Insights

The practice of law is changing every day, and the effect of changing legislation on businesses is significant. We write about recent developments in the world of tax & business law, keeping a watchful eye on the changing landscape for our clients. See what we’re thinking about, and what your business should be looking out for.

Tax & Estate Planning

STEP Canada / Canada Revenue Agency Roundtable (2019)

This year, two of our associates – Katherine Ratcliffe and Jocelyn Arnason – attended the 21stannual Society of Trust and Estate Practitioners (STEP) Canada National Conference in Toronto, Ontario on June 6th and 7th, 2019. As usual, the STEP Canada/Canada Revenue Agency (CRA) Roundtable was one of the highlights of the conference. During the Roundtable, the CRA provided detailed answers to 18 pre-selected questions posed by trust and estate practitioners across Canada on a variety of topics, including 6 questions requesting clarification on the relatively new "tax on split income" (TOSI) rules. In advance of the release of the CRA's...

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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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Business Law

ASC Expands Prospectus Exemptions for Distributions to Purchasers Outside Alberta

The Alberta Securities Commission (ASC) recently updated ASC Rule 72-501 Distributions to Purchasers Outside Alberta. This new rule significantly expands upon the exemptions available to an Alberta issuer where the offering materially complies with the securities laws of the foreign jurisdiction. In addition, the new rule contains a prospectus exemption to facilitate Alberta issuers using the offering memorandum prospectus exemption to more readily raise capital from investors in other jurisdictions of Canada.  The new rule is very similar, but not identical to, the new rule on this subject matter adopted earlier this year in Ontario. Key Prospectus Exemptions for Distributions...

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Business Law

Canadian Companies Need to Assess Their “Foreign Private Issuer” Status for SEC Reporting Purposes

Canadian companies wishing to access the US capital markets from time to time, and that have historically qualified as a “foreign private issuer” under US federal securities laws, need to annually assess whether they continue to meet the tests to qualify as a “foreign private issuer”.  Under US federal securities laws, “foreign private issuers” are exempt from US registration and continuous disclosure requirements. If a foreign company does not continue to qualify as a foreign private issuer, it becomes subject to the same registration and disclosure requirements applicable to domestic US entities.  A foreign company must determine its status as...

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Business Law

CSA Staff Says Most Coin/Token Offerings Are Securities

On June 11, 2018, the Canadian Securities Administrators (CSA) provided guidance on when an offering of cryptocurrencies such as coins or tokens, including ones that are commonly referred to as “utility tokens”, will be offering of securities. This is important because if the coin or token is considered a security, then the person issuing the coin or token must comply with provincial securities laws when doing so (i.e. file and clear a prospectus with securities regulators or rely on an exemption from those prospectus requirements). Failure to do so could give rise to statutory and civil liability including a requirement...

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Litigation

Letter of Credit Security and the “Autonomy Principle”

In commerce, parties often provide security in the form of letters of credit. A party (the “promisor”) may provide security for performance of its obligations under a commercial transaction (“underlying contract”) with the other party (the “promisee”) by procuring a letter of credit (“LOC”) from a bank.  The LOC would stipulate that a certain amount of money is to be released by the bank to the promisee/beneficiary if the promisor defaults in the underlying contract.  There would therefore be two different relationships at play: 1) that between the promisor and promisee in the underlying contract and 2) that between the...

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