Business Law - Corporate and Commercial: CBCA/OBCA, Directors, and Commercial Transactions
What the Exam Tests in Corporate and Commercial Law
The Business Law domain tests the Canada Business Corporations Act (CBCA) and the Business Corporations Act (Ontario) (OBCA), directors' and officers' duties, shareholder remedies, and core commercial transactions such as secured lending under the Personal Property Security Act (PPSA). Questions frequently compare federal and provincial rules and test the priority rules in secured transactions.
Core Rules and Concepts
- Incorporation and constating documents. The CBCA and OBCA both permit incorporation by articles of incorporation. The CBCA permits a single director; the OBCA requires at least one director but historically required Canadian residency for a majority of directors (now relaxed).
- Directors' duties. Directors owe a fiduciary duty to the corporation and a duty of care under s. 122 of the CBCA and s. 134 of the OBCA. The business judgment rule protects informed, good-faith decisions.
- Shareholder remedies. The oppression remedy (CBCA s. 241; OBCA s. 248) addresses conduct that is oppressive, unfairly prejudicial, or unfairly disregards a shareholder's interests. A derivative action under s. 239/246 permits a shareholder to sue on the corporation's behalf with leave.
- PPSA priorities. A security interest attaches when value is given, the debtor has rights in the collateral, and the debtor signs a security agreement. Perfection occurs by registration or possession. A perfected secured creditor generally ranks ahead of an unperfected one, and a purchase-money security interest (PMSI) can gain super-priority if perfected within 15 days of the debtor obtaining possession.
- Bulk sales and successor liability. Successor employer liability and asset sale rules are relevant in commercial transactions.
Worked Example
A lender advances funds to a corporation secured by a general security agreement and registers a financing statement on 1 March. A second lender advances funds on 10 April and registers on 12 April. The first lender has priority as the first to perfect. If the second lender had a PMSI in equipment delivered on 5 April and registered on 15 April (within 15 days), it would gain super-priority over the first lender's general security interest in that equipment.
Traps That Cost Marks
- Confusing the fiduciary duty (to the corporation) with a duty to individual shareholders.
- Assuming a PMSI always has priority regardless of registration timing.
- Missing the 15-day PMSI perfection window.
- Treating oppression and derivative remedies as interchangeable.
- Overlooking the difference between attachment and perfection.