Post on 18-Nov-2014
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The Role of Boards, Advisory Panels and Service Providers
MaRS Entrepreneurship 101
Craig C. Thorburn Blake, Cassels & Graydon LLP
March 25, 2009
3
The Corporate Model Corporation
→ Separate legal person → Limited liability
Triad → Shareholders → Directors → Officers
4
Shareholders Shareholders
→ Election of Directors (also removal) → Appointment of Auditors → Entitlement to receive Dividends → Proceeds on Winding up → Approval of major changes
• sale of all or substantially all assets • change of name • change of articles of incorporation
5
Directors Duty to Manage
→ “the directors shall manage, or supervise the management of, the business and affairs of the corporation”
Fiduciary Duty (Duty of Care) → Every director of a corporation in exercising powers and duties
shall • “act honestly and in good faith with a view to the best
interests of the corporation” • “exercise the care, diligence and skill that a reasonably
prudent person would exercise in comparable circumstances”
6
Director Liabilities Directors are “jointly and severally” liable to restore to the corporation
any amounts distributed or paid and not otherwise recovered by the corporation in certain circumstances for: → a purchase or redemption of shares → payment of a dividend → payment of an indemnity
Directors also liable in certain circumstances for: → unpaid wages of employees → unpaid income tax remittances → failure to make withholding tax payments → unpaid PST and GST → environmental liabilities → criminal offences
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Director Protections Due Diligence
Reliance on expert reports
D&O Insurance
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Officers Same duty of care as directors
Few statutory liabilities
Risk/Reward Mismatch
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Advisory Panels Expertise for corporation No liability for panel members Diversity of skills and views Don’t select people in your own image Angels
12202509.2 10
Service Providers Accountants Lawyers Investment bankers Advertising agencies MaRS
→ Business Mentorship and Entrepreneurship Program