided for informational and educational purposes only.   If you need legal advice with respect to drafting or reviewing Articles of Incorporation, you should seek professional assistance (e.g. make a post on Dynamic Lawyers).  We have Toronto business lawyers registered on the website who can answer your questions or help you draft and submit articles of incorporation for Ontario or Federal corporations.

Incorporating a business: a few words should be written about the roles and responsibilities of those involved with and acting on behalf of or for the corporation.

A corporation is created by having the initial directors file articles of incorporation in the jurisdiction in which the corporation is going to have its head office (provincial licenses will also be required to operate the corporation in particularly provinces).

After this, the directors have got a few things to do to get the corporation organized and up and running.  For example, they will need to pass a By-Law (which gives the corporation’s directors power-making authority), pass director resolutions, issue shares to shareholders (and have the shareholders subscribe to shares), have the shareholders ratify the by-law, have the shareholders vote in the new directors, etc.  Without these essential steps and documents, a corporation is not a legally operational entity.

The board of directors is comprised of individuals and typically a chairperson who oversee the affairs of the corporation , but not typically on a day-to-day basis.  The directors are typically paid to sit on the board, but it’s not a lot of money (as compared with the corporate officers) because they don’t meet that often and are not responsible for the day-to-day affairs of the corporation (as officers are).  The board is typically comprised of individuals with expertise in certain areas and who sit on a number of corporate boards.  They offer their insight and are accountable to the shareholders who vote them in.

For their part, shareholders are the owners of the corporation and have the power to vote in the directors of the corporation.  If there is only one sole shareholder holding all of the shares of the corporation then that person could vote in all of the directors.  It is possible to have only one shareholder and one director of a corporation.

Finally, officers of a corporation are appointed by the board of directors in order to oversee the day-to-day management of the corporation’s affairs.  The titles of officers are not that important, although traditionally most people have come to know officers as one of the following: President, Chief Executive Officer, Treasurer, Chief Financial Officer, Secretary, Vice-President, etc.  It does not really matter what these individuals are called.  Often, their titles, roles, and responsibilities will be outlined in a corporate by-law, which establishes their position and sets out their qualifications, powers, duties, etc.  Officers can be replaced by the board of directors, to whom they are accountable.

So to summarize: shareholders with voting power will vote in the directors on an annual basis (or sooner in certain circumstances), directors have the power to manage the corporation and they meet only a few times a year, and officers (e.g. CEO, VP, CFO, Treasurer, President, etc.) are the people who run the corporation on a daily basis and who are appointed (not elected) by the directors on an annual (or sooner in certain circumstances) basis.

written by admin \\ tags: answers to questions, articles of incorporation, assets and liabilities, blog, board of directors, breach, breach of contract, business lawyers, circumstances, contracts, corporation, federal corporations, federal government, government fees, incorporating a business, incorporation, incorporators, initial directors, insurance, issue shares, jurisdiction, lawyer, lawyers, legal advice, legal entity, limited liability company, nuans, nuans name search, professional assistance, provincial licenses, report, resolutions, search report, separation, shareholders, shareholders vote, toronto, toronto business

Please note that the information provided herein is not legal advice and is provided for informational and educational purposes only.  If you need legal advice with respect to creating a limited liability company, you should seek professional assistance (e.g. make a post on Dynamic Lawyers).  We have Toronto business lawyers registered on the website who can answer your questions or help you draft and submit articles of incorporation for Ontario or Federal corporations.

Want to know to incorporate?  First, if you’re trying to do it yourself, it’s pretty straightforward.  You just need to figure out which jurisdiction you’re trying to incorporate and then use a website service provider that will allow you to submit articles of incorporation, conduct a NUANS name search and submit a NUANS name search report, etc.  While the government fees are not high to incorporate (e.g. $200 for a federal corporation, plus $20 for a NUANS name search report), there are a number of questions arise which may lead you to seek out answers to questions relating to how to incorporate.

