2021-02-10

MINE 8020

Module 6

Business Organizations
1

Reading
MINE8020: Module 6 2021

• Sanders and Samuels, Chapter 5

• BC Business Corporations Act, SBC 2002

• S 136 Duties of Directors
• s 141 Officers
• s 142 Duties of Directors and Officers

• Overview of Directors’ and Officers’ Duties and Liabilities,

Ciarrocchi, 2015

• Duties and liabilities of directors and officers, Canada.ca

• Duties and Liabilities of Directors and Officers 2

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Types of Businesses
MINE8020: Module 6 2021

• Sole proprietorship

• Partnership

• Corporation

• Joint Venture

Types of Businesses
MINE8020: Module 6 2021

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Sole Proprietorship MINE8020: Module 6 2021

• The simplest form of a business

• One person
 Performs all the functions required for the successful
operation of the business, and
 Assumes all the liabilities.
• “Self-employed”

• Not efficient for high income

Sole Proprietorship MINE8020: Module 6 2021

• Own name or ‘doing business as’ dba

• Carry on business by yourself and for yourself

• Personally enjoy the profits of the business

• Personally incur any business losses of the business

• Register business name with gov.bc.ca

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Partnership MINE8020: Module 6 2021

• When two or more people or corporations arrange to carry

on business together they register as a partnership

• Governed by Provincial legislation: BC Partnership Act

• Partnership is the relation which subsists between
persons carrying on business in common with a view of
profit.

• Share profit and losses personally

• Partnership agreements are not required but advisable

Fiduciary Duty
MINE8020: Module 6 2021

• Section 122(1)(a) of the CBCA and section 142(1)(a) of the

BCBCA.
• Special trust relationship. Honesty and good faith.

• Forbids partners from operating separate competing

business
• Partners must always act in the best interest of the
partnership (selflessly, honestly, loyally, confidentiality) and
declare conflicts of interest
• A partnership agreement cannot negate or alter fiduciary
duties 8

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Partnerships MINE8020: Module 6 2021

• Partnership Act, RSBC 1996

• Describes three kinds of partnership

1. General Partnership

2. Limited Partnership

3. Limited Liability Partnership - LLP

General Partnership
MINE8020: Module 6 2021

In a general partnership the partners are responsible

for all aspects of the business, including the debts of the

partnership.

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Limited Partnership MINE8020: Module 6 2021

General partner

• Unlimited liability

• Runs the business

Limited partner

• Limited to their financial contribution

• The ‘silent partner’ – no involvement in controlling the

business or providing services to the business

LLP – Limited Liability Partnership

MINE8020: Module 6 2021

• Available to professionals

• No general partner as in a Limited Partnership, because

everyone’s a general partner

• Each partner’s liability is limited to their contribution

• Legislation in some jurisdictions requires liability insurance

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Partnership – the Agreement MINE8020: Module 6 2021

• Who does what – management responsibilities

• Share of profits (and losses)

•%

• Calculation

• Contribution to working capital

Partnership – the Agreement MINE8020: Module 6 2021

• How to end – dissolution of the partnership (file a form)

• Getting rid of someone

• Withdrawal

• Expulsion of partner

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Corporation MINE8020: Module 6 2021

A corporation is a legal person separate legal entity

• Corporation / Corp.

• Incorporated / Inc.

• Limited / Ltd.

• Company / Co.

CorporationsMINE8020: Module 6 2021

Private
Private Public

Few shareholders Shareholders

Board of
Directors

Officers Employees

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Forming a Corporation MINE8020: Module 6 2021

• Canada – Canada Business Corporations Act, 1985 - CBCA

• BC – Business Corporations Act, 2002 - BCBCA

• CBCA and BCBCA set out legal duties and liabilities for

directors and officers

• Extra provincial registration

Private vs Public
MINE8020: Module 6 2021

Shares Offered to
“Closely Held”
Public

Securities
Few shareholders
legislation

Stock exchange

Publicly traded

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Private Corp.
MINE8020: Module 6 2021

• Restrictions
• Restrictions on share transfers
• Maximum 50 shareholders
• Public subscription prohibited

• Advantages
• Private
• Finances aren’t public

Public Companies
MINE8020: Module 6 2021

Securities Law – Another lecture

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Key reasons to incorporate MINE8020: Module 6 2021

• Limited liability

• Separate legal entity

• Liability for corporate debts and obligations is limited to

corporate assets

• Shareholders, employees, directors and officers aren’t liable

for corporation’s debts and obligations

Directors and Officers MINE8020: Module 6 2021

Shareholders
Elect
Directors

Directors
Appoint
Officers

CEO

CFO / VP Finance COO VP Exploration

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BC Business Corporations Act

MINE8020: Module 6 2021

Directors

Duty to manage

136 (1) The directors of a company must, subject to this Act,

the regulations and the memorandum and articles of

the company, manage or supervise the

management of the business and affairs of the

company.

