Master issue-spotting decision tree

1. What is the relationship / vehicle?

 One person operating a business → sole proprietorship issues.
 Two or more people collaborating → test partnership vs co-ownership vs contractual JV vs
employment/agency.
 Incorporated entity in the fact pattern → corporation issues.
2. What is the dispute type?
 Third party (creditor/tort claimant/regulator) suing business actors → authority + liability allocation.
 Internal fight among owners/managers → governance + fiduciary/duty of care + remedies.
 Transaction changing corporate structure → fundamental change + approvals + dissent/appraisal +
oppression risk.
3. What does the question ask you to do?
 Identify entity, classify relationship, allocate liability, or recommend structure → use the relevant tree
below.

I. Choice of entity (recommendation decision tree)

Triggers
 “Starting a business”, “raising capital”, “limiting liability”, “professional practice”, “passive investor”, “joint
project”, “real estate co-owners”, “tax planning”.
Decision tree
1. Is limited liability essential?
 Yes → corporation (or LLP for certain professions; LP for passive investors).
 No / tolerance for personal liability → sole prop or general partnership or contractual JV.
2. Is there a passive investor who must not manage?
 Yes → limited partnership (LP): general partner manages; limited partner stays passive.
 No → proceed.
3. Is this a single project with defined scope and exit (not an ongoing firm)?
 Yes → contractual joint venture (contract defines contributions, control, sharing, exit).
 No → proceed.
4. Is this simply shared ownership of property with minimal “business activity”?
 Yes → co-ownership (avoid partnership indicia).
 No → proceed.
5. Key comparison factors to state explicitly
 Liability: unlimited (sole prop/general partnership) vs limited (corporation; LP limited partner; LLP).
 Tax: flow-through (sole prop/partnership) vs separate taxpayer (corporation).
 Control: centralized board/officers (corp) vs mutual agency/default equal management (partnership).
 Capital raising: easiest in corp (shares, classes) vs harder in partnerships.
 Formalities: corp has statute-driven filings/records/meetings; partnership can be informal but risky due to
defaults.
 Durability/transferability: corp most durable and transferable; partnerships fragile unless contractually
stabilized.
 Regulation: professional rules may force professional corporation or LLP structure.

II. Partnership existence (is there a partnership?)

Triggers
 “Partner”, “we split profits”, “we bought property together”, “we run a side hustle together”, “we share a
bank account”, “we agreed to share losses”.
Decision tree
1. Apply the statutory definition (core elements)
 (A) Two or more persons
 (B) Carrying on a business
 (C) In common
 (D) With a view to profit
 2. If unclear, use indicia (none determinative)
 Profit sharing (strong indicator, but check statutory exceptions for profit share that is not partnership, like
debt repayment, wages, rent, annuity).
 Joint control / management participation (especially important to distinguish from co-ownership).
 Holding out to third parties as partners.
 Common bank account, joint stationery/branding, shared expenses, shared clients, common financing.
 Contribution of property or skill to a joint enterprise.
 Mutual rights to bind the “firm” (agency-like behavior).
3. Common “not a partnership” buckets
 Co-ownership of property without “business in common” (rent collection alone often not enough unless
active management/business).
 Creditor-debtor with profit-linked repayment.
 Employment/independent contractor paid via profit share.
 Franchise/distribution relationship.
4. Exam conclusion format
 “On balance, court likely (will / will not) find a partnership because [top 3 indicia] and the statutory
definition is (met / not met).”

III. Partnership authority and firm liability (agency of partners)

Triggers
 “Partner X signed”, “one partner borrowed money”, “partner bought equipment”, “partner hired staff”,
“unauthorized contract”, “third party sues the firm”.
Decision tree
1. Was the actor a partner at the time?
 If not → generally no partner-based firm liability, except holding out.
2. Was the act in the ordinary course of the partnership business?
 Yes → presumptively binds the firm and all partners.
 No / extraordinary transaction → not binding unless actual authority or later ratification and third party
knowledge rules support it.
3. Did the third party have notice of limits on authority?
 If third party knew (or clearly should have known) partner lacked authority → firm may avoid liability.
4. State the liability type
 Contract debts: typically partners are jointly liable.
 Torts in course of business: partners typically jointly and severally liable.
 Partnership property at risk first, then partners personally.
Holding out (partnership by estoppel)
1. Representation by words/conduct that person is a partner, or knowingly permitting it.
2. Third party relies on that representation in extending credit/entering transaction.
3. Result: “held-out” person liable to that third party as if a partner (scope limited to reliance-based
transactions).

