A recent case from the Ontario Court of Appeal highlights that commercial parties must take care to ensure that their contracts are certain on essential terms when dealing with unsophisticated counterparties. In Corridor Transport Inc. v. Vittorio Junior Lentini, 2024 ONCA 773, a corporation was set up to carry on business transporting steel products (the “Venture”). 50% of the shares in the Venture were held by a sophisticated businessman (“JH”), and the other 50% were held by a trucking company that operated a separate business from the Venture (“Lentini”). Lentini’s principal left school after the fifth grade and immigrated to Canada from Italy as a young adult. The Venture claimed that JH would provide its startup and expansion capital , and Lentini would manage its day-to-day operations as an independent contractor. The parties agreed that Lentini could continue to operate its separate trucking business while participating in the Venture. … Read More
Corporate Governance Considerations During the Covid-19 Pandemic
Corporate governance issues are top of mind for directors and businesses who are attempting to navigate through the Covid-19 Pandemic related closures and emergency measures. Boards of Directors still need to operate and make decisions in the best interests of the corporation, and this can involve tough decisions, particularly where there is little guidance as to how measures to lift Covid-19 related restrictions will play out. By example, while it may be in the best interest of investors and shareholders that the Board act to lay off employees in the short term, the impact of staff shortages when Covid-19 restrictions are lifted may pose it’s own challenges. Many businesses must consider how to hold governance meetings during Covid-19 times. On March 30, 2020, Ontario passed an Order under the Emergency Management and Civil Protection Act (EMCPA), (Ontario Regulation 107/20) entitled “Meetings for Corporations” making temporary changes to the Business Corporations … Read More
Measures of Last Resort – The Benefits of Exit Provisions in Shareholder’s Agreements
The benefits of a shareholder’s agreement may not be fully considered when parties are intending to go into business together and become joint shareholders in a corporation. Perhaps the mood is optimistic and none of the participants anticipate that things might sour between them down the road. Sometimes corporations are formed absent such an agreement. However, among other benefits, these agreements become particularly useful in managing risk and guiding shareholders through governance issues and disputes that may arise, efficiently so as to minimize disruption to the corporation’s business. Absent a shareholder’s agreement, shareholders in a closely held corporation that cannot see eye-to-eye regarding the operation and path of the corporation, may become stuck in a deadlock where decision-making is effectively stifled due to a stalemate between them. Shareholder’s agreements can serve to provide mechanisms to address deadlock, protect the voice and rights of minority shareholders, provide a road map for … Read More