Business Organizations Summary

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Chapter 16 – Law of Sole Proprietorship and Partnership * Sole proprietorship – A business where the sole owner is responsible for the management and debts of the business. * Registration/licensing issues; Flexibility

* Partnership – Partnership Act (Ontario) defines partnership as a relationship that subsists between two or more persons carrying on business in common with a view to profit. * Differences between partnership and co-ownership * Joint and several liability * Partnership agreement – checklist of issues * Liability of partner for acts of employees * Rights and duties of partners to one another as set out in the Partnership Act (Ontario) * Dissolution
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As a general rule, in any transaction with the corporation, a director must disclose his or her interest in a particular contract and refrain from discussing or voting on the matter at the directors’ meeting. Shareholder approval of contracts in which a director has an interest may be required. A director must disclose a conflict of interest. Canadian Aero Service v. O’Malley et al (1973)

* Directors’ Liabilities - Numerous heads of director liability under various pieces of legislation: sell shares at a discount contrary to governing legislation; declare a dividend that impairs the capital of the corporation; environmental liabilities; employees wages in the event of a bankruptcy; failure to file corporate notices; Fraud charges under the Criminal Code; proceeds of crime and money laundering charges * Directors’ Defence of Due Diligence - Due diligence: the obligation on the directors of a corporation to ensure that effective systems are in place to comply with legislation, and to monitor legislative systems to ensure compliance. R. v. Bata sets out the criteria for the defence of due diligence.

Ani Abdalyan, B.A. LL.B. LL.M.
Member of the Ontario Bar
Lead Instructor
ALW 380 Business Law for Accounting

* Business judgment rule - A court would be reluctant to interfere with the decisions of the board of directors. The rule is limited to circumstances where the directors can demonstrate they informed themselves of the issue and
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