The Role of Boards, Advisory Panels, Service Providers

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Slide 2: The Role of Boards, Advisory Panels and Service Providers MaRS Entrepreneurship 101 Craig C. Thorburn Blake, Cassels & Graydon LLP April 9, 2008

Slide 3: The Corporate Model  Corporation → Separate legal person → Limited liability  Triad → Shareholders → Directors → Officers 3

Slide 4: Shareholders  Shareholders → Election of Directors (also removal) → Appointment of Auditors → Entitlement to receive Dividends → Proceeds on Winding up → Approval of major changes • sale of all or substantially all assets • change of name • change of articles of incorporation 4

Slide 5: Directors  Duty to Manage → “the directors shall manage, or supervise the management of, the business and affairs of the corporation”  Fiduciary Duty (Duty of Care) → Every director of a corporation in exercising powers and duties shall • “act honestly and in good faith with a view to the best interests of the corporation” • “exercise the care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances” 5

Slide 6: Director Liabilities  Directors are “jointly and severally” liable to restore to the corporation any amounts distributed or paid and not otherwise recovered by the corporation in certain circumstances for: → a purchase or redemption of shares → payment of a dividend → payment of an indemnity  Directors also liable in certain circumstances for: → unpaid wages of employees → unpaid income tax remittances → failure to make withholding tax payments → unpaid PST and GST → environmental liabilities → criminal offences 6

Slide 7: Director Protections  Due Diligence  Reliance on expert reports  D&O Insurance 7

Slide 8: Officers  Same duty of care as directors  Few statutory liabilities  Risk/Reward Mismatch 8

Slide 9: Advisory Panels  Expertise for corporation  No liability for panel members  Diversity of skills and views  Don’t select people in your own image  Angels 9

Slide 10: Service Providers  Accountants  Lawyers  Investment bankers  Advertising agencies  MaRS → Business Mentorship and Entrepreneurship Program 10 12202509.1

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