IV. Partnership internal relations (partner vs partner)

Triggers
 “Partner took money”, “secret profit”, “competing business”, “unequal work”, “expelled”, “accounting”,
“deadlock”.
Issue memory bank (deploy as checklist)
1. Fiduciary duties between partners
 Duty of loyalty, no secret profits, disclose conflicts, account for benefits derived from partnership
opportunities.
 No competing with the firm unless agreed.
2. Management and decision-making defaults
 Equal right to participate in management.
 Ordinary matters by majority; fundamental changes require unanimity (default logic).
 3. Financial defaults
 Share profits (and usually losses) per agreement; absent agreement often equal.
 Capital contributions and indemnity: firm indemnifies partner for liabilities properly incurred in the
business.
 No remuneration for acting in partnership business unless agreed.
4. Partnership property and accounting
 Identify what is partnership property vs personal.
 Remedies: accounting, constructive trust over secret profits, injunction, dissolution, damages.

V. Dissolution and winding up (partnership)

Triggers
 “Partner leaves”, “notice given”, “term ended”, “death”, “illegality”, “court dissolution”, “business
ended”.
Decision tree
1. Did dissolution occur by event?
 Expiry of term / completion of venture.
 Notice in partnership at will.
 Death/insolvency (often dissolution unless agreement says otherwise).
 Illegality.
 Court-ordered dissolution for breakdown, misconduct, impracticability.
2. Authority after dissolution
 Partners retain authority only as needed to wind up and complete unfinished business.
3. Winding up steps
 Collect assets, complete transactions, pay creditors, settle partner accounts, distribute surplus.
4. Post-dissolution liability
 Partners can remain liable for obligations incurred before dissolution and for winding-up acts.
 Notice to creditors matters to cut off apparent authority risk.

VI. Limited partnerships (LP) and LLPs (liability variation)

LP triggers
 Passive investor, real estate syndicate, “limited partner”, “general partner”, registration.
LP liability tree
1. Limited partner generally liable only up to contribution.
2. Limited partner risks losing limited liability if they take part in control/management beyond permitted
advisory role.
3. Limited partner name in firm name can trigger liability exposure depending on statute.
4. Exam conclusion: identify specific conduct that looks like “control” (signing contracts, directing
employees, holding themselves out as manager).
LLP triggers
 Professional firm, “LLP”, negligence claims.
LLP baseline
 Structure designed to limit personal liability for certain partnership obligations, commonly professional
negligence of other partners, subject to statutory conditions and professional regulation.

VII. Corporation basics (existence, personality, veil, pre-incorporation)

Triggers
 “Inc.”, articles, directors/officers, shareholders, share issuance, “promoter signed before incorporation”,
“parent/subsidiary”, “pierce the veil”.
Decision tree
1. Does the corporation exist?
 Comes into existence on proper incorporation and issuance of certificate (treat as separate legal person).
2. Separate personality and limited liability
 Default: corporation is liable for its debts; shareholders not personally liable merely as shareholders.
 3. Piercing the corporate veil
 Ask: is the corporation being used as a vehicle for fraud, improper purpose, avoidance of existing
obligations, or as a mere facade/alter ego in a way that makes respecting separateness unjust?
 Evidence bucket: undercapitalization plus misuse, commingling, failure to observe formalities, domination
and use as conduit for wrongdoing.
4. Pre-incorporation contracts
 Identify promoter/agent signing “for a corporation to be incorporated”.
 Default risk: promoter personal liability unless statute allows adoption and/or express exclusion.
 Post-incorporation: did corporation adopt the contract? If yes, allocate liability per statutory scheme
(often adoption can shift liability; court may apportion in some regimes).

VIII. Corporate authority and liability (contracts, torts, crimes)

A. Corporate contracts (agent authority)
Triggers
 “Officer signed”, “director promised”, “unauthorized contract”, “company says agent lacked authority”.
Decision tree
1. Actual authority (express or implied from role/board resolutions).
2. If not, apparent authority:
 Representation by the corporation (words/conduct, including holding out by position/title),
 Representation made by someone with actual authority,
 Third party relied on it.
3. Statutory protection for third parties
 Modern statutes reduce “constructive notice” arguments and protect good-faith reliance on apparent
authority.
B. Corporate torts
Triggers
 Employee tort, intentional tort by manager, negligent act in course of employment.
Decision tree
1. Employee tort in course of employment → vicarious liability likely.
2. Direct liability where “directing mind” commits or directs the tort in the relevant business sphere.
3. Individual tortfeasor remains personally liable.
C. Corporate crimes (high-level)
Triggers
 Regulatory offence, due diligence, “senior officer”, workplace safety, criminal negligence.
Decision tree
1. Classify offence: absolute, strict (due diligence), or mens rea-based.
2. Identify “senior officer” involvement and whether organization benefited or risk was tolerated.
3. Apply Criminal Code organizational liability framework (where relevant) and due diligence for strict
liability.

