Incorporation of a New Business
The first step in the process of incorporation is naming your corporation. You may choose either a numbered name or a corporate name. In the case of the latter, you will need to conduct a Nuans names search to ensure the proposed name is distinct and not already taken. The proposed name must not be more than 90 days old. You can obtain pre-approval of your corporate name before you file your articles of incorporation, or request approval at the time of filing.
The next step is to file articles of incorporation which establish the structure of your corporation. You can file your articles of incorporation through the Online Filing Centre or by completing a Form 1. The language of the articles must be in either official language, French or English or both.
Step three involves providing the official office address of the corporation also known as the registered office address. This is the address where you must keep your corporate records and where official documents will be served on the corporation.
Step four involves making a request for a certificate of incorporation which is sent to Corporations Canada. The request must also include the appropriate filing fee
During the final step, Corporations Canada will make sure your articles of incorporation have been properly completed and that the proposed name is acceptable. An application is complete if: it includes all necessary documents the forms are complete and signed, and the fee is included.
Our lawyers will ensure that all the necessary steps are taken to incorporate your business in a timely manner.
Shareholder and Partnership Agreements
A shareholder or partnership agreement is a written agreement between the shareholders or partners of a business. The agreement covers the funding, structure, management and direction of the business, as well as outlining the responsibilities and obligations of the owners or partners. A unanimous shareholder agreement (USA) is a written agreement among all of the shareholders of a corporation that restricts, in whole or in part, the powers of the directors manage the business and affairs of the corporation. Shareholder agreements accomplish the following:
Govern voting rights;
Limits share transfers; and,
Give existing shareholders pre-emptive rights to purchase securities from a treasury.
Partnership agreements must comply with the applicable legislation governing partnerships in the province where the partnership exists. The laws of Ontario recognize three types of partnerships: general partnerships, limited liability partnerships (LLP’s); and limited partnerships.
In Ontario, general partnerships and LLP’s are governed by the Partnerships Act whereas limited partnerships are governed by the requirements of the Limited Partnerships Act. Section 2 of the Ontario Business Names Act requires that the name of a partnership must be registered by all of the partners, except of a limited partnership carrying on business in accordance with the Limited Partnerships Act or where the partnership carries on business under a name that is composed of the names of all the partners.
Failure to register the name prohibits the partnership and partners of maintaining a proceeding in any court in Ontario in connection with business conducted by the partners or the partnership which becomes relevant in the context of partnership disputes notwithstanding the presence of a partnership agreement. Gaps in partnership agreements are substituted by provisions of the Partnership Act.
In the absence of a partnership agreement, a court will look to section 3 of the Partnership Act, assuming the partnership exists in Ontario. First a determination must be made as to whether a partnership exists. Section 3 of the Act sets out rules for determining:
Control over the business;
Participation in management;
Sharing of profits; and,
Responsibility for losses.
Courts will also look at the intention of the parties as disclosed in the partnership agreement, if any. Courts will turn to the relevant provisions of the Partnership Act to determine the rights and remedies available to individual partners if a formal partnership agreement does not exist.
Shareholder and Partnership Disputes
Resolution for this type of dispute begins with application of the corresponding shareholder or partnership agreement. In the absence of a shareholder agreement, shareholders can protect and enforce their rights in the following ways:
Personal actions for infringement of a personal right such as the right to vote;
Applications for winding up;
Right of dissent; and,
The two most common remedies available to shareholders are derivative actions and oppression remedies.
With leave of the court, a derivative action may be brought by a current or former shareholder, director, or officer of the corporation or its affiliates. The court will grant leave where four conditions are satisfied:
The shareholder gives 14 days of notice to the corporation’s directors of their intention;
The directors of the corporation will not bring, diligently prosecute, defend or discontinue the action;
The shareholder is acting in good faith;
The proposed action appears to be in the best interest of the corporation.
There are three major categories of commercial leases: industrial, office and retail. A commercial lease is a written agreement between a landlord and business tenant. These types of leases involve making an offer to lease a commercial property and then negotiating the terms of leasing said property. Various types of commercial leases involve different rent calculations:
Percentage rent lease — If you own a retail business, you might pay a base rent plus a percentage based on your sales.
