Business Associations
NSCA s.21 → Table A regs are default – apply unless expressly overridden in Articles
o If companies’ articles are silent on an issue i.e., does not exclude or modify a procedure set out in
Table A Regs, or do not have articles at all, then Table A Regs would apply (e.g., who has
borrowing power)
Non-Corporate Forms of Business Enterprise
Sole Proprietorship
Administrative convenience
o Minimal regulation (no registry docs except registration of business name)
o Low cost
o Easy to co-own and have employees
Formation of SP
o Register business name, consider HST registration, open a bank account
Single owner, can have employees (but SP cannot be own employee – cannot contribute to pension)
An SP is not a sperate legal entity (“you are the business”)
o Any contract with the business is a contract with you
o You personally are directly liable for any tort you commit in course of doing business and
vicariously liable for employees’ torts
o Unlimited liability – tort damages come out of your own pocket
Tax structure → advantageous if business expected to lose money in early years
o Business income taxed as SP’s personal income (individual progressive rates) even if kept within
business (e.g., R&D) rather than drawing salary
o Benefit – If negative revenue, loss can be carried 3yrs back or 7rs forward, to lower taxes of
profitable years/avoid yo-yoing between tax brackets
o Benefit – if spouse is employee of SP, can deduct their wage from SP’s income to pay less
taxes/fall into lower bracket
o Contrast with corp – corp is a distinct tax payer from owner, can’t arrange tax affairs together
Upon death of the SP, the business ceases to exist
o But assets of SP are normally freely transferrable
General Partnerships (“PP”)
Description
1. The business is NOT a separate legal entity, it is a relationship between legal entities
a. Each partner is personally liable for each other’s debts (e.g., if one P fails to pay a supplier, the
supplier can sue the other P in contract to recover, reaching the P’s personal assets)
2. Tax calculated at the entity level
a. Each P taxed individually on share of PP income (deemed to have personally made/lost their
proportionate share measured by profit/loss allocated to them in PPA) → losses can be used to
offset and reduce other income of that P
, b. PP is a separate legal entity → account for profit/loss of the PP as a whole (profit = revenue minus
expenses), then allocate a share of the profit/loss to each P (proportional to % of risk/loss allocated
to them in a PPA)
3. PPs operate through the law of agency with each P being an agent for all the others (NSPA s.8; Cox)
a. Each P has fiduciary obligations to one another
b. Every P is an agent of the PP – if your busines partner goes to Sobeys and enters into wholesale
agreement to supply your business 10lbs of sugar a week, then she is binding your business/you to
that agreement. So, it’s good to have stuff in written PPA setting out who has authority to make
certain agreements
4. GPs cannot be own employee → cannot contribute to pension
5. Easier to form/dissolve a PP than a corporation, BUT harder to add Ps (e.g., amend PPA) than issue new
shares to new SH in corporation
Only one formal prerequisite for formation: registration under PBNRA s.3(1) to claim name of
business. But you’d also want to register for HST and open a bank account. Consequence of not
registering → fine (s.19); inability to bring legal action (s.20)
Formation
PPs can arise in two ways:
a. Deliberately, by entering into Written PPA
See normal inclusions in Casebook p.1-16
Allocation of profits
Allocation of loss
Voting/mgmt powers
Investment by each P
b. Courts may infer PP under NSPA s.27, which means inferring
1. The parties intended to enter PP, as defined in NSPA s.4
Look to dealings between parties and their dealings with 3rd parties → is it consistent with a
subjective intention to carry on business in common with a view to profit?
2. An oral/written agreement setting out rights/obligations is present
Agreement must have all essential elements of a valid, binding contract
Offer containing essential terms + acceptance
Certainty of agreed terms
Consideration
Intention to create legal relations
Inferring the existence of a PP
Whether a PP exists is question of fact, all aspects of the business relationship are to be considered in
each case (Doran v Duff)
CL test to meet statutory definition (Backman)
1. Carrying on business
i. Contextual
ii. Can be new or existing (can be acquiring an existing business)
iii. May be formed by single transaction
iv. Not necessary to show the parties held meetings/made decisions
, v. Even the passive receipt of rent may be sufficient
2. In common
i. Intent to enter PP, as evidenced by express agreement or implied by facts e.g., a contract
setting out rights/obligations need not be called a “PP Agreement” to be considered one
through implication (Robert Porter)
1. Indicators of intention may include: (Boudreau)
a. Right to share in profits *strong, but not determinative
b. Duty to share the losses – e.g., filing tax returns together
c. Degree of control to be exercised by parties – capital contribution is not
necessary; knowledge and helping out business is enough to imply a PP
2. But, can be found even if parties hadn’t deliberately thought about forming PP
Purpose for which PP is alleged to exist is very important factor (combined
effect of Beaudoin and Kuchirka)
ii. Dormant partner is not fatal – even if only one partner manages the business/does
everything, can still be a PP in common
iii. Representations to 3rd parties relevant: do Ps hold themselves out to
lenders/suppliers/clients as Ps?
