XYZ INC.

: SUMMARY OF THE FACTS

Harry Burns is a landscaper. He is a professor of horticulture and landscaping at the Sainte-Anne-

de-Bellevue School of Horticulture. In his spare time, he does landscaping, first for relatives and
friends, and then for an expanded customer base. Over the years, he has built a solid reputation
in Montreal West. He is overworked and seriously considering leaving his teaching position to
devote himself exclusively to his landscaping business. Harry Burns is the sole owner of this
business, which he operates under the name of “Landscaping Harry Burns”. The business makes
annual sales of over $30,000.

For her part, Sally Albright does bookkeeping at a nearby car dealership. Sally is also passionate
about flowers and horticulture. Harry and Sally plan to join forces to develop the landscaping
business. Their intention is to have, in all respects, equal participation in this endeavor. To this
end, Harry will make a contribution to the new business of all his tools and goods that he currently
uses in his business, including his truck and trailer, as well as the clientele he has developed, with
the exception of cash and accounts receivable. These tools and goods have, according to him, a
value of $60,000.

As for Sally, it was agreed that she would also invest $60,000. Sally, who is expecting certain sums
of money, has about $35,000 to invest presently; she will pay the balance of $25,000 within three
months, when she has received the expected amounts.

These investments from Sally allow to the company to acquire some new equipment and to have
working capital sufficient to ensure its expansion. During their meeting, Harry and Sally describe
their income forecasts for the first year of operation of their joint venture. According to them,
they will be working full time, hiring staff, and investing in new equipment, which should enable
the company to achieve in its first year a net profit of not less than $160,000 without calculating,
among the expenses of the business, the remuneration they will receive. As such, they also
inform you that they would like to receive for this first year a remuneration of $60,000 each in
order to maintain a balance of $40,000 worth of the profits.

1. Which legal vehicle (form of business) would be better for Harry and Sally to use for the sake
of their new joint venture? Indicate the vehicles available and, for each, indicate their advantages
and disadvantages. Justify your answers.

ADDITIONAL FACTS

Jess, Harry’s friend, mentions to Harry that his company, Construction Jess Inc., no longer has to
hold board meetings or shareholder meetings or to appoint an auditor. In addition, Jess informed
Harry that he is deemed as a shareholder to be authorized to do anything on behalf of the
company.

2. Harry and Sally find this advantageous and would like the company they establish under the
Quebec Business Corporations Act to function this way. Is this possible? Justify your answer.
Please see sections 213 to 220 of the Quebec Business Corporations Act.

ADDITIONAL FACTS

Sally is also the sole shareholder of Sally Investments Inc.. She is now aware of the benefits of the
simplified operation of the Quebec Business Corporations Act for corporations consisting of a
single shareholder. Sally wants Sally Investments Inc. to benefit from this simplified scheme.

3. Draft, effective September 25, 2023, the required single shareholder's declaration for this
simplified plan to apply to Sally Investments Inc. Sally must declare that she is the sole
shareholder, that she wishes to withdraw all powers from the board of directors, and that she
has decided not to have a board of directors.