Let's start the answer to the question with this explanation. A corporation is an artificial entity created by law. Hence, a corporation is a legal person (as opposed to a natural person). Following the right procedures, an individual can create a company or corporation, separate and distinct from themselves, with the ability in law to carry on a business, buy and sell, to incur debts in its own name, and with the ability to borrow money, to sue and be sued. Provided the legal person (the company or corporation) is kept distinct and separate from the creator (the natural person), the debts and liabilities of the company are also separate and distinct from the owner of the company. But this is general information only. Direct real issues to a professional for advice. This general information helps answer the question, "What is a legal person?".
Our textbook contains a full chapter of corporations and securities and another chapter on business entities (including companies). Look inside our book at https://bit.ly/3Ay0lSR
What is corporation and securities law? The word "corporation" is another name for "company." So, the above general overview will provide sufficient general information about what is a company or corporation. As noted, a company can be a private company which limits the number of owners, also called shareholders. When a company goes PUBLIC, it comes under one or more securities commissions and it may trade its shares on a stock exchange. Shares are one kind of securities. Shares in a public company are more likely to be called securities but as noted securities can be shares, bonds, debentures and other instruments (that generally evidence ownership or a debt owed to the holder of the security). Securities commissions endeavour to maintain fair markets, and facilitate sale of securities to raise capital and inform and protect the public (investor).
Are there different kinds of companies or corporations? Yes, some are private companies, often owned by a few, possibly family members. Some private companies have only one shareholder or owner who is also the director and officer of the company. There are also public companies that raise capital from the general public and may be listed on a stock exchange. Such public companies must abide by rules set by a securities commission and the stock exchange. Besides, private and public companies, there are not-for-profit companies (that do not have shareholders or owners as such) and professional corporations (that have some limitations on their liability).
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What is corporate governance? Essentially, it is internal controls and mechanisms put in place to run the corporation so that it abides by the applicable laws and is able to sustain itself. Obviously, a Board of Directors plays a key role in such governance. The Board can explore mergers, asset acquisitions and sales, and propose amendments to the articles of incorporation and draft bylaws for approval. It can bring about dissolution of the company.
What is a corporate officer? The Board appoints officers usually highly trained and specialized individuals (sometimes employees) to assist in the management of the corporation. Officers include a president, secretary, treasurer, a CEO (Chief Executive Officer) or a CFO (Chief Financial Officer).
What is the duty of loyalty? In Canada, this would be seen as the duty to act honestly in the best interests of the company. In the United States the duty of loyalty may include the duty of oversight or supervision. In Delaware State, the laws there hold directors and officers personally responsible if they fail to establish information and reporting systems in the organization that are reasonably designed to provide senior management and the board timely, accurate information sufficient to allow management and the board to reach informed judgments (concerning both the corporation's compliance with law and its business performance). The foregoing is part of the duty of loyalty or more precisely the duty of supervision and oversight. Also, directors and officers cannot turn a blind eye to that which appears to be improper or non-compliant or not in the company’s best interests.
(This is general abbreviated information, not legal advice.)
Where are securities of corporations traded? A public corporation, to raise capital for its operations and goals, may sell its shares rather directly to the public through a broker. This is referred to as over the counter sales. A public company must meet the requirements of a securities commission and a stock exchange if it wishes to trade its shares on the Toronto Stock Exchange or other such exchange.
Does a company have duties or obligations? Yes, among them is the necessity to keep records, usually at their headquarters. These records include the articles of incorporation, bylaws of the company, minutes of meetings, and a record of resolutions. These records include a securities register (names of who owns what shares) and with federally incorporated companies and many provincially incorporated companies, a "transparency register".
What is a transparency register? Essentially, it is a record of the names and interests of those who in fact control a private company through shares or influence. Ontario's Business Corporations Act refers to this as "a register of individuals with significant control over the corporation" [s. 140(1)(f)]
What is oppression within a company and what is the oppression remedy? Generally, whether in a private or public company, minority shareholders and certain others have a remedy if treated oppressively. Oppressive conduct or consequences must be burdensome, harsh, wrongful, lacking in probity or fair dealing, or be done in bad faith.
In a B.C. case, a "condominium" unit owner challenged the strata (condo) corporation on its decision to wind up the corporation; appoint a liquidator to carry out the winding-up, and sell the strata (condo) complex.
Denturists, operating as SDI Inc., argued that if the strata (condo) complex were sold, they would then be out of their place of business and unable to purchase or rent another commercial space within the same neighborhood without further investment or mortgage debt.
The court disagreed: More than 80 % of the owners of the strata “condo complex” supported the winding-up and sale of the Georgia Court Strata Lands and all of the owners would receive fair compensation for their respective units from the sale proceeds: The Owners, Strata Plan LMS3746 v Strathcona Denture Clinic Inc.
