Chapter 16 - Chapter 16: The Corporate Form: Operational...

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Chapter 16: The Corporate Form: Operational Matters Corporate Liability Liability in Tort A corp can experience two distinct kinds of liability in tort: primary liability and vicarious liability A corp has a primary liability for tort when it is regard as the entity that actually committed the tort in question Identification theory: a theory specifying that a corp is liable when the person committing the wrong is the corp’s directing mind Generally, it is the highly placed corporate officers who are classified as directing minds A corp has vicarious liability when the tort has been committed by an agent or employee who is not directing mind of the corp Liability in Contract A corp is bound by the actions of the agent only if the agent was acting within his actual or apparent authority To avoid personal liability, the person signing the document on behalf of a corp should ensure that the document contains a clause clearly indicating that the person is signing on behalf of the corp and is not signing in her personal capacity Criminal and Regulatory Liability Criminal Liability The corp has committed the crime if the person committing the crime is the directing mind of the corp and he committed it in the course of his duties and did so most;ly for the benefit of the corp Regulatory Offences A corp also faces liability pursuant to a wide range of statutory enhancements related to taxation, human rights, pay equity, employment standards consumer protection, unfair or anticompetitive business practices, occupational health and safety, environmental protection Relevant legislation often imposes penalties on the cotp and sometimes on its directors and officers, incl. civil liability for damages The above offences are known as regulatory offences They have a criminal aspect b/s they involve some kind of punishable conduct that is contrary to the public interest Directors and Officers
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Directors can declare dividends, call shareholder meetings, adopt bylaws, and issue share Directors are usually not in the position to carry out the actual management themselves and generally are authorized to appoint officers to carry out many of their duties and exercise most of their power However this does not relieve them of ultimate responsibility for the management of the corp Duties of Directors and Officers In exercising their management function, directors and officers have obligations contained in two broad categories: fudiciary duty and duty of competence Fiduciary Duty This duty requires directors and officers to act honestly and in good faith with a view to the best interests of the corp One of the central principals informing fiduciary duties in corp law can be summarized as follows: directors and officers must not allow their personal interest to conflict with their duty to the corp Self-dealing contract This is a contract in which fiduciary has a conflict of interest Under the Canada Business Corp Act, owner’s contract to sell equipment to his
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Chapter 16 - Chapter 16: The Corporate Form: Operational...

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