3. With a view to a profit
i. As evidenced by the intentions of the parties
ii. Does not require a net gain over a period of time (can lose money)
iii. An ancillary intention to make profit eventually is sufficient (Spire Freezers)
What happens when a PP dissolves in the absence of a written PPA? (Boudreau)
No PPA or other evidence to support oral reps of one P (that they had no intent to divide equally upon
dissolution) → courts will defer to default rules in NSPA and CL to determine who gets what upon dissol.
o Presumptive equality between the parties (50/50 on profit/loss) (s.27)
o At CL, Ps have fiduciary obligations to each other → everything is split equally, absent a statutory
provision to the contrary
o Therefore, the assets will divide equally between the Ps
Terms of Partnership
Written PPA → rights/obligations of Ps determined or varied by PA
No written PPA → rights/obligations of Ps determined by NSPA/CL by default
NSPA rules set out in s.22-34
s. .23 – Partnership property defined (see p.20)
o PP Property → must be held in and applied by the Ps exclusively for purposes of PP and in
accordance with written PPA, rather than private purpose of a P
o Written PPA should provide what is PP property and what is not, if issue arises and no express
arrangement, the intention will be inferred from circumstances
Source from which property obtained
Purpose for which property acquired
Use of property
s.23(2) – Special case of devolution of land
, s.5(a) – Nuance to s.23 → unless contrary intention appears, joint ownership does not in and of itself
create a PP in property, can jointly own property with Ps and not as Ps
s.24 – Buying property with firm money → PP property
s.25 – PP property, unless contrary intention appears, will be treated as personal/moveable property
rather than real/heritable property
s.26 – Procedural requirements concerning execution against PP property
s.27(a)-(i) – Nine rules to define relative interests and duties of Ps
o Codifies CL – e.g., presumptive equality between Ps
o Can be overridden by implied/written PPA
Right to participate in mgmt of business
Right to consent to new P being added
Difference of opinion decided by majority vote, but changes in nature of business requires
unanimous consent
s.28 – No majority of Ps can expel any P unless a powder to do so is provided for by express
agreement between Ps
s.29 – Giving notice to end PP
Relationship between Ps → fiduciary obligations at CL
Duty of care and skill (reasonable)
Duty of loyalty
o Strict because law of agency (you can really fuck your P over)
o Right to info possessed by other Ps
o Cannot act at expense of other Ps
o No secret profits
Breach of FD can occur even if PP has not yet been formed (e.g. use of info during negotiations towards
PP may breach FD)
Most FDs can dissolve if the other P repudiates their own FD obligations – e.g. if P1 violates FD1, then
P2 can violate FD2 without being sued for breach
Relationship of Ps to 3rd Parties → law of agency
s.8 – Every P is an agent of the PP → any act of one P, acting as a P, done in the course of business in the
usual way, binds the firm and other Ps, unless (1) the acting P lacks authority to act for firm in that
particular area; and (2) the person whom the P is dealing with is either (a) aware that the P lacks authority;
or (b) does not know/believe him to be a P
s.9 – Meeting the above criteria will bind the firm
o Need not even be a P (e.g. can be authorized by P to sign document in firm’s name)
s.10 – Firm not bound where one P pledges credit of the firm for a purpose not connected with the firm’s
ordinary course of business, unless specifically authorized to do so by other Ps
s.11 – If Ps agree to restrict individual power to bind firm → any person who has notice of agreement is
bound by such restrictions
s.12-17 – Liability for certain situations
s.13 – If P acting in ordinary course of business commits a wrongful act → firm is liable (application of
vicarious liability)
NSCA s.21 → Table A regs are default – apply unless expressly overridden in Articles
o If companies’ articles are silent on an issue i.e., does not exclude or modify a procedure set out in
Table A Regs, or do not have articles at all, then Table A Regs would apply (e.g., who has
borrowing power)
Non-Corporate Forms of Business Enterprise
Sole Proprietorship
Administrative convenience
o Minimal regulation (no registry docs except registration of business name)
o Low cost
o Easy to co-own and have employees
Formation of SP
o Register business name, consider HST registration, open a bank account
Single owner, can have employees (but SP cannot be own employee – cannot contribute to pension)
An SP is not a sperate legal entity (“you are the business”)
o Any contract with the business is a contract with you
