Complex Corporate Structures

Event 6

Deakin University CRICOS Provider Code: 00113B

6.1 Business structures

• Overview of different business structures

– Advantages and liabilities

• Why organisations choose different business structures

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6.2 Business structures in Canada• Corporations– Private corporations

o Canadian-controlled private corporation (CCPC)o Other private corporation

• Public corporations– Corporation controlled by a public corporation

• Other types of corporations

• Other business structures– Sole traders/proprietorships

– Partnerships and Limited partnerships

– Joint ventures

– Branch offices and Subsidiaries

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6.3 Characteristics of a corporation

• Separate legal entity

• Limited liability

• Capacity to sue and be sued

• Perpetual succession

• Owns property in its own right

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6.4 Classification of corporations

• By ownership

– Private – shares held in private

– Public – public can become shareholders

• By members’ liability

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6.5 Private corporations

• Cannot offer shares or debentures to the public

• Reduced financial reporting requirements compared with public corporations

• Smaller in terms of number of shareholders but not necessarily in terms of assets or profitability

• Different tax treatment to public corporations

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6.6 Public corporations

• Can offer shares or debentures to the public

• Subject to greater regulation thanprivate corporations

• Corporations listed on a stock exchange(e.g. TSX) must be public but not all public corporations are listed

• Subject to stock exchange listing requirements (e.g. TSX Company Manual) and restrictionsif listed

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6.7 Members’ liability

• Corporation limited by shares

• Corporation limited by guarantee

• Unlimited liability corporation (only in Alberta and Nova Scotia)

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6.8 Other types of registered corporations• Credit unions

• Cooperatives

• General insurers

• Crown corporations

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6.9 Other types of business structure• Sole traders

• Partnerships and Limited partnerships

• Joint ventures

• Branch offices and Subsidiaries

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6.10 Partnerships

• The partnership is not a separate legal entity

• Partners are jointly and severally liable for the debts of the partnership

• Easy to establish and dissolve, so less stable than corporate form of organisation

• No perpetual succession

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6.11 Limited partnerships

• Made up of general partners and limited partners

• General partners:

– Contribute capital and share profits

– Exercise managerial power

– Held personally liable for all debts and obligations

• Limited partners:

– Contribute capital and share in the profits

– Take no part in management

– Not held responsible for debts or liability

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6.12 Joint ventures

• Like a partnership, is not an incorporated entity and is not a separate legal entity from the participants in the joint venture:

– Absence of limited liability for the participants

– Absence of perpetual succession

• Simple and inexpensive to establish, maintain and dissolve

• Unlike a partnership, joint ventures are not subject to joint and several liability and are not agents for each other

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6.13 Branch offices and subsidiaries• Branch offices:

– Available to foreign corporations

– Provide some unique tax benefits

– Registration/licence required

• Subsidiaries:

– Used by foreign corporations to expand into Canada

– Separately incorporated under Canadian regulations

– Treated the same as branch offices

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6.14 Overseas business structures• The concepts of public vs private ownership

and differing types of liability apply in the US,UK and Europe

• Differences occur in registration requirements, reporting requirements, reporting dates, accounting standards, stock exchange listing requirements, etc.

• State differences exist in the US

• National differences exist within the EU

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6.15 Choosing the appropriate business structure• Economic pressures for globalisation

• Political and national issues

• Legal implications for operating in other countries

• Advantages of mergers and acquisitions versus joint ventures, partnerships, consortia, strategic alliances, subcontracting and ad hoc arrangements for individual projects

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