For example, you may have questions concerning what exactly goes into the Articles of Incorporation.  You can find a previous blog about Articles of Incorporation here. “Articles of Incorporation” is the name of the document that must be submitted to the Federal Government to create a corporation.  A corporation is a separate and distinct legal entity from its incorporators and from its owners, managers, employees, etc.  A corporation has its own rights and obligations; must file its own taxes (at both the provincial and federal levels); has its own income, assets, and liabilities; and can be sued and sue other parties.  These things being said, a corporation must act through other parties (e.g. owners, managers, employees, directors, etc.), who can in turn be held liable for their actions (e.g. negligence, breach of contract, etc.), although the corporation will likely be sued in these circumstances because of things like vicarious liability, insurance, and its otherwise deep pockets.

But simply submitting and having the government approve of your incorporate package is not sufficient to have your company up and running.  In fact, the cheap incorporation companies out there that promise to incorporate your company may not help you establish by-laws (which are power-giving or authority-giving documents that make corporate actions legal), prepare director and shareholder meetings and minutes (which establish accountability and transparency by letting stakeholders know what was decided upon), and finish explaining each party’s (i.e. shareholders, directors, officers, employees) roles and responsibilities vis-a-vis the corporation. Knowing how to incorporate is a good start,  but it’s always wise to consult with a business lawyer (e.g. by making a post on Dynamic Lawyers) with respect to questions about these and other things corporation related.

The roles of the various parties in a corporation will be discussed in the next post…

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Toronto law firms can help answer your legal questions, facilitate your transaction (e.g. business, real estate, wills and estates, family, etc.) or even represent you in court.  To find a Toronto lawyer or law firm, go to Dynamic Lawyers and make a post.  It’s free and anonymous and Toronto lawyers and law firms will respond to you with information and quotes for you to compare.

Here are some of the different types of law that Toronto law firms can assist you in:

• Accidents and Injuries: Involved in an accident where you suffered personal injury?
• Business: Need corporate or commercial agreements? Need to have a lawyer help you do a transaction?
• Charities and Not-For-Profit: Need to establish a Not-For-Profit corporation or obtain charity status?
• Civil Litigation – Higher Court: Have a serious legal claim that needs to be litigated in the Superior Court, Divisional Court, etc.?
• Civil Litigation – Small Claims Court: Have a legal claim (e.g. breach of contract, negligence, etc.) for less than $10,000?
• Constitutional / Human Rights and Freedoms: Challenging a law or government action / inaction?
  Criminal: Charged with a criminal offence? Appealing a conviction?
• Employment and Labour: Need an employment agreement? Unjustly terminated? Need to know your rights?
• Family: Going through a separation or divorce? Fighting to get custody or access? Dealing with spousal and child support?
• Government: Need to lobby the government? Need to resolve a dispute with a government agency?
• Highway Traffic Tickets: Charged with speeding or DUI? Need to fight traffic tickets?
• Immigration: Need to immigrate to Canada? Fighting against deportation?
• Insurance: Having difficulties with your Insurance company?.
• Intellectual Property: Need to register a copyright or trademark? Need help with a patent?
• Landlord and Tenant: Need a resolve a dispute? Need to know your rights?.
• Notary Public / Commissioner: Need to notarize or commission your documents?
• Real Estate: Need someone to facilitate your residential or commercial purchase, sale, or lease?
• Tax: Need help structuring your tax affairs? Need help resolving tax disputes with the Canada Revenue Agency?
• Wills, Estates and Trusts: Need a will? Need to update your will? Find out why having an up-to-date will is a must.

Try to consult with a couple of Toronto law firms and Toronto attorneys until you’re comfortable with whom you’re speaking with.  Toronto law firms differ in size, location, expertise, and reputation.  Go to Dynamic Lawyers and save time and money finding the right Toronto law firms and Toronto attorneys who specialize in the legal area you require!

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Please note that the information provided herein is not legal advice and is provided for informational and educational purposes only.   If you need legal advice with respect to drafting or reviewing Articles of Incorporation, you should seek professional assistance (e.g. make a post on Dynamic Lawyers).  We have Toronto business lawyers registered on the website who can answer your questions or help you draft and submit articles of incorporation for Ontario or Federal corporations.

In this blog, I’ll be discussing articles of incorporation for Federal corporations, which are governed by the Canada Business Corporations Act.  Not many people realize this, but corporations are creatures of statutes.  The theory is that citizens vote in politicians, who in turn create legislation, which is then used by citizens to create corporations to limit their liability, gain access to capital, expand their business, etc.

