🚀 go-pugleaf

Paul Klimstra (ab837@freenet.hamilton.on.ca) wrote:
: Peter Selk (bk078@torfree.net) wrote:
:  
: : Within the 
: : constraints of the bylaws, the directors are free to dispose of tfn's 
: : assets as they think best in pursuance of its objects.

: Just out of interest, and of very little relation to the above topic, if
: the TFN folds, do the directors become liable for its debts? I mean, if
: they're free to spend the assets on a whim, shouldn't they be held
: accountable for its debts?

First off, I must note that nobody said anything about a whim until you 
did.  I noted that if the directors thought it best to spend money on 
legal fees, or whatever else for that matter, they have the power to do 
so.  I was taking it for granted that their judgments would be made 
rationally and intelligently in the best interests of the corporation.  
From what I've seen at Board meetings, that's an entirely reasonable 
assumption in tfn's case.

The whole reason for the creation of the concept of corporations
historically, and one of the main reasons for their continued existence
today, was to protect shareholders (or members in the non-profit case)
from liability for the corporations debts.  As against most creditors, the
directors are simply a subset of the shareholders (or members), and enjoy
the same protection as shareholders or members in general.  As we all
know, there has been an increasing legislative trend in recent years to
make directors personally liable for debts of corporations.  Examples
include unpaid wages and payroll deductions if a corporation becomes
insolvent.  The general rule, however, is still that directors are not
liable for corporate debts, in the absence of a specific statutory
provision to the contrary. 

That said, I believe directors have some fiduciary duty to the members.  
If corporate assets were squandered on purposes not within the corporate 
objects, directors would not become liable for the corporate debts, but 
they might have some liability to members and others who provided the 
misappropriated resources.  Please note that I am beyond my legal depth 
here, and just speculating.

: Paul Klimstra (ab837@freenet.hamilton.on.ca) wrote:
: : Just out of interest, and of very little relation to the above topic, if
: : the TFN folds, do the directors become liable for its debts?

Directors are liable for some debts, mainly back wages and unpaid taxes.

: Paul Klimstra continues:
: : I mean, if
: : they're free to spend the assets on a whim, shouldn't they be held
: : accountable for its debts?
Peter Selk (bk078@torfree.net) wrote:
: First off, I must note that nobody said anything about a whim until you 
: did.  I noted that if the directors thought it best to spend money on 
: legal fees, or whatever else for that matter, they have the power to do 
: so.

TFN directors are restricted by bylaws on "whatever else" to spend on. E.g.
Unlike directors of other corporations, TFN directors are unpaid. (Letters
Patent bylaw 31 follows). 
 
-------------------------TFN Letters Patent-----------------------------
31.	Remuneration of Directors.   The directors shall serve without 
	remuneration and no director shall directly or indirectly receive any 
	profit from their position as such. [...]

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For anyone interested, the next election of directors occurs in Nov 1997.
At least 6 seats will be up for election. In Nov 1996, 13 seats were up
for election, because all but 2 directors resigned prior to the election.

Cheers. 
-- 
|Board member                                              Bill Chow, B.Com.|
|Toronto Free-Net Inc.                                Toronto,Ontario,CANADA|
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