Proposed Changes to the Canada Business Corporations Act – How Could this Affect You?

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Last month, the Government of Canada tabled Bill C-25 to amend the Canada Business Corporations Act (the “CBCA”). The objective of these amendments is to modernize Canada’s legal and regulatory framework for the country’s nearly 270,000 federally incorporated corporations, and would also amend the Canada Cooperatives Act and the Canada Not-for-profit Corporations Act.

The following are some key changes which were proposed, and, if the bill is passed, should be considered should they impact your organization:

  1. Annual Elections and Individual Votes: There will be a requirement to hold annual elections and individual votes for director candidates, as opposed to slate voting. This is consistent with the requirements already imposed on TSX-listed companies, and many companies have already adopted this requirement voluntarily.
  2. Majority Vote: Directors must receive a majority of votes in favour of their election when the number of candidates is the same as the number of positions to be filled.
  3. “Notice and Access”: The CBCA’s requirements for paper-based communications will be replaced with a “notice and access” system which would allow for corporations to use electronic communications to provide notice of shareholder meetings, and online access to relevant documents.
  4. Diversity: Reporting issuers will be required to provide to its shareholders information concerning the gender composition of their boards and senior management, as well as disclose any diversity policies or explain why none are in place.

While these amendments are still in the early stages and will likely undergo further revisions, they are worth noting as they may have significant impacts on your organization if they come into effect.

 

Transitioning to the New Societies Act

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Further to last week’s post, the following sets out the immediate impact of the Societies Act (the “Act”) on existing BC societies and what is require to transition to the Act.

The Act, with a few noted exceptions therein, will apply to all BC societies on the day it comes into force, being November 28, 2016, and each society will be required to immediately comply and govern itself in accordance with the Act. Further, any provisions in a society’s bylaws that are inconsistent with the Act will no longer have any effect as of November 28, 2016. This will be true regardless of whether a society has transitioned to the Act or not. All BC societies however, will need to transition to the Act within two years of the Act coming into force. Continue reading

BC Societies – The New Act

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New legislation will come into force the end of this November to govern societies formed or operating in BC. The new Societies Act (the “Act”) replaces the outdated Society Act with a more comprehensive framework that includes modern governance provisions that provides societies more flexibility in how they are created and operated.   Similar to what was done when the federal legislation governing non-profits was replaced, the Act borrows various provisions and concepts from the Business Corporations Act to allow societies to function and be run more like companies.

The following are some of the more significant features of the Act. Continue reading

Representations & Warranties – No One-Size-Fits All

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Private M&A purchase and sale agreements in Canada follow a very familiar pattern and typically include what can be described as the ‘usual representations and warranties’. In sophisticated purchase agreements the usual representations and warranties are comprehensive and cover everything from corporate, employment and environmental matters to financial, tax and intellectual property matters.  While the usual representations and warranties cast a wide net, they are by no means a one-size-fits all solution for addressing risk. Each transaction is unique and requires that clients, their financial advisors and their legal advisors turn their mind to drafting representations and warranties that address the specific risks of the transaction. Continue reading

New B.C. Technology Fund – Countdown to the Launch Begins

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In December 2015, British Columbia Premier Christy Clark unveiled the first part of the BC government’s plan to accelerate the province’s high tech sector, announcing the creation the $100-million BC Tech Fund created for investing in startup companies.

The provincial government boasts that the technology sector supports the BC economy at its very foundation and is a key driver of growth for our economy, creating 86,000 jobs that pay 60% higher wages than the average. The sector is outpacing the overall economy, adding $13.9 billion to BC’s GDP and growing 4.7% higher than the overall provincial economy. Continue reading

When Shareholders Can’t Get Along (Part 2)

business04In my last blog post, I explained how the shotgun clause can be used to separate shareholders that are no longer getting along. The shotgun clause can be an effective way of avoiding litigation and providing a clean split between the warring parties.

How does the shotgun clause work? Generally speaking, it provides that one shareholder may make an offer to buy the other shareholder’s interest at a price set by the shareholder making the offer. However, the interesting twist is that having made the offer to buy, that shareholder is also deemed to have offered to sell their interest at the same price and on the same terms as the offer to buy. So it is left up to the shareholder receiving the offer to determine whether or not they want to sell their interest or buy the interest of the other shareholder. This has the effect of making the offering shareholder think carefully about the price. If they make a lowball offer, they may end up being bought out at that low price! Continue reading

When Shareholders Can’t Get Along

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Many privately owned businesses have more than one owner. This can be beneficial to a business, but it also poses its own problems. Sometimes one or more of the parties realizes that the partnership is not working which leads to dissention and conflict. What options are there for individuals facing this scenario? Continue reading

Business Succession – Learn from the Errors of Others (Part 2)

business02Whether a business is worth $1 million or $100 million, the same principles apply when it comes to business succession.   After many years of experience in private company succession (and with over a third of a billion dollars of transaction value behind me) I see business owners falling into the same predictable patterns time and time again.

It’s understandable because while business owners are skilled at business operations, they have little experience in succession planning. After all, most business owners will sell or transition out of a business only once. Let’s take a look at some more of the key lessons to be learned (see Part 1 here). Continue reading

Business Succession – Learn from the Errors of Others

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Whether a business is worth $1 million or $100 million, the same principles apply when it comes to business succession. After many years of experience in private company succession (and with over a third of a billion dollars of transaction value behind me) I see business owners falling into the same predictable patterns time and time again.

It’s understandable because while business owners are skilled at business operations, they have little experience in succession planning. After all, most business owners will sell or transition out of a business only once. Let’s take a look at some of the key lessons to be learned. Continue reading

The Staged Buyout

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When it comes to succession, some business owners prefer to pass the business on to their employees. Instinctively, they know that this can be a very risky way to transition the business. On the other hand, they like the idea of passing on the business to employees because these are the very people that helped to make the business a success. I assist many business owners with planning and executing tailored business succession strategies.  In particular, one method I have used successfully is what I call the staged buy-out process. In that process I consider three critical elements. First, the need for the business succession plan to create an alignment of interests between the owner of the business and the proposed successor. Second, the need for the business succession plan to set measurable milestones to ensure that the proposed successor has financial targets to meet that will generate the income needed to buy the owner’s interests in the business. Third, the need for the business succession plan to provide “escape hatches” that will allow the owner to unwind the buyout if things were not working out as planned. When these critical elements are present, the likelihood of a good result is increased. Continue reading