o You personally are directly liable for any tort you commit in course of doing business and
vicariously liable for employees’ torts
o Unlimited liability – tort damages come out of your own pocket
Tax structure → advantageous if business expected to lose money in early years
o Business income taxed as SP’s personal income (individual progressive rates) even if kept within
business (e.g., R&D) rather than drawing salary
o Benefit – If negative revenue, loss can be carried 3yrs back or 7rs forward, to lower taxes of
profitable years/avoid yo-yoing between tax brackets
o Benefit – if spouse is employee of SP, can deduct their wage from SP’s income to pay less
taxes/fall into lower bracket
o Contrast with corp – corp is a distinct tax payer from owner, can’t arrange tax affairs together
Upon death of the SP, the business ceases to exist
o But assets of SP are normally freely transferrable
General Partnerships (“PP”)
Description
1. The business is NOT a separate legal entity, it is a relationship between legal entities
a. Each partner is personally liable for each other’s debts (e.g., if one P fails to pay a supplier, the
supplier can sue the other P in contract to recover, reaching the P’s personal assets)
2. Tax calculated at the entity level
a. Each P taxed individually on share of PP income (deemed to have personally made/lost their
proportionate share measured by profit/loss allocated to them in PPA) → losses can be used to
offset and reduce other income of that P
, b. PP is a separate legal entity → account for profit/loss of the PP as a whole (profit = revenue minus
expenses), then allocate a share of the profit/loss to each P (proportional to % of risk/loss allocated
to them in a PPA)
3. PPs operate through the law of agency with each P being an agent for all the others (NSPA s.8; Cox)
a. Each P has fiduciary obligations to one another
b. Every P is an agent of the PP – if your busines partner goes to Sobeys and enters into wholesale
agreement to supply your business 10lbs of sugar a week, then she is binding your business/you to
that agreement. So, it’s good to have stuff in written PPA setting out who has authority to make
certain agreements
4. GPs cannot be own employee → cannot contribute to pension
5. Easier to form/dissolve a PP than a corporation, BUT harder to add Ps (e.g., amend PPA) than issue new
shares to new SH in corporation
Only one formal prerequisite for formation: registration under PBNRA s.3(1) to claim name of
business. But you’d also want to register for HST and open a bank account. Consequence of not
registering → fine (s.19); inability to bring legal action (s.20)
Formation
PPs can arise in two ways:
a. Deliberately, by entering into Written PPA
See normal inclusions in Casebook p.1-16
Allocation of profits
Allocation of loss
Voting/mgmt powers
Investment by each P
b. Courts may infer PP under NSPA s.27, which means inferring
1. The parties intended to enter PP, as defined in NSPA s.4
Look to dealings between parties and their dealings with 3rd parties → is it consistent with a
subjective intention to carry on business in common with a view to profit?
2. An oral/written agreement setting out rights/obligations is present
Agreement must have all essential elements of a valid, binding contract
Offer containing essential terms + acceptance
Certainty of agreed terms
Consideration
Intention to create legal relations
Inferring the existence of a PP
Whether a PP exists is question of fact, all aspects of the business relationship are to be considered in
each case (Doran v Duff)
CL test to meet statutory definition (Backman)
1. Carrying on business
i. Contextual
ii. Can be new or existing (can be acquiring an existing business)
iii. May be formed by single transaction
iv. Not necessary to show the parties held meetings/made decisions
, v. Even the passive receipt of rent may be sufficient
2. In common
i. Intent to enter PP, as evidenced by express agreement or implied by facts e.g., a contract
setting out rights/obligations need not be called a “PP Agreement” to be considered one
through implication (Robert Porter)
1. Indicators of intention may include: (Boudreau)
a. Right to share in profits *strong, but not determinative
b. Duty to share the losses – e.g., filing tax returns together
c. Degree of control to be exercised by parties – capital contribution is not
necessary; knowledge and helping out business is enough to imply a PP
2. But, can be found even if parties hadn’t deliberately thought about forming PP
Purpose for which PP is alleged to exist is very important factor (combined
effect of Beaudoin and Kuchirka)
ii. Dormant partner is not fatal – even if only one partner manages the business/does
everything, can still be a PP in common
iii. Representations to 3rd parties relevant: do Ps hold themselves out to
lenders/suppliers/clients as Ps?