Gross rent lease — You pay a flat rate equal to base rent plus other specific expenses. The landlord pays the other operating costs.
Net lease — You pay some of the taxes plus the base rent.
Net-net lease — You pay base rent, taxes and insurance costs to the landlord.
Triple net lease (net-net-net) — You pay base rent, taxes, and operating and maintenance costs.
Our team will assist you in preparing leasehold agreements that will accommodate your business needs while minimizing your exposure to risk associated with leasing commercial property.
Mergers and acquisitions
Mergers generally involve the consolidation of two companies whereas acquisitions involve one company purchasing another. Mergers are also known as amalgamations. In a merger, shareholder approval is required between the shareholders of the two companies. The continuing corporation formed is a union between the amalgamating companies and has the rights and is subject to the liabilities of the amalgamating companies in addition to owning the property of the amalgamating companies. The amalgamated corporation is not a new legal entity but a continuation of the two companies as a single entity.
An amalgamated company is entitled to take the name of one of the amalgamating companies and is governed by a single corporate statute depending on the location of the head office the amalgamated corporation. The amalgamated corporations must enter into an amalgamation agreement except in the case of a “short form amalgamation”. The agreement must set out the terms on which the shareholders will receive money or securities in the amalgamated corporation. It must also set out the corporate by-laws.
In certain cases, where the amalgamation is between previously unaffiliated corporations, warranties and representations regarding its assets and liabilities must be set out in the amalgamation agreement. If the amalgamation is a short-form amalgamation under the Ontario Businesses Corporations Act, the articles must be accompanied by a copy of the directors’ resolutions. In an acquisition, the acquiring company obtains the majority stake in the acquired company, which does not change its name or legal structure. Acquisitions are often made as part of the acquiring company’s growth strategy, to expands its’ business, improve upon economies of scale or enter into a foreign or niche market.
The typical lease transaction begins with a term sheet, letter of intent or agreement to lease. These preliminary documents should set out the process to getting to the final lease agreement which is usually time dependent. Upon execution of the final lease agreement, a decision will need to be made if you wish to register the lease, or a notice or short-form thereof, on title to the applicable property. Where a tenant does not register its lease, the lease loses priority to subsequent purchasers, mortgagees and other third parties dealing with the property, who could take steps to terminate the lease.
Other items to consider include but are not limited to:
Type of permitted business activities;
Responsibility for repairs;
Options for first refusal if more space becomes available;
Options for first refusal if more space becomes available;
Damage and destruction;
What happens if the building is condemned; and,
Escape clause (in the event you become unable to run the business)
Financing can be obtained through the government or a private lender such as a bank. The Federal government offers small businesses up to $1, 000, 000.00 in financing for the purchase of land or business premises ($350, 000.00 for leasehold improvements and equipment). With assistance from the Federal government, businesses can support their financing requirements without using personal assets as security. There are various restrictions with this type of loan such as gross revenues must not exceed $10, 000, 000.00. Loan terms are usually between 7-10 years depending on the asset being financed.
Through private institutions such as banks, businesses can apply for commercial loans or lines of credit. Such institutions will impose restrictive covenants such as maintaining certain margins or revenue levels. We can assist you in negotiating the terms of these loans or applying to the government for a loan on your behalf.
Mortgage Disputes and Remedies
When a mortgagor has defaulted under a mortgage, the mortgagee has a number of remedies to choose from:
Sell the mortgaged property under power of sale provisions contained in the mortgage or sell the property under a judicial order;
Obtain title to the mortgaged property by a foreclosure action or acceptance of a quit claim deed to the mortgaged property.;
Take possession of the mortgaged property privately, by court order or by a receiver; or,
Obtain a judgment against the mortgagor and/or any guarantor; or the current owner of the mortgaged property, if there has been a change of ownership for payment of the debt secured by the mortgage either:
Before sale under power of sale; or,
After sale under power of sale for the amount then due on the mortgage debt (after application of the net proceeds of sale).
Our team will assist you in choosing the most efficient strategy for meeting your needs while minimizing any costs involved in the selected strategy.