Glossary

• Author: J. Anthony VanDuzer
• Pages: 663-680

663

GLOSSARY

Accredited investor:a category of person to whom the sale of securities

by an issuer is exempt from the securities law requirement that the

issuer prepare and f‌ile a prospectus. The accredited investor is def‌ined

in National Instrument 45-106 (Prospectus Exemptions) and includes

a purchaser who (1) either alone or, together with a spouse, benef‌icial ly

owns net f‌inancial assets exceeding $1,000,000 or; (2) in each of the

last two years ha s net individual before-tax income of at least $200,000

or, combined with that of a spouse, has net before-tax income of at least

$300,000 and reasonably expects to exceed that net income in the cur-

rent calendar year. The rationale for the exemption is that accredited

investors are deemed to be suff‌iciently sophisticated to protect their

own interests and do not need the protection of mandatory prospectus

disclosure. They can negotiate for the level of disclosure they deter-

mine they need. See “Prospectus,” National Instrument 45-106, s 1.1,

and Chapter 11.

Aff‌iliated corporations: corporations where one is the subsidiary of the

other, both are subsidiaries of the same corporation, or both are con-

trolled by the same person. One cor poration is the subsidiary of another

if it is controlled by the other. These are the basic and most common

types of aff‌iliated corporations. If two corporations are aff‌iliated with

the same corporation, they are deemed to be aff‌iliated. “Control” for

the purpose of the def‌inition of “aff‌iliate” is legal control: holding vot-

ing securities of the corporation that carry more than 50 percent of the

THE LAW OF PARTNERSHIPS AND COR PORATIONS664

votes that may be cast for the election of directors, where such votes

are suff‌icient to elect a majority of the board of directors. See “Parent

corporat ion,” “Subsidi ary,” CBCA, ss 2(2)–(5), and Chapters 8, 9, and 10.

Agency costs: in corporate governance theory, costs to shareholders

arising as a result of someone other than the shareholders being re-

sponsible for managing the corporation’s business. They include the

direct costs ass ociated with directors and off‌icers acting to fur ther their

personal interests, in an opportunistic way, at the expense of the cor-

poration, which reduces the value of shareholders’ shares, and the rel at-

ed costs that shareholders incur to monitor their agents, the directors

and off‌icers, for the purpose of guarding against such opportunistic

behaviour and to hold them accountable. See Chapters 12 and 13.

Amalgamation: a statutory procedure by which two or more corpora-

tions are combined into one. The rights and liabil ities of the amalgamat-

ing corporations continue as right s and obligations of the amalgamated

corporation. See “Short-form amalgamation,” and Chapter 8.

Annual meetings: meetings of shareholders that must be held at least

every f‌ifteen months or six months after the end of the corporation’s

f‌inancial year. Annual meetings are identif‌ied and def‌ined by the hap-

pening of three items of business:

• election of directors;

• receipt of annual f‌inancial statements and the report of the auditor

on such statements; and

• appointment of an auditor (unless dispensed with by unanimous

agreement of shareholders in certain circumstances).

All other meetings are called “special meetings.” To the extent any

business other than the three items above is carried on at an annual

meeting, it is called an “annual and special meeting.” See “Special meet-

in g,” CBCA, s 133, and Chapters 7 and 8.

Articles or articles of incorporation: the document f‌iled with the dir-

ector appointed, under the CBCA or similar provincial government of-

f‌icials under corporate statutes modelled after the CBCA, to create a

corporation. Under the CBCA, they must be f‌iled in the form required

under the Act (Form 1), along with an Initial Registered Off‌ice Ad-

dress and First Board of Directors (Form 2). They set out the funda-

mental characteristics of the corporation — for example, its name, the

class and number of share s authorized to be is sued, any restrict ions on

transferring shares, and any restrictions on the business the corpora-

tion may carry on. Once the director issues a certif‌icate to which the