CORPORATE LAW IN A FAMILY LAW CONTEXT

By:
Graham A. Knight, Corporate Commercial Department;
Andrew D. Ain, Corporate Commercial Department;
Lorene H. McDougall, (former associate) Family Law Department

(Below are the first 2 pages of the paper, being the Index and General Observations. Please click here to download the full paper, in .pdf format. You will require Adobe Acrobat Reader to view the full paper.)

 

INDEX

I. General Observations

II. Pre Marriage Breakdown

1. Preventative Measures

a. Shareholder Agreements
b. Domestic Contracts

III. Post Marriage Breakdown

1. Disclosure

a. General Rule
b. Financial Statement under the Family Law Rules
c. Federal Child Support Guidelines
d. Disclosure under the Ontario Business Corporation Act
e. Compelling Disclosure

2. Determination of Income and Valuation of Business

a. Valuation of Income
b. Valuation of Business

3. Resolving the Ownership of the Corporation

a. Transfer of Shares
b. Alternative Dispute Resolution
c. Shareholder Remedies

i. Oppression Remedy
ii. Winding up corporation
iii. Investigation
iv. Compliance Order

IV. Observations Relating to Directors

V. Corporate Records – What to Look For and What to Watch Out For

VI Authors

VII. Appendix

I. GENERAL OBSERVATIONS

The purpose of this paper is to address corporate law issues, which may be of relevance in a family law context.

Businesses may be carried on by individuals as sole proprietors, or by individuals carrying on business with a view to profit, in a partnership context, or in a corporate context.

For the purposes of the comments contained herein, we are looking at ‘for profit’ corporations. For our purposes an incorporated business entity will generally have its incorporation documentation rooted in either Ontario or Federal law.

This paper addresses itself to Ontario business corporations. While there are differences between Provincial and Federal corporations, the corporate themes are usually relatively similar.

At the moment of incorporation an artificial entity is created at law which is given many of the powers possessed by a natural persons, including the power to contract, sue and be sued, and carry on business.

Those investing in the corporation are called shareholders. The degree of ownership a shareholder possesses in a company is ascertained by dividing the number of shares that that individual holds by the total number of issued and outstanding shares.

One may control the day to day affairs of incorporation by having 50% plus 1 of the votes. For special or extraordinary resolutions (eg. sell the company) generally 66 2/3% of the votes are required.

The shareholders, as investors elect persons to manage the corporation. These are directors. The directors from among themselves elect or appoint officers (President, Vice-President etc.) to attend to certain specified functions.

The responsibility for management is, absent a unanimous shareholder agreement with the directors.

Corporations are required to hold annual meetings. At these annual meetings, which really comprise three meetings, the directors formally approve the financial statements as the last act of their term. They then adjourn after which the shareholders convene, approve the financial statements, elect an accountant/auditor for the corporation for the ensuing year, and elect directors. The shareholders then retire. Lastly, the directors who have been elected or re-elected convene and elect or appoint officers from among them.

Provided the corporation does not exceed certain specified limits, a resolution of the shareholders is generally passed to waive audit provisions for the ensuing year. In simple terms, if the investors are not inclined to want an audit then the Government is prepared to proceed on that basis.

Directors evidence their decisions by resolutions which are found in the corporate minute book. There is no requirement to record resolutions relating to normal corporate activities. Resolutions are generally reserved for important or unusual decisions which are taken.

(The above are the first 2 pages of the paper, being the Index and General Observations. Please click here to download the full paper, in .pdf format. You will require Adobe Acrobat Reader to view the full paper.)

<-Back

---

The above is not intended to constitute legal advice. Please contact a lawyer to clarify your legal rights.