New laws to take effect this year Over the last half of 2017 there was a flood of information on what was going to take effect in 2018 and how we are to prepare for it all, taking the form of articles and news segments discussing controversial components of what will be implemented as of January 1st and how it will impact Canadians as a whole. To help simplify what to expect for 2018 in Canada and Ontario specifically, here’s a quick summary of some things to expect this year: Parental Leave (Canada) Changes to parental leave in Canada provide Canadians with the ability to spread a years worth of federal employment insurance over 18 months, stay home with their children longer, and allow for a 15-week leave caregiver benefit to assist critically ill or injured adults or 35-week leave for an ill or injured child. Microbeads Ban (Canada) Microbeads are officially banned from being manufactured and imported in Canada. They have been seen and used in many toiletries including toothpaste, facial scrubs, lotions, gels, and other beauty products. The ban has been implemented due to the inability for the microbeads to break down and are too small to be caught by wastewater treatment filters, ending up in our bodies of water. In addition, microbeads have also been added to the list of toxic substances under the Environmental Protection Act. Small-business Tax Changes (Canada) The primary change to small-business taxes is the issue of “income sprinking”. This is one of the many changes that have been implemented by the government in their tax reform plan as they continue to make Canada’s tax system fair and close certain loopholes that exist. Legalization of Marijuana (Canada) July 1, 2018 is the expected date for Canada’s legalization of cannabis to take place and introduce LCBO managed stores (Ontario), personal growth regulations, and licensing of cannabis producers and sellers among many other components to be introduced with the sale of cannabis in Canada. Minimum Wage Increase (Ontario) The Fair Workplaces, Better Jobs Act, 2017 proposed changes to Ontario’s Employment Standards Act, which included an increase of the minimum wage to $14 per hour by January 1st, 2018 and again to $15 per hour by January 1st, 2019. Scalper Bot Ban (Ontario) The scalper bot ban has attracted the most attention. Within the consumer protection bill is the Ticket Sales Act, which will address ticket bots and ticket resale prices. In summary, the Ticket Sales Act would: ban scalper bots ban tickets from being resold at more than 50 per cent of the face value will make it illegal to knowingly resell tickets that were purchased by bots sellers will need to display all fees, taxes, service charges resellers will need to disclose the face value of the ticket The legislation passed at Queen’s Park as of December 13, 2017. The province voted in favour of the bill, with MPPs from the Liberals supporting, while the Progressive Conservatives and the New Democrats opposed it. If you have any questions or concerns about any upcoming changes, or require any legal services please contact our office at 416-449-1400 to speak with a lawyer at Devry Smith Frank LLP. “This article is intended to inform. Its content does not constitute legal advice and should not be relied upon by readers as such. If you require legal assistance, please see a lawyer. Each case is unique and a lawyer with good training and sound judgment can provide you with advice tailored to your specific situation and needs.” By Fauzan SiddiquiBlog, Cannabis Law, Corporate Law, TaxJanuary 5, 2018June 17, 2020
The Importance of Shareholder Agreements Any business that has two or more shareholders or equity investors should seriously consider having a shareholder agreement to protect not only the shareholders but also the business itself. Too often, the shareholders of a start-up business are reluctant to spend the time or money to prepare an agreement that addresses the major areas of business operations or potential areas of dispute that may arise in a jointly owned and managed business. While it is desirable to have an agreement that deals with most of the ongoing management issues in a business and the areas of potential disagreements, realistically the cost of preparing such agreement with successive meetings and drafts is not within the budget of a start-up business. However something is better than nothing, and a limited practical approach is to have what I like to refer to as a “Meanwhile Agreement.” This would take the form of two or three page listing of the most important areas of agreement between the parties without getting into the detailed “boilerplate” that usually finds its way into a 30-40 page agreement. There is always time and money available when a business evolves beyond the start-up phase and becomes profitable. There is no such thing as a standard off-the-shelf agreement that is a one size fits all document. The most effective way to ensure your shareholder agreement meets the needs of the parties is to require the parties to be involved in the process of establishing the terms of the shareholders’ agreement While a perfect Agreement is desirable, it is more realistic for the parties to feel comfortable that they can “live” with the terms of the Agreement, no