1. All About Shares (& other stuff)
Talk 3
LAW
BUSINESS ORGANIZATIONS
Allard School of Law, UBC
Fall, 2016
Jon Festinger Q.C.
Festinger Law & Strategy
@jonfestinger

2. Good Morning LAW 459 003 BUSINESS ORGANIZATIONS

3. Topic #1
Logistics

4. Course Website

5. For full privileges on the website
1. Please create an account at using your CWL. 2. Once you create an account and sign in at you can click your name in the top right. Half way down the following page will be your WordPress address. 3. Send me your WordPress address at or at 4. Then, I will invite you to participate with authoring privileges via your WordPress address.

6. Awesome Posts
Comments?

7. Encouragement?
Counting started noon Tuesday

8. 66/33% web/email Roughly 50% commenting
No problem if you are not comfortable posting on-line
66/33% web/
Roughly 50% commenting

9. Tips:
Don’t feel your posts have to be perfect. Engaging and engaging others is the key.
Please tweet #allardbizorg

10. News of the “Week”…

11. Also on bizorg.allard.ubc.ca

12. Materials now cleaned up

14. Course Construction: Lecture-Capture Mondays

15. Wonderful Wednesdays Some combination of:
Clean-up/Catch-up on materials
Questions/Discussions
Guest Lecture/Talks
Collaborative exercises

16. Course Rhythm
“Also there is one slightly weird and perhaps interesting part of all this. Because you have all the materials - will it be better to have them fully digested before my talks or better to hear me talk about the subject and then go through the materials with that context? Different people will come up with different answers. My guess is skim/be acquainted with the materials, come to class then review/study them. But that really is a guess. Remember that all the materials and most of the lectures will be on-line so you can always go back to either.”

17. QUESTIONS? DISCUSSION?

18. Topic #2
Clean-Up

19. Correction
Conflating Stanley Milgram’s electro-shock experiments with Phillip Zimbardo’s Stanford Prison Experiment where Guards treated prisoners with ever increasing sadism (but no electric-shocks).

20. Topic #3
All About Shares

21. The capital of a company is divided into shares.
Each share forms a unit of ownership of a company. Offered for sale to raise capital for the company.
Shares can be broadly divided into two categories - common and preferred.

22. Rights of shareholders not generally defined by company law but by contract – the Shareholders Agreement.
Almost infinitely sliceable & dice-able (like copyright).
Factors in deciding what types of shares to create/issue include market conditions, investor requirements, tax consequences etc.
Variables in shares can include
Voting
Non-voting
Common
Redeemable
Preferred (Dividend)
Subordinated

23. Pause…
Debt v. Equity

24. Debt can take the form of loan agreements or bonds
Debt can take the form of loan agreements or bonds. Bonds are just a form of loan–usually with a strong IOU attached and perhaps regular interest payments.
Note that interest income (debt instruments) is taxed less favorably than equity (shares).

25. There are two forms of equity shares

26. Preferred & Common Sounds like these terms must have
a defined meaning, doesn’t it?

27. Few if any defined meanings!!
Common Shares are often voting shares (except when they are not – Class B non-voting). Generally Preferred Shares carry no voting rights (except when they do)
Generally Preferred Shares do not have a maturity date (except when they do)
Generally Preferred Shares have a par value (except when they doesn’t)
Generally Preferred Shares pay a fixed distribution rate that is determined at issuance (except when they don’t and it isn’t )

28. *Footnote 1
Preferred shares can offer a significantly higher after-tax yield than fixed income securities like bonds or other debt instruments which are taxed as interest income.

29. *Footnote 2
Why choose to create No Par Value(“NPV”) shares or Par Value (‘PV”) Shares?
What is the risk of PV Shares?

30. BMO Bank of Montreal Chart

31. Five core characteristics Underlying Company Law
The company an entity distinct from all its shareholders.
Limited liability for shareholders.
Specialized management, “separate” from the shareholders.
Freely transferable shareholder interests.
Shareholder control.

32. QUESTIONS? DISCUSSION?

33. Topic #3

35. Corporate Persons are Psychopaths ?

37. A terrifying point… on many levels
“private enterprise cannot be maintained in a democracy.” -Adolf Hitler

38. Alt-Darwinism

39. Related: Have corporations become resistant to societal anti-biotics

40. Diffusion of responsibility

41. How corporate personhood is constituted
Canada Business Corporations Act R.S.C., 1985, 15 (1) A corporation has the capacity and, subject to this Act, the rights, powers and privileges of a natural person. Business Corporations Act [SBC 2002] 30 A company has the capacity and the rights, powers and privileges of an individual of full capacity.

42. A. Drafting Alternatives?

43. Do we need “personhood” language
Do we need “personhood” language? Why not just allow companies to enter contracts. Why do they have to have any other rights?
Why can’t a corporation just be an “entity”, not a person? With specified, rights and responsibilities?

44. B. What will the sequel be about?

45. QUESTIONS? DISCUSSION?

46. Always include a cat picture