Saturday, February 28, 2009

The importance of written notice in a commercial lease

I previously discussed the importance of having written documents & agreements. Today, I would like to share the importance of a written notice in a commercial lease. As you may imagine, the Tenant may be noted in default pursuant to the terms of the lease. In the event of a default by the Tenant, the Landlord may exercise certain rights in order to remedy the default. If you are the Tenant, you need to ensure that the Lanldlord give you a written notice that you are in default. By receiving the written notice, you will be able to cure the default and the Landlord will not be able to note you in default.

For ease of reference, I included the 2 clauses:

ACTS OF DEFAULT AND LANDLORD'S REMEDIES

(1) An Act of Default has occurred when:
(a) the Tenant has failed to pay Rent for a period of five (5) consecutive days, regardless of whether demand for payment has been made or not;


&&&&&&&&&&&&

In the event of a default made by Tenant in the payment of rent when due to Landlord, Tenant shall have five (5) days after receipt of written notice thereof to cure such default.

Did you notice the difference??

Why is it so important?

well, in the event that you sign a 5 year lease and 1 option for another 5 year - pursuant to the terms of the lease, in order to renew and exercise your option, you need to have to respected the terms of your lease.

here is an example of clause:

Provided the Tenant has observed and performed its obligations under this Lease, and is not in default hereunder, the Tenant shall have one option to renew this Lease for a further period of five (5) years on the same terms and conditions

Friday, February 20, 2009

100% Tax Deduction on Computers

2009 Federal Budget: Temporary 100% Capital Cost Allowance Rate for Computers and Software

David Brighten from Andrews & Co advised us that the Budget provides a temporary 100% CCA rate for eligible computers and software acquired after January 27, 2009, and before February 2011. Further, the “half-year rule” will not apply, allowing the taxpayer to fully deduct the cost of an eligible computer in the first year that the CCA deductions are available. In general, this special treatment is restricted to computers acquired for business uses. Various other restrictions also apply.

Wednesday, February 11, 2009

Top 10 reasons why your company needs a Shareholders’ Agreement

As mentioned before, a shareholders’ agreement is an important and very helpful document when setting up a business, or when acquiring partial interest in a business. It sets out the privileges and responsibilities of the shareholders, and provides a means for setting out the principles upon which the shareholders intend to run the business and deal with unforeseen circumstance and contingencies. In other words, a shareholders’ agreement defines the way in which the company should be governed and managed so as to avoid messy and expensive disputes in the future. Therefore, companies should have a shareholders’ agreement for ten main reasons.

Top 10 reasons why your company needs a Shareholders’ Agreement

Reason #1: Provides a customized relationship between shareholders and directors

Corporations often want to customize their relationship to create an arrangement which differs from the applicable corporate legislation, including shareholder voting entitlements, imposing share-transfer requirements, and providing for a dispute-settlement mechanism.

Reason #2: Voting entitlements

Shareholders in a corporation may want to exercise their power to vote on a basis different from the votes they have according to their share ownership. For example, it may be essential to provide for how the shareholders are to nominate and elect the directors.

Reason #3: The possibility of imposing share-transfers

The general rule is that no shares may be transferred without prior approval of the directors. This rule protects the shareholders from ending up in a business relationship with parties who are different from those initially agreed upon. Consequently, if not supplemented by other provisions, a shareholder that wishes to exit needs to obtain prior approval from the other shareholders and there is no assurance that such approval will be imminent. It is therefore vital to provide a predetermined method for transferring shares.

Reason #4: Preventing conflict between the shareholders by providing conflict-resolution methods.

Different forms of dispute-settlement methods, such as mediation or arbitration, are often included in shareholders’ agreements to avoid going to court to resolve such disputes.

Reason #5: Transferring of power

Shareholders’ agreements permit altering the distribution of power between directors and shareholders. Basically, it can restrict in whole or in part the powers of the directors to manage or supervise the management of the business and affairs for the corporation, and provide a greater degree of power to the shareholders.
Reason #6: Future shareholders

It is common in shareholders’ agreements to stipulate that all transfers and share issuances are conditional upon any new shareholder signing the agreement. Please note: this is not required if there is a unanimous shareholders agreement.

Reason #7: Addressing the quorum and other minimum requirements for director and shareholder meetings

It is important to address the minimum number of members necessary to carry out the business of the corporation.

Reason #8: Issues relating to the finances of the company

Shareholders may wish to regulate the distribution of the corporation’s profits in some manner. It may also be imperative to set out the relevant terms of debt financing in the shareholders’ agreement.

Reason #9: Potential inconvenience

A corporation can anticipate future situations and therefore a shareholders’ agreement can lay out possible solutions for potential problems such as deadlocks.

Reason #10: Impact of other agreements

Some shareholders are party to other agreements with respect to the corporation. The shareholders’ agreement may provide information on what to do if a shareholder breaches that other agreement.

The lawyer’s role in preparing this agreement requires him/her to learn as much as possible about the client’s objectives, needs, and fears. This information mentioned above is incorporated into the agreement in order to ensure that each agreement is designed to fit the unique needs and circumstances of each client.

Thursday, February 5, 2009

Dissolving a Corporation...

What is dissolution?

Definition

It is the legal termination of a corporation. In other words, dissolution is the act of ending the existence of a corporation. To dissolve a corporation, the applicant must respect the CBCA formalities that will lead to the issuance of a certificate of dissolution. The corporation is dissolved as of the effective date of the certificate of dissolution.

Bankrupt or Insolvent Corporation

The fact that a corporation is bankrupt or insolvent does not end its existence. A corporation that is insolvent or bankrupt under the Bankruptcy and Insolvency Act cannot voluntary dissolve.

A corporation is insolvent under the Bankruptcy and Insolvency Act if:

i) it is unable to meet its obligations as they generally become due;

ii) it has ceased paying current obligations in the ordinary course of business as they generally become due; or

iii) the aggregate of the corporation's property is not, at a fair valuation, sufficient; or if disposed of at a fairly conducted sale under legal process, it would not be sufficient to enable payment of all obligations, due and accruing due.

If you file Articles of Dissolution with Corporations Canada for a corporation that is bankrupt or insolvent, the application will be rejected.

For any questions regarding a bankrupt or insolvent corporation, please contact the Office of the Superintendent of Bankrupty Canada.