Introduction
Canada has various laws that regulate business operations and the relationship between firms and individuals. The policies define different types and levels of business ownership and each player’s role, from directors to the lowest level. In addition, the Canadian laws spell out the methods of securing loans, define both bankruptcy and insolvency, and recommend solutions. Various court cases have been used to demonstrate the laws. Understanding different business forms enables entrepreneurs to comprehend rules and operational limits, limiting conflicts and cases of illegality in business setup.
Relationship Agency
Sometimes, an individual, body, or company may hire or assign another to conduct business or deal on its behalf. For instance, an organization may agree with another to supply. Such agreements are known as agency relationships. Canadian Law recognizes agency relationships between an agent and principal in business activities. The relationship agency is created when a company (principal) assigns another (agent) to conduct business on its behalf.
The agent accepts and thus binds themselves to the terms of the deal and the exercising power (Steininger et al., 2022). In cases where the business or task involves a third party, such as supply, construction, or purchase, the agent will act as the principal individual without necessarily disclosing the agency relationship. For example, a company can assign another to receive supplies on its behalf without necessarily disclosing the agency relationship to the third party doing the supply.
How a Limited Partnership Can Become a General Partnership
The Canadian Law considers a limited partnership where the partner has passive and minimal powers over the operational control of the business activities. That is, the partners do not actively engage in the management of the daily activities. In addition, partners in the limited partnership arrangement have less liability to the business, such that when the enterprise incurs losses, they are not liable for them.
On the other hand, in a general partnership, the partners have complete operational control of the business (Mahmoudi & Ghaneei, 2022). In addition, partners in the general partnership system are highly liable to the business, meaning they are liable for the losses incurred by the company. Therefore, a limited partner would lose the limited partner status if they start actively managing the business’s operations and activities. In such a case, they might be considered general partners and subjected to business liability.
Limited Partnership vs. Limited Liability Partnership
The first difference is that a limited partnership does not allow the partners to manage the company’s operations, as the partners are considered passive investors. The arrangement has one general partner who is responsible for making important decisions and managing the business on behalf of the passive partners. In contrast, the partners in the limited liability setup are active investors who participate in the important activities of the company, such as decision-making and management (Al-Adeem, 2022).
The second difference is that partners in a limited partnership enjoy protection against the business’s liability, such that losses and debts incurred by the company are not directly linked with them. On the other hand, a limited liability partnership does not protect partners against the business’s liability. For example, a partner may lose property for a loan incurred by the company.
Directors Fiduciary Owe
Directors are usually hired to be the custodians of the organization and thus act in the interest of the shareholders. They manage the funds and operations and make critical decisions affecting the company to ensure the business’s success. The directors possess important information about the business and conduct essential activities such as hiring and dismissing the workforce.
In addition, they control all the company’s resources, including its financial, labor, human, and technological resources. As a result, they are fully responsible for the corporation’s growth and success (Young, 2022). As the corporation’s fiduciary, the directors are therefore under the company’s obligation to show loyalty, honesty, transparency, and goodwill. The directors should always put the interests of the business ahead of their personal interests and make decisions that promote the company’s success.
How Courts Differentiate Employees and Independent Contractors
For the court, there are differences between an employee and an independent contractor based on their privileges and the employer’s powers over them. An employee is a worker hired by an employer on a permanent or contractual basis for wages or salary. For employees, the employer has all the power and dictates what and how to do the task assigned, including the discipline and general conduct during the period of the activity (Buckley, 2022).
In addition, employees enjoy privileges under the employment acts, such as pensions. An independent contractor is an individual hired to perform a particular task for a specific amount of money without any privileges, and the contract ends with the completion of the activity. Employers do not have maximum authority over independent contractors as far as supervision and work direction are concerned.
Methods of Securing Debt
Securing debt refers to offering properties to act as collateral for loans so that lending companies can take them as collateral in cases of default. Several Canadians take out loans for various reasons; however, due to some factors, some usually fail to repay their debts. To boost the confidence of lending companies, collateral properties are always needed to secure debts. The two popularly used methods of securing loans are mortgages and liens.
Defaulting on a loan is a likely occurrence in Canada since many people live beyond their financial ability, making them resort to debt. However, the lenders require collateral property to help them recover the full or part of their money in case of default (Cohen et al., 2023). Many Canadians are taking loans and thus offering their mortgages to secure their debts. A car is another common method of securing debts in Canada. Many people taking loans in Canada offer their vehicles as collateral.
Bankruptcy and Insolvency
Even though they are sometimes used interchangeably, bankruptcy and insolvency have different meanings. While insolvency refers to the situation where an individual cannot pay debts on time, bankruptcy, on the other hand, is when a person or business cannot pay debts. From the definition, insolvency does not mean the end of the road, as a company still has other options to exploit to slowly repay the loans (Popoola, 2022).
However, bankruptcy means the end of the road for the business as it is incapable of repaying the loans, no matter the time given. The Bankruptcy and Insolvency Act R.S.C., 1985 was created to protect all the parties involved in bankruptcy and insolvency cases, including the debtors, creditors, and the bodies involved, by outlining the correct procedures for managing and solving the problem. The Act ensures that all parties’ interests are taken care of.