matter how brief or detailed it may be. So what are we talking about? A Shareholder Agreement is essentially a private contract entered into voluntarily by all shareholders of a business, that contains the following kinds of provisions (the listing is not exhaustive), even in the simplest of businesses: the names of the shareholders the number and class of shares held by each shareholder the amount of investment by each shareholder what happens if the business requires additional capital allocation of responsibilities as between the different shareholders in the operation of the business what happens if a dispute arises between the shareholders; do the parties wish to create a mechanism for one shareholder to buy out the other How decisions relating to the business will be made; unanimity, or in the case of 3 or more shareholders, does a majority of votes rule What happens if a shareholder dies; will the shareholders, or the business take out insurance on each shareholder’s life to provide funds for a buy-out on death; what happens if a shareholder becomes incapacitated and is unable to work full time What happens if a shareholder wants to leave the business Are shareholders required to work full time in the business Is any shareholder permitted to start another business, or do engage in a competitive activity Without some agreement that deals with what happens if a dispute arises, any shareholder can apply to the court for an order winding up the business, not a desirable result. However, if the parties have addressed this issue in an agreement, even if it is a short one, the courts will give effect to the parties’ intentions. For more information or to arrange an appointment with Frank Shostack for any corporate services, please click on his profile, email him, or give him a call today. For any other needs, please call our office directly at 416-449-1400. “This article is intended to inform. Its content does not constitute legal advice and should not be relied upon by readers as such. If you require legal assistance, please see a lawyer. Each case is unique and a lawyer with good training and sound judgment can provide you with advice tailored to your specific situation and needs.” By Fauzan SiddiquiBlog, Corporate LawDecember 1, 2017June 17, 2020
Provisional Application of CETA For Canadian businesses that are growing insecure about the potential consequences resulting from the re-negotiation of NAFTA, CETA may be an opportunity to diversify ties to the international market. Any changes to NAFTA could have significant consequences to Canadian industries, as the United States is Canada’s largest trading partner. Trump’s America First/Buy American domestic policies are evident in the recent release of the American agenda driving the renegotiations. Trump’s immigration policies have also created uncertainty with respect to issuing work permits and their recognition by border officers. However the growing uncertainty about the future of NAFTA and what it means for Canadian businesses may be mitigated by a different Agreement. Just two days prior to commencement of the third round of NAFTA renegotiations, Canada entered into a comprehensive trade agreement with the world’s second largest economy, and Canada’s second largest trading partner: the EU. CETA, the Canadian-European Union Comprehensive Economic Trade Agreement, is a progressive trade deal that aims to reduce or eliminate tariffs by a substantial amount. Presently, only 25% of Canadian goods enter the EU as duty-free. Once the Agreement is in full force, 99% of Canadian goods will be imported as duty-free goods to the EU. Bilateral trade is expected to increase by 20%. What might be most exciting about CETA is how it will facilitate labour mobility as the Agreement streamlines the process for work permits between the two signatories. CETA has enhanced the ability of temporary workers to enter Canada. For four categories of workers a LMIA will no longer be necessary: Key Personnel: including business visitor for investment purposes, investors and intra-corporate transferees Contractual Service Providers Independent Professionals: including self-employed workers Short-Term Business Visitors Eliminating the requirement for an LMIA will mean that employers are no longer required to advertise their positions in the domestic market for a prolonged period of time. Further, CETA’s elimination of the requirement of a LMIA for these key categories creates certainty for employers that they will be able to hire workers who meet the requirements. There is no limit to the workers that can come to Canada without an LMIA in these categories. The different categories a employee or professional falls under determines how the long work permit will be granted for, whether it can be extended, and if there is a limit to how many times per year an individual can be a recipient. Once CETA is fully established Canadian employers will be able to recruit European workers with certainty, and less costs and expedited processes. It is important to note that while CETA has come into force, the national parliaments of all EU member states must still ratify the Agreement in accordance with their domestic requirements. By: Samantha Hamilton, Student-at-Law “This article is intended to inform. Its content does not constitute legal advice and should not be relied upon by readers as such. If you require legal assistance, please see a lawyer. Each case is unique and a lawyer with good training and sound judgment can provide you with advice tailored to your specific situation and needs.” By Fauzan SiddiquiBlog, Corporate LawOctober 19, 2017June 18, 2020
