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Ingenuity

Ingenuity. CE 402 Law for Engineers. 1. The Canadian Legal System 5. Business Organizations 25. Securities Law – Disclosure & Liability Jim White, P.Eng. jrw@shk.ca 604.408.2038. Samuels and Sanders, 1 st & 2 nd ed. Smythe, Soberman, Easson. Chapter 1 The Canadian Legal System.

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Ingenuity

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  1. Ingenuity

  2. CE 402 Law for Engineers • 1. The Canadian Legal System • 5. Business Organizations • 25. Securities Law – Disclosure & Liability Jim White, P.Eng. jrw@shk.ca 604.408.2038 JRW / SHK 679002.2

  3. Samuels and Sanders, 1st & 2nd ed.

  4. Smythe, Soberman, Easson

  5. Chapter 1 The Canadian Legal System

  6. The Canadian Constitution • Statutes • British North America Acts, • Canadian Constitution Act; • Charter of Rights and Freedoms • Conventions • Common Law & Caselaw The Canadian Constitution

  7. Division of powers: • Most areas are provincial by default. • private law is generally within provincial government jurisdiction; • exceptions arise where jurisdiction is expressly federal: competition, criminal, railways, ports, banks. • Operational conflicts: • federal statute prevails

  8. Canadian Constitution (Continued) • Law within provincial government jurisdiction varies between provinces: lien legislation, most employment and labour legislation. • Territories: power assigned by federal government, but act much like provinces • Federal Law applies across the country

  9. Canadian Court System • “Rule of Law” = Law governs, not people. • Separation of powers is a constitutional principle requiring independence of the judiciary: an essential element of the Rule of Law. • Each province has a superior trial level court and court of appeal: judges federally appointed • Supreme Court of Canada: matters of national importance (require leave)(Continued)

  10. Canadian Court System (Continued) • Each province has a lower trial court: jurisdiction is limited by subject matter (e.g. cannot deal with liens) and value of claim (e.g. BC Small Claims Court has claim value limit of $25 000) • Lower trial courts typically also handle criminal and family matters

  11. The Creation of Law • Law is dynamic: Courts add interpretations. • Statutes and regulations: federal and provincial. • Authority can be delegated e.g. to Municipalities. • E.g. 2013, Parisian women got the right to wear pants without a permit, required since 1800. • Common law: rules established by previous decisions. • As judges interpret and apply statutes and common law rules, more law is created.

  12. International Law (beyond Scope) • International treaties; must be ratified • NAFTA • Professionals must be licensed or permitted in other jurisdictions: often by agreement between Associations • Tax treaties: minimize double taxation

  13. Subject Areas and Principles (details by others) • Contract law Contracts are voluntary, often need not be in writing, define rights and responsibilities • Tort law • Duty to not harm neighbours • Negligence is just one type of tort, but is common in construction disputes

  14. Chapter 5: Business Organizations

  15. Overview • Many different forms of business organization: each has strengths and weaknesses • Main types: • Sole proprietorship [need not register] • Corporation (Company) [must register] • Partnership [should be registered, not must] • Others: LLP, LP, JV, etc.

  16. Corporations: Introduction • The corporation is a separate legal person • Limited liability • Requires registration of a name, and that name must warn the public of the limited liability nature of the enterprise • Can be incorporated federally or provincially

  17. Corporations: Separate Legal Entity • The corporation has a separate legal identity from its shareholders and directors • Corporation should have separate bank accounts and must keep separate records. • Shareholder's may be required practically, to guarantee the obligations of the corporation

  18. Corporations: Organization & Control • Articles of incorporation define the nature of the business, and the ownership structure. • Owned by shareholders, who elect directors. • Directors appoint officers, who may also be directors • Day to day management is by the officers • Officers and directors must be individuals i.e. a corporation cannot be an officer or director

  19. Corporations: Capacity • Being a legal person, the corporation can enter into contracts in its own name • Depending on the type of contract, special authorization may be required • The articles of incorporation are like a corporate constitution • may restrict the activities the business can engage in, or specify special approval procedures for certain contracts.

  20. Corporations: Debt and Equity • Debt: corporate funding obtained through borrowing. • Equity: corporate funding obtained through investment by shareholders. • Equity is also generated through profits of the corporation.

  21. Corporations: Public v Private • Private (closely held) corporation: • all shares held by a small group of shareholders • shares not traded on a public market • more limited disclosure requirements than for public corporations • Public corporation: • shares traded publicly • stringent filing and disclosure requirements

  22. Corporations: Officers & Directors • Officers and Directors owe fiduciary duties to the corporation; must disclose conflicts [eg. personal v. corp interest; opportunities; cost v. quality] • Risk of personal liability for officers and directors: • Derivative action [Co. v. officer/director] • Liability under statute e.g. environmental regulations, employment standards, tax • Due diligence defense: Acted reasonably and took reasonable precautions? • Mitigate risk: corporate indemnity; insurance

  23. Corporations: Insider Trading • Unlawful insider-trading = trading in reliance on information not disclosed to the public • Not all insider trading is unlawful • Stock tipping also prohibited • Insider trading rules apply to share and commodities markets • Civil and criminal liabilities

  24. Sole Proprietorship • An individual carrying on business • Least expensive / Simple to administer • Unlimited liability • Required to register a business name? [NOT] • Not tax efficient for high income levels, BUT few barriers to entry

  25. Partnerships: Introduction • Simple to set up and administer • Governed by provincial legislation • Each partner is jointly liable for the debts and obligations of the partnership • Liability of partners is not limited to the partner's proportionate share. • Not liable for a partner’s other debts.

  26. Partnerships: Formation • Do not require written agreement • The nature of the relationship, not the label given to it by the partners, determine whether it is a partnership • Parties jointly participating to make a profit are likely in partnership • Generally, registration is required [Practically] (Continued)

  27. Partnership: Formation (Continued) • A corporation may be a partner • Fewer fees and filing requirements for partnerships than for corporations • Tax implications may be complicated for partnerships but may have benefits.

  28. Partnerships: Fiduciary Duty • Partners owe each other fiduciary duties • Fiduciary duty: • Special relationship of trust • Required to put the interests of the partnership ahead of one's own interest where there is a conflict. • Partnership agreement cannot negate the fiduciary duty

  29. Limited Partnerships [beyond scope] • Require at least one general partner and at least one limited partner • Limited partners liable only to the extent of their investment • General partner has unlimited liability (but the general partner could be a corporation) • Limited Liability Partnerships [WAY beyond scope]

  30. Chapter 25 Securities Law

  31. Overview • Securities = Publicly traded shares, bonds, and other investment devices • feds and provinces regulate securities • Mostly provincial • Securities commissions promote fair and efficient trading of securities • prohibit insider trading • regulate disclosure of information

  32. Disclosure Requirements • Prospectus = A document that provides the public with information about a publicly traded corporation • A prospectus must contain full, true, and plain disclosure of all material facts about the security being issued • Before being released to the public, the prospectus must be approved by the relevant securities commissions • Disclosure requirements are ongoing

  33. Technical Disclosure Guidelines • Special standards have developed for disclosure related to mining: Scientific and technical information must be reviewed by a qualified person before being released • Often these are engineers, most often mining or geological

  34. Common Law and Statutory Liability • Geoscientists and engineers face liability for misrepresentation if their reports, or a prospectus contains false statements • Securities legislation creates another cause of action if the contents of inaccurate technical reports are used to support a prospectus or to attempt a company takeover • It is not possible to disclaim statutory liability

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