Business Law in Canada

Running head: BUSINESS LAW IN CANADA 1
Business Law in Canada
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BUSINESS LAW IN CANADA 2
The principles of agency law are relevant to corporations in that they provide guidelines for
entities to follow in case of any eventualities. The principles of agency law outline fiduciary
instructions that govern the relationship between corporations, agents, and third-party players.
Corporations employ these principles to determine the type of authority relayed to the third
party.
Free transferability of shares allows shareholders to benefit from liquidity and deal with
situations such as a shareholder’s demise. The right is often modified by shareholder agreement
since the shareholders hold the rights to shares hence get to decide how they should be
transferred.
i. Increased federal regulations – corporates are subjected to more oversights such as
complicated tax filing
ii. Double taxation – dividends and profits paid to stakeholders are taxed as taxed doubly as
income
iii. High costs in forming corporations – Attorneys and legal agencies typically charge more
to allow the formation of corporations
iv. Higher state fees – corporations are charged annual franchise fees by the state
The memorandum is the basic important legal document that controls and provides guidelines on
a corporation’s external operations. Articles of incorporation represent the legal formation of a
corporation detailing company name, address, stock to be issued, an agent for service. The
articles of association regulate the corporation's internal affairs detailing initial capital and
conditions necessary for operation.

BUSINESS LAW IN CANADA 3
A corporation’s capacity is determined by its memorandum of association which outlines exactly
the main objectives and expertise provided by a corporation. An exception to the corporation
capacity rule is realized when a contractual agreement has already been made between parties
hence nothing can halt the contract or transaction from being fulfilled.
Yes. Preferred and common shareholders have a right to dividends and are entitled to claiming a
portion of the company's profits. Once dividends are announced, common shareholders have a
right to receive their share depending on the percentage payout as decided by the board of
directors. However, preferred shareholders get their dividends before the common shareholders.
It is becoming increasingly difficult to get prominent individuals to serve as directors of
Canadian corporations because they are highly in demand yet the supply of such people is
limited. A majority of prominent individuals are already members of more than a single board of
directors underscoring the demand for highly qualified persons.
In order to terminate a corporation in Canada, it is necessary to inform the Canada Revenue
Agency, fulfill any outstanding tax amounts. Termination of a corporation also requires filing a
final tax return and as well as financing the succession strategy. Payroll accounts also have to be
closed with the Canada Revenue Authority.
Employer to employee
I. Remunerate employee agreed amount for work done.
II. Adhere to safety and health guidelines.
III. Assign employees with duties.
IV. Afford employee Mutual Trust and Confidence.
V. Allow a reasonable chance for any complaints to be addressed.