Caution: Legal information is not legal advice. This website merely provides a general guide to the subject matter. More questions and answers below.
We encourage you to visit us at our alternate website: https://www.fera-gasparini.ca/ and also to have a quick look inside our new book on Canadian Law and Business Studies: https://bit.ly/3Ay0lSR. This book contains a full chapter on "Corporate Law and Securities Regulation". There is also a separate chapter on business entities which includes the corporation. The co-author of this book, Dr. R. Gasparini, is also a contributor to the "The Handbook of Board Governance" edited by Dr. R. Leblanc and published by Wiley.
Can a director be personally liable? Yes, a director of a company can be held personally liable. This may occur because a statute holds a director personally liable for certain acts such as the corporation not paying wages, or under the common law, for example, under the oppression remedy (say, taken by a creditor) where the director took unlawful and internal corporate manoeuvers to strip value from such creditor knowing of the corporation’s rental lability to that creditor. (This is merely a general summary. Details as to oppression remedy in context described above appear in FNF Enterprises Inc v Wag and Train Inc.).
What is over-the-counter trading? A public company can sell its shares over-the-counter, using an agency. Smaller companies will do this . These are unlisted stocks, that is, stocks not listed on an exchange like the Toronto Stock Exchange. These over-the-counter stocks do not meet the requirements of any stock exchange and for the investor are considered more risky than listed stocks. In over-the-counter trading, a broker may sell to another broker. Exchange trading, on the other hand, has legal and financial restrictions imposed by the exchange and a Securities Commission.
What is the Canadian Securities Administrators (CSA)? Among other things, in basic terms, securities commissions strive to assist corporations to raise capital while protecting the investor from deception and scams. Each province and territory can regulate securities, including a company’s stocks, and this could be very frustrating for a company that operates or wishes to sell securities across Canada. Sameness would be preferable. Through the CSA, the different provinces and territories work to harmonize their securities regulations. When we hear that the CSA has a numbered National Instrument pertaining to a matter, this indicates that a particular standard or requirement pertaining to securities has been agreed to by the various jurisdictions (that could have their own distinct and separate regulatory requirements). For example, National Instrument 43-101 is a technical reporting standard that applies to mineral stocks traded on Canadian exchanges. This is generalized information designed merely to provide some appreciation of why the CSA exists and is used and how it helps to achieve nationwide harmonization in what would otherwise be a series of stumbling blocks for a company with national perspectives and goals.
What is ESG? Investors today are looking to put there money in companies that emphasize ESG – environmental, social, and corporate governance. With a view to creating a better world and be socially responsible, a company makes decisions based on good environmental, social, and internal governance practices. A company or other organization with a strong ESG ethos strives to benefit or generate value for consumers, employees, suppliers and investors without sacrificing its own viability and likely ensuring its sustainability. (This is a simplified general explanation. More on this topic appears below.)
What does ESG stand for? What is ESG? As it relates particularly to publicly traded companies, ESG stands for environmental, social, and governance matters – better stated as “measures taken” in these three areas by a corporation. It seems to be accepted that companies that are complacent and not aware of and engaged in dealing with current environmental and social concerns run a serious risk of not surviving. Putting in place appropriate measures that address ESG meets the demands and requirements of investors, professional bodies, and regulators and helps ensure sustainability of the corporate enterprise.
In a nutshell, what is ESG? Workers, investor, and creditors, regulators, the media, and the general public are among those that will judge an enterprise based on current successes, its sustainability, its transparency, and disclosures. The focus is on corporate citizenship, the company’s accounting practices and governance, its social awareness and engagement, its environmental responsibility and advancements, and its bottom line commitments to ESG. Indeed, there are now even agencies available to assess and report on a company’s ESG measures and to rate it. Indeed, some investment instruments (such as bonds, and mutual funds) are now specifically designated to finance or be invested in projects designed to better social conditions or improve the environment. For example, there are green bonds, also called climate bonds. Accordingly investors can select companies and projects within companies that uphold their values.
Copyright Protected. This is general information not legal advice.
What are environmental, social, and governance measures? As it relates to environmental matters, this may involve assessing greenhouse gas output of the business and putting in place a plan to “green” and to do so more aggressively than required by governments. It also takes into consideration the risks of climate change – floods, coastal erosion, displacement of land, fires, etc. - and takes steps to minimize their effect. Change may provide opportunities and companies should have the appropriate attitude, approach and means to exploit them.
The social aspect of ESG starts with internal management (which includes wages, work conditions, engaging work, diverse workforce, etc.) and assessing partners, suppliers, and others as to their social responsibility and awareness.
The governance aspect of ESG has to do with how the enterprise is governed, its structure, its leadership, its stability, its compensation system, its transparency, its internal controls, the degree of accountability, and how it regards shareholders and creditors.