Business Law

Tales of Flawed Disclosure: The Importance of the FDD Certificate

The recent decision of the Ontario Superior Court of Justice (the Court) in the case of 2483038 Ontario Inc. v. 2082100 Ontario Inc. (2020 ONSC 475) (the Fit for Life Decision) highlights the importance of ensuring the delivery of a compliant franchise disclosure document (a FDD) upon the grant of a franchise and serves as a reminder to franchisors and their principals of the significant consequences of failing to do so. In this case, the franchisee entered into a franchise agreement with the franchisor for the operation of a “Fit for Life” restaurant in Ontario. The franchisee opened for business...

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Business Law

Default Deference to Administrative Tribunals – The New Era of Review Standards

Background Judicial review involves a process by which a court is asked to review a ruling made by an administrative tribunal in Canada (a Tribunal). Tribunals include the Investment Industry Regulatory Organization of Canada (IIROC), the Privacy Commissioner of Canada, the Trademarks Opposition Board and the Occupational Health and Safety Tribunal Canada. Clients may, from time to time, be subject to rulings of a Tribunal and may therefore seek to weigh the advantages and disadvantages of having a court re-consider the process employed by such Tribunal in reaching such decision and/or the substance of the decision itself. Although such Tribunals are...

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Business Law

Licensors Be Wary – Are you Actually Franchising?

Franchising and licensing are often appealing models for businesses looking to expand. With either model, a franchisor or licensor can broaden the reach of their business without having to rely solely on their own capital. However, it is important that the two models be contrasted as against the legal framework within which they each operate. In provinces that have franchise legislation, a franchisor is required to follow a certain set of requirements including delivering a disclosure document to a prospective franchisee. The disclosure obligations are relatively onerous and require that a franchisor disclose all material facts relating to the franchise...

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Business Law

On Your Marks! A Reminder to Register Your Trademarks

Click here to view in PDF. On June 17, 2019, a number of significant amendments were made to the Trademarks Act (Federal) (the Act). As an example, amendments were made to permit: the registration of a trademark in respect of not only words, designs and other distinguishing guises but also new categories which include scent, tastes, textures, holograms, colour (by itself) and moving images; and the filing of one international application for the registration of a trademark which can cover up to 121 countries throughout the world rather than undertaking separate applications in each of those jurisdictions. The applicant would...

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Business Law

Good Faith Disclosure: Some Relief for Franchisors

Click here to view in PDF. The decision of the Ontario Superior Court of Justice in 2101516 Ontario Inc. et al. v. Radisson Hotels Canada Inc.(2019 ONSC 3302) is likely to be welcomed by franchisors across the country. In this decision, the Court ruled that a franchisee cannot claim for misrepresentation under section 7 of the Arthur Wishart Act (Franchise Disclosure), 2000, S.O. 2000, C.3 (the Act) if the misrepresentation is contained in a disclosure document that the franchisor was not obligated to deliver to the franchisee pursuant to the Act. 2101516 Ontario Inc. along with certain other guarantors (collectively,...

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Business Law

Be Aware of the Competition Act When Making Acquisitions

Executive Summary The Competition Bureau can review any merger or acquisition transaction, whether or not it is a “notifiable transaction” and whether or not the transaction has already closed. The general rule of thumb is that they will object to any transaction where they determine that the resulting company will be able to increase prices in any definable market by more than 5% and maintain those prices for one (1) year. The Competition Bureau must generally be given advance notice of proposed transactions when: Transaction-Size Threshold - the assets in Canada or revenues of the target firm generated in or...

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Business Law

Using the “Material Adverse Change” Condition to Terminate

Click here to view in PDF. According to a recent decision of the Delaware Court of Chancery, a buyer may rely on the material adverse change condition (also known as a “material adverse effect”, “MAC” or “MAE” condition) to terminate an acquisition agreement if the change in the target company "substantially threatens the overall earnings potential of the target in a durationally-significant manner" … "measured in years rather than months." Almost every merger or acquisition agreement contains a closing condition in favour of the buyer that the target company not suffer a MAC prior to closing but courts have historically...

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Business Law

Another Case of the Accidental Franchisor

Click here to view in PDF. The decision of the Ontario Superior Court of Justice in Fyfe v. Stephens (2018 ONCSC 5066) (Fyfe) exemplifies the importance of substance over form as it relates to contractual relationships that may or may not be characterized as "franchising arrangements". In Fyfe, the parties entered into a business agreement regarding “Dial a Bottle” and executed a document entitled “Exclusivity Agreement” (the Agreement). Unfortunately, the plaintiffs' business undertaking in connection with the Agreement was not successful and the plaintiffs sought to rescind the Agreement through the Arthur Wishart Act (Franchise Disclosure) (Ontario). The plaintiffs claimed...

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Business Law

CSA Proposes New Rule on Non-GAAP and Other Financial Measures Disclosure

The Canadian Securities Administrators (the “CSA”) have published for comment Proposed National Instrument 52-112 Non-GAAP and Other Financial Measures Disclosure (the “Proposed Instrument”). The Proposed Instrument sets out prescribed disclosure requirements for non-GAAP financial measures and other financial measures (i.e. segment measures, capital management measures, and supplementary financial measures). There is no indication of an intended effective date but the proposed instrument is substantively similar to, although quite a bit more exhaustive than, their current guidance on the matter contained CSA Staff Notice 52-306 (Revised) Non-GAAP Financial Measures (“SN 52-306”). Consequently, I speculate that it may become effective by the...

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Business Law

Everyone Revokes the Northwest Exemption Except Alberta and Saskatchewan

This article updates a previous article written by myself and Adam Rock dated June 9, 2016 entitled “Finder’s Fees – Permitted, Recommended and Prohibited Activities”. The Northwest Exemption is a conditional registration exemption currently in place in Western Canada often relied upon by “finders” to receive fees for their services in introducing investors to companies looking to raise money. However, on August 15, 2018, the securities regulatory authorities of British Columbia, Manitoba, Nunavut, the Northwest Territories, and Yukon announced that they will revoke the “Northwestern Exemption” in their jurisdictions effective on April 30, 2019. And both Alberta and Saskatchewan have...

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