IX. Corporate finance (shares, dividends, redemption/repurchase)

Triggers
 “Issued shares”, “paid with services”, “stated capital”, “dividend declared”, “buyback”, “redemption”,
“insolvency concerns”.
Decision tree
1. Share issuance validity
 Was issuance authorized under articles/statute and board approval?
 Consideration: money, property, past services at fair value (as applicable).
2. Share rights and class equality
 Identify class rights (vote, dividends, residual assets) and whether shares within a class treated equally.
3. Dividends
 Solvency/capital maintenance test: corporation must meet statutory solvency requirements before
declaring/paying.
  If dividend rights are cumulative vs non-cumulative, state consequences.
4. Redemption/repurchase
 Apply statutory tests (solvency and stated capital constraints).
 If insolvency-like facts, flag director liability risk for unlawful distributions.

X. Corporate governance (shareholders, directors, officers, meetings, disclosure)

Triggers
 “AGM not held”, “notice defective”, “proxy fight”, “shareholder proposal rejected”, “quorum”, “director
election”, “USA”, “financial statements refused”.
Shareholder power tree
1. Was a meeting required and properly called?
 AGM timing, special meeting requisition where applicable.
 Notice: who, when, content.
2. Was quorum met and voting properly conducted?
 Quorum rules, proxies, ballots, class votes where required.
3. Proxy solicitation and dissident circulars
 Identify solicitation, compliance with proxy rules, remedies include restraining/compliance orders.
4. Shareholder proposals
 Was proposal eligible and required to be circulated? If refused, check statutory exceptions.
5. Information rights
 Audited statements, access to records, auditor appointment and disclosure duties.
Director/officer power tree
1. Board manages business and affairs, subject to any unanimous shareholder agreement (USA).
2. Director qualifications, election/removal, meetings, delegation.
3. Officers act by delegation from board; scope matters.
USA tree
1. Does a USA restrict directors’ powers?
2. If yes, shift of powers can shift liabilities and duties to shareholders to the extent of the restriction.
3. Transferees can be bound; rescission windows may arise if no notice (statute-specific).
Indemnification tree
1. Is the person a director/officer (or former)?
2. Was the proceeding “by reason of” their corporate role?
3. Did they act honestly, in good faith, and with a view to best interests, and (for penal matters) with
reasonable belief in lawfulness?
4. If yes, indemnification may be mandatory or discretionary depending on outcome and statute; also
consider D and O insurance.

XI. Corporate changes (fundamental transactions)

Triggers
 “Amend articles”, “change share rights”, “amalgamate”, “continue”, “sell all assets”, “arrangement”,
“going private”, “dissolve”.
Decision tree
1. Classify the transaction
 Amendment of articles/by-laws/stated capital.
 Continuance.
 Amalgamation.
 Arrangement/reorganization.
 Sale of all or substantially all assets.
 Going private/squeeze-out.
 Dissolution.
2. What approvals are required?
 Board approval typically first.
 Shareholder approval: special resolution for fundamental changes.
  Class vote if rights of a class are affected distinctly.
3. Is there a dissent/appraisal right?
 If statute grants dissent for the transaction type, flag appraisal procedure and valuation disputes.
4. Overlay risks
 Oppression risk if process is unfair, disclosure defective, or reasonable expectations are defeated.
 Fiduciary and duty of care scrutiny for directors (process, conflicts, fairness).