Update: Laid-off Sears Workers land hardship fund By: Stuart Clark, Student-at-Law In an earlier blog, we noted that Sears Canada had agreed to create a fund for former employees who were denied severance payments while the company restructured. Now, according to the Financial Post, Sears’ creditors say that they will seek a motion to lift the court-ordered stay which prevents them from exercising their rights on Sears’ unpaid debts. Recall that a debtor company can seek an initial order from the court that grants them a ‘stay’ against its creditors while it renegotiates or restructures its debts, but that this stay is not indefinite. The creditors have said that they will seek to remove the stay to go forward with a claim of ‘negligent misrepresentation’ and ‘oppression’ against Sears leadership. The ‘oppression remedy’ is a specialized tool that corporate stakeholders can use to contest actions by a corporation and its board of directors. The remedy derives from s 241 of the Canada Business Corporations Act (CBCA) which says that the courts may intervene wherever a corporation’s business is carried out, or directors’ powers are being exercised, in a manner that is ‘oppressive’ or ‘unfairly prejudicial’ to the interests of any security holder, creditor, director, or officer. The remedial powers in the section are vast—allowing the court a wide range of discretion to correct the oppressive treatment. The test for engaging the remedy comes from a case called Icahn Partners LP v Lions Gate Entertainment Corp, which says that the oppression remedy is only appropriate where: There is a breach of reasonable expectations: The stakeholder’s reasonable expectations are breached through the actions of the corporation or its directors; and, The breach is oppressive: The breach was either oppressive, unfairly prejudicial, or unfairly disregarded the interests of the complainant. For the first condition to be met, the expectations breached form part of the reasonable expectations created between the claimant and the company. This depends on the specific relationship between the two parties and accounts for the relationship between parties, duties under the CBCA (like a director’s duty to act in the best interest of the corporation), and industry standards. For the second, the conduct must be found to be substantially unfair. A breach of those reasonable expectations is not automatically oppressive, the conduct of the company must unfairly disregard the interests of the security holder. In Icahn, the court found that shareholders have a reasonable expectation that their interests will not be discriminated against to the benefit of other stakeholders. As a result, board walk a fine line between protecting larger corporate interests and oppressive conduct towards shareholders. Sears walks this line right now. One of the biggest tensions in corporate governance arises when interests of the corporation run against the interests of its shareholders or creditors. We will have to wait to see if Sears’ leadership has been successful in meeting their duty to the corporation while still taking into account the interests of their creditors. Devry Smith Frank LLP is a full service law firm that has a very experienced group of lawyers within our corporate and bankruptcy groups. If you are in need of representation, please contact one of our lawyers today or call us directly at 416-449-1400. “This article is intended to inform and entertain. Its content does not constitute legal advice and should not be relied upon by readers as such. If you require legal assistance, please see a lawyer. Each case is unique and a lawyer with good training and sound judgment can provide you with advice tailored to your specific situation and needs.” By Fauzan SiddiquiBlog, Corporate LawAugust 21, 2017June 19, 2020
Laid-off Sears Workers land Hardship Fund By: Stuart Clark, Student-at-Law According to the Financial Post, Sears Canada has agreed to create a fund for former employees who were denied severance payments as the company restructures itself. The deal was hammered out by lawyers representing the company and workers, and will be funded to the tune of $500,000—coming directly from money earmarked for executive bonuses. While it will not make employees as a group whole, the fund will target those facing genuine hardship. Sears’ severance obligations were modified as a component of the court-controlled restructuring process under the Companies’ Creditors Arrangement Act (CCAA). Using the Act, Sears was able to shed roughly 2,900 jobs across the country without severance. Under the Act, a debtor company can seek an initial order from the court that grants them a ‘stay’ against its creditors while it renegotiates or restructures its debts. In simple terms, this means that creditors are prevented from exercising their rights to collect on a debt, agreements with suppliers cannot be