This article is both a guide to corporate law in Canada, and also a list of a few crazy corporate law scandals. It’s important to know what to do, and what not to do as a business owner.
Let’s first start by talking about a bit about corporate law, then get into the juicy stuff.
Corporate law, also known as business law, deals with the creation, management, and dissolution of corporations. It covers a wide range of legal issues that arise in the formation, financing, operation, and dissolution of a corporation.
This can include issues related to corporate governance, securities regulation, mergers and acquisitions, and corporate finance. Corporate law also deals with the rights and responsibilities of a corporation's shareholders, officers, and directors.
An important part of corporate law is avoiding problems for your business. Many people want to save money on legal fees, but it costs them more down the line.
Spending $3000 on a shareholder agreement isn’t expensive. Want to know what is? Spending $200,000 on a corporate lawsuit.
It costs around $10,000 (with trial prep included) for each day you spend in court. So a ten day trial, which isn’t that long, will cost you around $100,000.
You don’t want to be fighting over shareholder rights in court because you didn’t spend a few thousand dollars to get a shareholder agreement done.
Corporate fraud and embezzlement in Canada refer to illegal actions taken by individuals or organizations to deceive or misappropriate funds from a company or its shareholders. This can include activities such as insider trading, accounting fraud, and falsifying financial records.
Embezzlement, specifically, is the unauthorized use of funds or assets that have been entrusted to an individual or organization. These actions are considered criminal offenses under Canadian law and can result in significant fines, penalties, and even imprisonment for those found guilty.
Insider trading is prohibited under securities laws and regulations, specifically under the Securities Act. Insider trading occurs when a person who possesses privileged or material non-public information about a publicly-traded company, uses that information to buy or sell the company's securities for personal gain. It is illegal and can result in significant fines, penalties, and even imprisonment for those found guilty.
Financial misconduct, in Canada, refers to illegal or unethical actions taken by individuals or organizations in relation to financial markets and transactions. This can include activities such as insider trading, accounting fraud, and falsifying financial records. Financial misconduct is also prohibited under securities laws and regulations and can result in significant penalties for those found guilty, including fines and imprisonment, as well as being banned from working in the securities industry.
Corporate bribery and corruption refer to the illegal or unethical payment or offering of money, goods, or other forms of inducement in exchange for influence or preferential treatment. In the case of corporate bribery, this often involves paying officials or representatives of a company or government to gain an unfair advantage in business dealings or contracts.
Corruption, on the other hand, can take many forms, it can be the use of position, power or influence to gain an illegal advantage. In the case of corporate corruption, it often involves the abuse of power by individuals or organizations within a company to gain illegal or unethical financial or business benefits.
Both bribery and corruption can occur at different levels, from local to international. They can happen between companies, between companies and government officials, and between government officials, for example.
The way these activities work is that a person or a company would offer money, gifts, or other incentives to an official or representative of a company or government in exchange for preferential treatment or to gain an unfair advantage in business dealings. This can be done directly or indirectly, through intermediaries such as consultants or third-party agents.
It's important to note that both activities are illegal in most countries and can result in significant fines, penalties, and even imprisonment for those found guilty. In addition, the reputation of companies and individuals involved can be severely damaged, which can have long-term consequences on the business and personal life.
There was the SNC-Lavalin Scandal. This scandal involved allegations of bribery and corruption involving the Canadian engineering and construction firm SNC-Lavalin and government officials. The scandal led to the resignation of several high-ranking government officials and resulted in a significant loss of public trust in the government.
Nortel was a Canadian telecommunications company that went bankrupt in 2009. The scandal involved allegations of accounting fraud and mismanagement, which resulted in the loss of thousands of jobs and significant financial losses for investors.
Bre-X was a Canadian mining company that was involved in a major gold mining fraud in the 1990s. The scandal involved the falsification of gold assay results, which led to the collapse of the company and significant financial losses for investors.
Livent Scandal: Livent was a Canadian entertainment company that went bankrupt in the late 1990s. The scandal involved allegations of accounting fraud and mismanagement, which resulted in significant financial losses for investors.
These are large scale corporate fraud cases, but you could end up getting involved in small fraud cases without getting things checked by a corporate lawyer. Don’t get defrauded by dishonest business people (or dishonest lawyers.) Find the right lawyer for you on our homepage, and compare ratings.
One of the longest prison sentences served by a Canadian CEO for fraud is that of Earl Jones, a former Montreal-based financial advisor. In 2010, he was sentenced to 11 years and three months in prison after being found guilty of defrauding over 150 investors out of nearly $50 million. Jones was convicted on multiple counts of fraud, theft, and forgery, and the court found that he had operated a Ponzi scheme, using the money of new investors to pay off earlier investors and to fund his own lavish lifestyle.
It's worth noting that there have been other cases of Canadian CEOs and other corporate executives being sentenced to prison for fraud, although the sentences may have been shorter in duration. The severity of the sentence often depends on the nature and scope of the fraud, as well as the harm caused to the victims.
Ponzi schemes are more common than you might think. A lot of investment opportunities that go wrong turn into ponzi schemes, because the business person is desperate. Just because someone is honest when you meet them, it doesn’t mean that money worries won’t change them.
Embezzlement in Canada is a type of financial fraud that involves the unauthorized use of funds or assets that have been entrusted to an individual or organization. It is considered a criminal offense under Canadian law and can result in significant fines, penalties, and even imprisonment for those found guilty.
Misappropriation of funds: This involves taking money or assets from a company or organization for personal gain, without authorization. This can include activities such as stealing cash, writing unauthorized checks, or using company credit cards for personal expenses.
False billing: This involves submitting false or inflated invoices for goods or services that were never provided, in order to steal money from a company or organization.
Kickbacks: This involves accepting money or other forms of compensation in exchange for awarding a contract or business deal to a particular company or individual.
Skimming: This involves taking a percentage of cash transactions before they are recorded, such as taking cash from a till.
Ghost employee: This involves creatingfake employees on the payroll and taking their salary, benefits, and other compensation.
The most common type of corporate fraud is accounting fraud, also known as financial statement fraud. This type of fraud involves the manipulation of a company's financial records in order to deceive investors, creditors, and other stakeholders about the company's true financial performance and condition.
Overstating revenues involves reporting higher revenues than the company actually earned.
Understating expenses is when a person reports lower expenses than the company actually incurred.
Misstating assets involves reporting higher assets than the company actually owns.
Misstating liabilities involves reporting lower liabilities than the company actually owes.
Creating false entries is when someone creates fake transactions or entries in the financial records to deceive others about the company's financial performance.