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 2

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 3

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 4

6.4 Classification of corporations By ownership – Private – shares held in private – Public – public can become shareholders By members’ liability 5

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 6

6.6 Public corporations Can offer shares or debentures to the public Subject to greater regulation than private 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 restrictions if listed 7

6.7 Members’ liability Corporation limited by shares Corporation limited by guarantee Unlimited liability corporation (only in Alberta and Nova Scotia) 8

6.8 Other types of registered corporations Credit unions Cooperatives General insurers Crown corporations 9

6.9 Other types of business structure Sole traders Partnerships and Limited partnerships Joint ventures Branch offices and Subsidiaries 10

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 11

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 12

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 13

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 14

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 15

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 16