3. With a view to a profit
i. As evidenced by the intentions of the parties
ii. Does not require a net gain over a period of time (can lose money)
iii. An ancillary intention to make profit eventually is sufficient (Spire Freezers)
What happens when a PP dissolves in the absence of a written PPA? (Boudreau)
No PPA or other evidence to support oral reps of one P (that they had no intent to divide equally upon
dissolution) → courts will defer to default rules in NSPA and CL to determine who gets what upon dissol.
o Presumptive equality between the parties (50/50 on profit/loss) (s.27)
o At CL, Ps have fiduciary obligations to each other → everything is split equally, absent a statutory
provision to the contrary
o Therefore, the assets will divide equally between the Ps
Terms of Partnership
Written PPA → rights/obligations of Ps determined or varied by PA
No written PPA → rights/obligations of Ps determined by NSPA/CL by default
NSPA rules set out in s.22-34
s. .23 – Partnership property defined (see p.20)
o PP Property → must be held in and applied by the Ps exclusively for purposes of PP and in
accordance with written PPA, rather than private purpose of a P
o Written PPA should provide what is PP property and what is not, if issue arises and no express
arrangement, the intention will be inferred from circumstances
Source from which property obtained
Purpose for which property acquired
Use of property
s.23(2) – Special case of devolution of land
, s.5(a) – Nuance to s.23 → unless contrary intention appears, joint ownership does not in and of itself
create a PP in property, can jointly own property with Ps and not as Ps
s.24 – Buying property with firm money → PP property
s.25 – PP property, unless contrary intention appears, will be treated as personal/moveable property
rather than real/heritable property
s.26 – Procedural requirements concerning execution against PP property
s.27(a)-(i) – Nine rules to define relative interests and duties of Ps
o Codifies CL – e.g., presumptive equality between Ps
o Can be overridden by implied/written PPA
Right to participate in mgmt of business
Right to consent to new P being added
Difference of opinion decided by majority vote, but changes in nature of business requires
unanimous consent
s.28 – No majority of Ps can expel any P unless a powder to do so is provided for by express
agreement between Ps
s.29 – Giving notice to end PP
Relationship between Ps → fiduciary obligations at CL
Duty of care and skill (reasonable)
Duty of loyalty
o Strict because law of agency (you can really fuck your P over)
o Right to info possessed by other Ps
o Cannot act at expense of other Ps
o No secret profits
Breach of FD can occur even if PP has not yet been formed (e.g. use of info during negotiations towards
PP may breach FD)
Most FDs can dissolve if the other P repudiates their own FD obligations – e.g. if P1 violates FD1, then
P2 can violate FD2 without being sued for breach
Relationship of Ps to 3rd Parties → law of agency
s.8 – Every P is an agent of the PP → any act of one P, acting as a P, done in the course of business in the
usual way, binds the firm and other Ps, unless (1) the acting P lacks authority to act for firm in that
particular area; and (2) the person whom the P is dealing with is either (a) aware that the P lacks authority;
or (b) does not know/believe him to be a P
s.9 – Meeting the above criteria will bind the firm
o Need not even be a P (e.g. can be authorized by P to sign document in firm’s name)
s.10 – Firm not bound where one P pledges credit of the firm for a purpose not connected with the firm’s
ordinary course of business, unless specifically authorized to do so by other Ps
s.11 – If Ps agree to restrict individual power to bind firm → any person who has notice of agreement is
bound by such restrictions
s.12-17 – Liability for certain situations
s.13 – If P acting in ordinary course of business commits a wrongful act → firm is liable (application of
vicarious liability)