Arora v. Whirlpool (2013)
The case resulted from Whirlpool’s front-loading washing machines, which allegedly had a design defect attributed to odor, mold, and mildew, thus contributing to smelly clothes. The appellants blamed the company for overcharging their unworthy goods and thus sought damages for overpayments, citing diminished value. In the ruling, the judge only considered the negligence claim as the only reasonable argument, dismissing several other allegations presented (Schwartz & Ben-Ishai, 2023).
However, the judge stated that the negligence claim, even though valid, did not call for a course of action. In the further ruling, it was decided that even if there was a call for action, the class action demanded by the appellants was not the appropriate one. The judge argued that the Canadian Law did not provide for recovery of economic loss where there is no threat to life or property.
Confidential Information and Trade Secrets
The statement is not credible since the Canadian common law considers it a legal breach to access, obtain, communicate, or disclose trade secrets without permission of the company and use the information for personal gain. It is a criminal offense to obtain confidential information or trade secrets from a particular organization through deceit and falsehood, and share them with another or use them for personal benefit. The law was evident in the case of Lac Minerals v. International Corona Resource LTD (1989) (Newell & Walsh, 2022).
The Supreme Court ruled that Lac Minerals had breached the confidence by fraudulently pursuing the Williams property after advising Corona Resource LTD to proceed with the deal. Lac Minerals instead went back to acquire property on the false pretext of a fiduciary relationship. On emphasizing the confidential information and trade secrets law, the Supreme Court ordered the return of the property to Corona Resource LTD.
Computer Programs Under Patent Laws
Even though not all computer programs are patentable in Canada, some inventions considered original are patentable; for instance, software inventions can be patented. The Canadian patent policy outlines the programs, or rather, the computer inventions that meet the threshold for patenting. The first and major threshold for patenting is originality, which is protected under intellectual property. Most software innovations are considered original inventions and have long-term business value; hence, they qualify for patenting. However, ordinary computer programs, such as apps and personal computer programs, including applying skills, are non-patentable.
Similarly, programs that are not part of the original inventions, such as computer ideas, cannot be patented because they are considered computer facts and thus cannot be patented. In the case of Choueifaty v. Canada, the Federal Court pronounced that the Canadian Intellectual Property (IP) did not properly determine whether computer-generated innovations meet the invention threshold (Wareham, 2022). This gave room for patenting software inventions and original computer works.
Conclusion
In summary, an agency relationship is where a firm hires another to act on its behalf. In a limited partnership, partners have protection from business liability, while in general, partners are liable for business losses. Thus, a limited partner would become a general partner by active engagement. Directors owe corporations loyalty, honesty, and commitment as part of their fiduciary obligations.
On the other hand, courts differentiate employees from contractors through the privileges and powers employers have over them. In addition, bankruptcy and insolvency have different meanings, while mortgages and vehicles are common methods of securing debts. Finally, computer programs are patentable if they are original ideas.
References
Al-Adeem, K. R. (2022). Reconceptualizing the management–auditor relationship by applying the general partnership contract to challenge independence: Ideals versus reality. Journal of Accounting, Business and Management (JABM) 29(1), 155-193. Web.
Buckley, L. (2022). The foundations of governance: Implications of entity theory for directors’ duties and corporate sustainability. Journal of Management and Governance, 26(1), 29-53. Web.
Cohen, M. C., Dahan, S., Khern-Am-Nuai, W., Shimao, H., & Touboul, J. (2023). The use of AI in legal systems: Determining independent contractor vs. employee status. Artificial Intelligence and Law, 1-30. Web.
Mahmoudi, M., & Ghaneei, H. (2022). Detection of structural regimes and analyzing the impact of crude oil market on Canadian stock market: Markov regime-switching approach. Studies in Economics and Finance. Web.
Newell, W., & Walsh, J. S. (2022). Legally-informed information disclosure in early-stage ventures. International Journal of Technology Transfer and Commercialisation, 19(3), 374-392. Web.
Popoola, O. (2022). The impact of corporate governance on long-term survival of small businesses in Canada. Journal of the International Council for Small Business, 3(3), 205-213. Web.
Schwartz, S., & Ben-Ishai, S. (2023). Prevalence of high-cost loans among the debts of Canadian insolvency filers. Canadian Public Policy, 49(1), 62-75. Web.
Steininger, D. M., Kathryn Brohman, M., & Block, J. H. (2022). Digital entrepreneurship: What is new if anything? Business & Information Systems Engineering, 64(1), 1-14. Web.
Wareham, L. (2022). The nature, patentability and value of patents for computer-implemented business method inventions in the UK and Canada. Journal of Intellectual Property Law & Practice, 17(6), 513-525. Web.
Young, A. R. (2022). Product regulations: You can drive my car, otherwise let it be. In J. Adriaensen & E. Postnikov (Eds.), A geo-economic turn in trade policy? EU trade agreements in the Asia-Pacific (pp. 149-173). Springer International Publishing. Web.