terminated (from either party), and further transactions require court approval. For example, under a stay, a creditor with an outstanding secured debt would be prevented from repossessing the secured property (like a piece of equipment, etc.). The stay is not indefinite, however. The guiding purpose of the Act is to give companies who qualify time to restructure so they can meet their creditor obligations. Generally, a business may only qualify if the total claims against the company are more than $5,000,000 (s.1). The counterpart to the CCAA is the Bankruptcy and Insolvency Act (BIA), which applies to individuals, corporations, income trusts, and partnerships. The key difference is complexity, debtor companies apply for CCAA protection because of their size, while individuals and small businesses operate under the BIA. The processes are similar, however, and both offer debtors the tools to preserve their business, renegotiate with creditors, and, most importantly, avoid liquidation. Devry Smith Frank LLP is a full service law firm that has a very experienced group of lawyers within our bankruptcy and insolvency groups. If you are in need of representation, please contact one of our lawyers today or call us directly at 416-449-1400. By Fauzan SiddiquiBlog, Corporate LawAugust 17, 2017June 19, 2020
How Some Gyms are Trying to Avoid Rights under Gym Contracts Read your contracts carefully! Beach season is coming, which means many gyms are launching “free” trials in order to entice customers to enroll in lucrative contracts at their gym. However, many consumers looking to get in shape are unaware of the recent trend by gyms to classify their contracts as “student tuition agreements” in order to avoid contractual obligations to their members. Why does the classification matter? Organizations such as gyms, sports clubs, dance classes, martial arts clubs and hot yoga studios, previously had their contracts classified as “personal development services.” Since many consumers are vulnerable to unscrupulous practices in the area, the government has introduced the Consumer Protection Act to regulate these services. Some of the consumer’s rights under “personal development services” include the following: the contract must be in writing and delivered to the consumer (if a copy of the agreement is not received, a consumer can cancel the contract at any time within one year); consumers have a 10 day “cooling off period” where they can cancel the contract for no reason with no penalty (the “cooling off period” starts upon receipt of the contract); the agreement is limited to one year (the contract is deemed not to be renewed unless explicitly authorized by the consumer or the contract has a one month’s notice opt-out provision); initiation fees cannot be more than double the price of an annual membership; and if the consumer is paying in monthly installments, the total amount cannot be more than 25% of the amount of the contract if it was paid upfront. If these contracts are classified as “student tuition agreements” all of these rights are avoided. Student tuition agreements can have automatic renewals for more than one year and there are fewer requirements to provide consumers with information. Many gyms are requiring that consumers pay for their memberships using a credit card, which allows gyms to charge payments months in advance, automatically renew the membership and directly bill late fees. For personal development services, there is an implied right that the gyms must provide a reasonable use of their premises and equipment to their members, something completely disregarded in “student tuition” contracts. Usually, gyms guarantee that there is working fitness equipment, premises which are clean and sufficient space for members—otherwise, the contract can be cancelled with notice (see Findlaw Canada’s Article). It is now common for prospective members to show up for the “free” trial class, and then be pressured into signing a “student tuition agreement” by a gym that will never provide a copy of the contract. Furthermore, the default is that the start of the contract is deemed to be the date of the first free trial class (consumers must correct this date before signing the contract). Consumers should also ensure to check the billing date of the contract—if a member signs up a few days before the end of the month there is a chance he or she could be billed for the whole month even though he or she didn’t use the facilities/classes during that time. Visit the Government of Ontario website for more information. It is important to know your rights before signing any sort of contract. If you are in need of a lawyer, please visit our website and contact one of our commercial law lawyers today. If you are in need of any other services or have any questions, you may also contact our Toronto office directly at 416-449-1400. “This article is intended to inform and entertain. Its content does not constitute legal advice and should not be relied upon by readers as such. If you require legal assistance, please see a lawyer. Each case is unique and a lawyer with good training and sound judgment can provide you with advice tailored to your specific situation and needs.” By Fauzan SiddiquiBlog, Corporate LawMay 10, 2017June 22, 2020