Corporate Things

Question 1

What does issuing voting retractable preferred shares allow?

Answer 1

Owner to maintain control of company and keep their capital value

Question 2

What does issuing convertible PS do? And no par value?

Answer 2

You may no be able to maintain control of the company and if there is no par value then you are also not guaranteed to receive the capital

Question 3

What does issuing new Common Shares at nominal value do?

Answer 3

Allow (children eg.) to benefit from companies growth

Question 4

What do voting right shares do?

Answer 4

Give person control of company by order of shares

Question 5

What do voting retractable shares do?

Answer 5

Allow someone to maintain control of the company while issuing common shares to someone else and giving them the growth

Question 6

Sole Proprietors and Partnerships are vulnerable to what?

Answer 6

Creditors

Corporations are not.

Unincorporated businesses put risks towards personal assets

Question 7

Events that would trigger the need of a buy / sell agreement

Answer 7

1. Death: surviving spouse would default as new shareholder and they may not be equipped or interested in doing so
2. Disability, serious illness: If one falls ill the other shareholder may not want to feel they’re carrying the burden of both partners when one is physically unable to contribute to further business acitivies, triggering the need to buy the other out
3. Marital Breakdown: a marriage breakdown could trigger either partner to give up ownership of the corporation to deal with matrimonial property obligations and division of assets
4. Personal bankruptcy: avoids creditors hands if other partner buys out one
5. Loss of Capactity: if one can’t contribute to the growth and future of the company it is likely the other will want to buy them out
6. Morals Clause: if one partner hurts the image of the company it is likely one will want to buy the other out.

Question 8

Important things to consider when forming a thorough buy sell agreements

Answer 8

1. Timing of Purchase: set times per event or unique need, eg 30 days 90 etc
2. Valuation Price: pay a professional business that has expertise in business valuations
3. How will the proceeds be taxed? - capital dividend, eligible dividend etc etc
4. Dispute resolution: how will the partners handle a dispute?
5. Mismatch between available funds and valuation? Donate or divide equally?