The Role of Boards, Advisory Panels and Service Providers

MaRS Entrepreneurship 101

Craig C. Thorburn Blake, Cassels & Graydon LLP

March 25, 2009

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The Corporate Model   Corporation

→  Separate legal person →  Limited liability

  Triad →  Shareholders →  Directors →  Officers

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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

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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”

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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

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Service Providers   Accountants   Lawyers   Investment bankers   Advertising agencies   MaRS

→  Business Mentorship and Entrepreneurship Program