“Articles of Incorporation” is the name of the document that must be submitted to the Federal Government to create a corporation.  A corporation is a separate and distinct legal entity from its incorporators and from its owners, managers, employees, etc.  A corporation has its own rights and obligations; must file its own taxes (at both the provincial and federal levels); has its own income, assets, and liabilities; and can be sued and sue other parties.  These things being said, a corporation must act through other parties (e.g. owners, managers, employees, directors, etc.), who can in turn be held liable for their actions (e.g. negligence, breach of contract, etc.), although the corporation will likely be sued in these circumstances because of things like vicarious liability, insurance, and its otherwise deep pockets.

The Articles of Incorporation must provide the following information to be valid (s. 6 of the Act):

1. The name of the corporation;
2. The province in Canada where the head office of the Corporation is to be situated;
3. The classes and any maximum number of shares that the corporation is authorized to issue (and the characteristics of such shares);
4. If the issue, transfer or ownership of shares of the corporation is to be restricted, a statement to that effect and a statement as to the nature of such restrictions;
5. The number of directors or the minimum and maximum number of directors of the corporation; and
6. Any restrictions on the businesses that the corporation may carry on.

The Articles of Incorporation may also set out additional provisions permitted by the Act or by law to be set out in the corporate by-laws (for the purpose of this blog, I won’t get into this here).

With respect to the different classes of shares, it’s always best to keep things simple: most small private companies have two classes of shares (one preferred and one common) and have the ability to issue an unlimited number of shares, but only issue common shares.  The preferred shares are left for estate freezes and other tax-savings structures for the shareholders (which I won’t get into here).

Typically, the Articles of Incorporation of a small private corporation will not impose any restrictions on the business of the corporation (otherwise, if the corporation engages in such business later on, liability could arise for breaching the Articles of Incorporation).  Also, amending the Articles of Incorporation is not easy if there are many shareholders (because two-thirds of the votes cast by the shareholders entitled to vote is required): s. 173.

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Please note that the information provided herein is not legal advice and is provided for educational purposes only.   If you need legal advice, you should seek professional assistance (e.g. make a post on Dynamic Lawyers).

A friend recently asked me: “What are the legal ramifications when I purchase something that doesn’t work for the purpose which I bought it for?  Take for example, the case of an explosion proof refrigerator.  What if it failed to protect people and things on the outside from the dangerous contents on the inside?”

Now that may be an extreme and unfortunate example, I thought.   But nevertheless, I thought it would be worthwhile to dissect his question and outline some general thoughts here..

As I understand it, the purpose of an explosion proof refrigerator is generally twofold:  (1) to protect the internal contents from external explosions and (2) to protect external things, people, etc. from internal explosions.  If the explosion proof refrigerator fails to do either or both of these things, then injuries, damages, and losses may result.

In these situations, a person may claim, in addition to other things, that the manufacturer of the explosion proof refrigerator: (1) breached the contract of purchase and sale with the buyer or (2) was negligent in manufacturing the explosion proof refrigerator.   In the former case, the contract should be examined to see what exactly was bargained for.   Sometimes, the contract (particularly in the fine print) will specify that consumer protection statutes are inapplicable.  Consumer protection statutes are generally designed to allow people to raise claims that the product they purchased did not meet the purpose for which it was purchase.  If the contract, however, specifically excludes the application of such statutes, then claims and relief through them would generally not be available.

With respect to negligence claims, it’s safe to say that the manufacturer owes a duty to the ultimate purchaser of the explosion proof refrigerator to take reasonable care in the way in which it manufactures such refrigerators. The manufacturer will be held to the standard of care of a reasonable manufacturer in the same industry following industry standards (i.e. with respect to safety, testing, design, etc.).  Hence, if the specific manufacturer failed to live up to that standard of care, it could be liable if the ensuing damages from the defective explosion proof refrigerator were caused by its negligence, those damages were reasonably foreseeable as resulting, and no viable defence (e.g. contributory negligence) is available.

Also worth mentioning is that advertisements in respect of the explosion proof refrigerator should  be examined to determine if they claimed that the product was suitable for something which turned out to be false.  In these case, a claim for misrepresentation (either innocent, negligent, or fraudulent) may also arise.  Claims for misrepresentation are generally based on false statements that induce one party to take action or refuse to take action and which causes injury or damage.

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