XII. Directors’ and officers’ duties (fiduciary duty, duty of care, takeover bids)
Triggers
 Self-dealing, conflict, taking opportunity, competing, defensive tactics, negligent oversight,
misstatements, statutory non-compliance.
Fiduciary duty tree
1. Who owes the duty?
 Directors and officers owe fiduciary duty to the corporation.
2. Is there a conflict of interest transaction?
 If yes: disclosure, abstention, approval mechanisms, fairness scrutiny.
3. Corporate opportunity
 Was the opportunity in the corporation’s line of business, discovered through position, or something the
corporation had an interest/expectation in?
 If yes, taking it personally is high risk.
4. Competition
 Acting in competition while in office is presumptively problematic absent informed consent.
5. Takeover bid context
 Identify board’s objective: best interests of corporation and fair treatment of stakeholders; scrutinize
defensive measures for proper purpose, proportionality, and process.
6. Reliance defenses
 Statutory safe harbours for reasonable reliance on financial statements, professionals, officers,
committees, where conditions met.
7. Shareholder ratification/sanction
 Certain breaches can be sanitized only if statutory conditions are met and approval is informed and
procedurally proper.
Duty of care tree
1. Identify decision or omission (oversight failure, inadequate information, failure to supervise).
2. Apply standard: reasonably prudent person in comparable circumstances, with contextual deference to
business judgment for informed decisions.
3. Causation and loss: connect breach to damages; consider statutory liability provisions (unlawful dividends,
disclosure, wages, etc.) where relevant.

XIII. Shareholder remedies (pick the right tool fast)

The remedy choice is driven by who suffered the harm and what you need the court to do. Remedies listed here
track the syllabus coverage.
Remedy selection decision tree
1. Is the harm to the corporation (misuse of corporate assets, director breach causing corporate loss)?
 Yes → Derivative action.
 No → proceed.
2. Is the harm to the complainant’s personal legal right (voting right, entitlement under a share contract,
misrepresentation to that shareholder)?
 Yes → Personal action (ordinary civil claim).
3. Is the core complaint unfairness that defeats reasonable expectations (squeeze-out, exclusion from
management in a quasi-partnership, unfair dilution, diversion of value, abusive majority tactics)?
 Yes → Oppression remedy.
4. Do you need narrow statutory housekeeping relief, quickly?
 Enforce statute/articles/by-laws/meeting rules → Compliance / restraining order.
  Fix the share register or corporate records → Rectification.
 Get internal information where stonewalled → Investigation.
5. Is the issue a fundamental change and you want fair value for shares?
 Yes → Dissent and appraisal.
6. Is the business relationship irreparably broken and no workable lesser remedy?
 Yes → Winding up / dissolution (drastic).
A. Personal action (shareholder sues in own right)
Triggers
 Denial of vote, denial of meeting participation rights, misrepresentation inducing share purchase, breach
of a shareholders’ agreement owed personally.
Key exam points
 Identify the personal right and defendant (corporation, directors, controlling shareholders depending on
cause of action).
 Remedy: damages, declaration, injunction.
B. Derivative action (sue on behalf of corporation)
Triggers
 Corporate opportunity usurped, self-dealing harming corporation, negligence causing corporate loss,
directors refuse to sue.
Elements (generic)
 Applicant has standing as complainant.
 Notice to directors (often required unless futile).
 Good faith.
 Action appears to be in best interests of corporation (some merit).
Relief
 Damages or restitution paid to corporation, governance orders, costs directions.
C. Oppression
Triggers
 Quasi-partnership freeze-out, unfair dilution, diversion of value, abusive related-party deals, failure to
disclose, unfair process in major transaction.
BCE-style structure
1. Standing: complainant category.
2. Reasonable expectations grounded in relationships, agreements, representations, and commercial
practice.
3. Conduct that is oppressive, unfairly prejudicial, or unfairly disregards interests.
4. Remedy tailored to rectify the oppression (common: buyout; also governance orders, damages,
injunctions).
D. Compliance and restraining orders
Triggers
 Meeting/proxy/proposal rules breached, statutory process not followed, need an order to compel or
restrain corporate acts.
Use case
 When full oppression/derivative is overkill and the fix is statutory compliance.
E. Rectification
Triggers
 Wrong share register entries, wrongful deletion/omission, disputed transfers, improper issuances
affecting control.
Relief
 Order correcting records plus ancillary restraints (stop meetings/dividends until corrected).
F. Investigations
Triggers
 Suspicion of concealment, need internal facts, serious misconduct alleged but information is inaccessible.
Relief
 Court-appointed inspector to investigate and report; used to unlock information asymmetry.
G. Dissent and appraisal
Triggers
 Fundamental change where statute grants dissent: shareholder wants fair value instead of being dragged
along.
Steps to state
 Perfect dissent procedurally (notice, no vote in favour, demand payment).
 Valuation dispute and court appraisal if necessary.
H. Winding up and dissolution
Triggers
 Deadlock, loss of substratum, oppression with no workable alternative, relationship irretrievably broken.
Relief
 Liquidation, dissolution, or supervision orders; emphasize “last resort” character.