Law Notes

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enough funds to repay loss, other partners must cover on behalf of the partner according to capital owned by partner at that moment

- Fiduciary Duty

o Highest level of faith and trust

o To place partner’s best interest above own’s and owed to act in the best interest

o No competition – especially where it is the partnership’s service

- Limited Partnership

o General and limited partner(s)

o Limited partners – not personally liable for losses, act more as investors

 Cannot participate in management

 Cannot be held forth as general partners

 Some fiduciary duty, as relates to investment and accounting

o All partnerships require at least ONE general partners – provide collateral

o Limited partner may not participate in control of the business, and cannot take part in any public notice (appear on headings, official papers, etc) - only confined by investment and cannot take out investment until dissolution of partnership

o Require registration

- Limited Liability Partnership (LLP)

o Creation of statute

o Intended for professions where liability is potentially huge and difficult to assess

 Lawyers and Chartered Accountants

o Requires professionals governing association mandate minimum levels of liability insurance

o Partnership itself liable for acts of all partners, employees, etc

o Partners liable for own acts and acts of those supervised

o Individual partners not liable for negligent acts of other partners

o Shift to large-scale insurance schemes

- Sophisticated Partnerships

o Corporations can partner with one another

o Short term ventures are possible, as are continuing relations

o Term “partner” doesn’t necessarily refer to partnership, likely does not

- Trusts (NOT TESTED)

o used to pass on estates

o includes fiduciary duty – no personal profit, avoid conflict of interest, administer strictly for best interest

- Foundations of Corporate Law

o Combined concepts of partnerships and trusts form the basis of modern corporate law

Corporations – Nature and Characteristics

Boardmatch Canada

- Organization that matches person who is looking to be on a board of director

*HISTORICAL THINGS WILL NOT BE TESTED, TESTED – ITEMS THAT ARE TODAY (relevance)

Historical Development

- Created by special charter

o Government pass law to create corporation (i.e. Hudson’s Bay Company – first corporation in Canada)

o

- Aimed at large public works

o Often things gov’t could not or did not want to do

- Problem of capital and limited liability

o Contributors distant from venture to muster large amount of diverse sources of capital

o No one would willingly assume personal liability

Natural Person Analogy

- Separate legal entity - existence in law but no material existence

- Directors control the management of a corporation (elected at beginning of corporations)

- Corporations ability to contract

o Only liable for own investment, personal assets are protected

- Limited Liability

o Natural person liability only extends to limits of his/her own individual property

- Problems

o Past: Corporations developed for specific purposes and cannot operate outside purpose (according to law)

o

- Constructive Notice & Ultra Vires Rule

o Parties are assumed to know any limits on the corporation

o Court treat statute and memorandum of association as body of law that powers corp

o Doctrine of COnstructive Notice - expectations that you must know the law but has been abolished in most General Act Juristdiction provinces - third parties not expected to examine memorandum and any act out of place in the position of a director would be considered Ultra Vire and become null

- Doctorative constructive notice – as people in the society, have to know the law

o Deemed to know the law

Nature of Corporation:

- Separate and distinct from shareholders, acts through authorized agents

- properly authorized agents may bind the corporation in contract with third parties

- SH possess limited liability for debt

- Corporation governed by statutory laws instead of contractual --> partnerships

Acting Through Agents

- Corporations can attract same rights, liabilities, obligations as individuals

o Problem with agents – in corporations, don’t know who is qualified to deal with corp

- Indoor Management Rule

o Indoor Management Rule - party