BC Business Corporations Act

MINE8020: Module 6 2021

Officers

141 (1) Subject to subsection (3) and to the

memorandum and articles of a company, the directors
may appoint officers and may specify their duties.

…
(4) Unless the memorandum or articles provide otherwise,
the directors may remove any officer.

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Directors and Officers MINE8020: Module 6 2021

Duties of directors and officers

142 (1) A director or officer of a company, when exercising
the powers and performing the functions of a director or
officer of the company, as the case may be, must
(a) act honestly and in good faith with a view to the best
interests of the company,
(b) exercise the care, diligence and skill that a reasonably
prudent individual would exercise in comparable
circumstances,
(c) act in accordance with this Act and the regulations, &
(d) subject to paragraphs (a) to (c), act in accordance
with the memorandum and articles of the company.

Fiduciary Duty
MINE8020: Module 6 2021

(a) act honestly and in good faith with a view to the

best interests of the company

• Duty is owed to the Corporation

• Duty to avoid conflicts of interest

• Latin, to trust – think ‘fidelity’, loyalty

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Fiduciary Duty
MINE8020: Module 6 2021

Conflicts of Interest

• Transacting with the corporation

• Taking corporate opportunities

• Competing with the corporation

Duty of Care
MINE8020: Module 6 2021

(b) exercise the care, diligence and skill that a reasonably

prudent individual would exercise in comparable
circumstances,

• Reasonably prudent individual

• Reasonably prudent engineer?

• Duty owed to all stakeholders: employees, suppliers,

creditors, governments and the environment

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Duty of Care
MINE8020: Module 6 2021

• Business Judgment Rule

• Delegation and Reliance on Officers and Professionals

Liability of Directors & Officers

MINE8020: Module 6 2021

Statutory Sources: Many! > 100 (Federal and Provincial)

• Taxes
• Employer obligations
• Environmental offences

• Securities Law
“If businesses are operated through a partnership that
includes a corporate partner, the directors of that company
have directors’ duties and liabilities with respect to the
partnership business” Sarah Ciarrocchi

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Due Diligence
MINE8020: Module 6 2021

Strict liability offences

Proof of actions or omissions; intent is irrelevant

• Due diligence is a defense

Corporate Governance
MINE8020: Module 6 2021

Key governance policies

 Conflict of Interest
 Code of Conduct
 HR
 Job descriptions
 Whistle blower
 Environment

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Professional Governance Act

MINE8020: Module 6 2021

"firm" means

(a) a legal entity or combination of legal entities engaged in

providing services in respect of a regulated practice, or

(b) a government registrant, but does not include a legal entity

or combination of legal entities that may be exempted

from this Act by regulation of the Lieutenant Governor in

Council;”

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Engineering Corporations MINE8020: Module 6 2021

• Provincial Governance Act

• Permit to Practice

Permits corporations, partnerships or other legal entities to

practice professional engineering

Permit to Practice Manual is currently under development.

This document will be a comprehensive resource that provides
guidance to firms on the Permit to Practice requirements and
what must be included in the firm’s Professional Practice
Management Plan (PPMP)
https://www.egbc.ca/Practice-Resources/Firm-Practice/Professional-Practice-Management-Plan

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Professional Practice Management Plan (PPMP)

MINE8020: Module 6 2021

The PPMP must contain, at minimum:

• A code of conduct that identifies how the registrant firm will
ensure compliance with Engineers and Geoscientists BC’s Code of
Ethics;
• Policies and procedures meeting the quality management
requirements in the bylaws;
• Policies and procedures to ensure compliance with the
continuing education requirements;
• The organizational structure of the registrant firm;
• The names of the registrant firm’s Responsible Officer and
Responsible Registrant(s);
• The registrant firm’s area(s) of practice; and
• The Responsible Registrant(s) designated to each area of
practice at the registrant firm.
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Professional Governance Act

MINE8020: Module 6 2021

• Engineering and geoscience firms became regulated,

bringing BC in line with the rest of Canada.
• All firms that engage in the practice of professional
engineering or geoscience are now required to hold a
Permit to Practice.
• Applications open July 2, 2021, and firms will need to apply
by September 30, 2021.
• egbc.ca/firms
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Next Week

Module 7

Insurance & Employment Law

S&S Chapters 16 & 21
37

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