Corporate law is fundamentally the law of business corporations, governing the incorporation of companies, shareholders’, directors’, and officers’ duties, corporate restructuring and bankruptcy, and the sale and trade of “securities” (including shares of the corporation).
A corporation itself is a separate legal entity from all individuals involved. People can own parts of the corporation by owning “shares”, thus making them shareholders. The shareholders are the ownership structure of the corporation and elect the corporation’s directors. Directors are what is referred to as the “mind management” of the corporation, responsible for setting the mission and vision of the corporation and making major business decisions. The directors, in turn, appoint the officers of the corporation, including the Chief Executive Officer and Chief Operating Officer (you may also have heard the term “C-suite”, which refers to a corporation’s officers). The separate ownership of the corporation by shareholders gives rise to a concept known as limited liability. Shareholders are considered to be responsible to the corporation only to the amount they have invested. Should the corporation be sued or enter bankruptcy, each shareholder can lose only the amount they invested, and creditors cannot go after their personal assets.
A corporation in Canada may be private, public, not-for-profit, or a “professional corporation”.
- Private corporations are by far the most common. An individual may establish a private corporation with only themselves as the sole shareholder, director, and officer, and this is commonly done by individuals carrying on business. Multiple individuals may be a part of the private corporation as well; it is distinguished from a public corporation on the basis of its shares being privately held and not available to be traded publicly.
- On the other hand, a public corporation has its shares listed on some sort of public exchange – you’ll likely have heard of the Toronto Stock Exchange or the New York Stock Exchange. When a corporation is publicly listed, anyone may buy and sell its shares, and a public corporation will always have many more shares outstanding than a private corporation. Almost all of the largest companies in the world are public corporations.
- A corporation can also be established as a Not-for-Profit corporation, meaning that it is being established for some sort of charitable or philanthropic purpose. A Not-for-Profit corporation does not have shareholders, and the company does not owe a duty to deliver a profit to shareholders. Instead, a Not-for-Profit corporation is dedicated to some social purpose. The corporation may also, in many cases, accept charitable donations and issue donation receipts.
When a corporation, or any other business entity, sell shares of ownership (whether of itself or another entity) or any other sort of tradable financial asset (such as a bond), it is said to be transacting in securities. Securities law is a vast and complex area, and although it overlaps much with corporate law, there are still differences between the two.
What sort of laws governing corporate law in Canada?
The Canadian Business Corporations Act in Canada and the Business Corporations Act in Alberta govern the formation, use, operation, and ownership of business corporations. There is no national securities regulator in Canada. Instead, each province has its own securities legislation, which establishes a securities regulator for the province – this legislation is usually called the Securities Act.
What sort of work would a corporate lawyer be involved in?
A common type of work for a corporate lawyer will be incorporating a company. Incorporation requires the submission of Articles of Incorporation to a licensed registry in any province and may be done under either the provincial or Federal Act.
Corporate lawyers also often handle securities work. At a minimum, all corporate lawyers will be aware of basic securities regulations in Canada and understand how to handle basic security transactions, such as buying and selling shares or bonds of a privately-held company.
Points of Interest
- The same individual may be a shareholder, director, and officer of a corporation. Generally, a concept called the “corporate veil” protects the individual assets of that person from being exposed to liability when they are acting through a corporation (except in cases of director liability due to negligence, or fraud such as tax evasion). In rare cases, courts have the power to “pierce” the corporate veil and hold the sole shareholder and director personally liable for acts of the corporation, but this is generally only done in extreme cases.
- In 2011, an attempt by the Federal government to enact a new statute creating national securities regulation was found to be unconstitutional by the Supreme Court of Canada, with the Court deciding that securities were best regulated by each province in cooperation with each other, rather than by one set of regulations nationally.
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