Based on my 25 plus years of experience, business owners need to
make sure they do the following:
If you lend money to your company – take security!
The bank takes security for the money it loans to your company,
why shouldn't you? Banks generally do not have an issue with
this. They will treat the money advanced as equity if you give them
an assignment and postponement of claim. Assuming you do not do
this at the eleventh hour, you will be a secured creditor in the
event of insolvency, giving you priority over unsecured trade
creditors. You will be unsecured creditor if you do not take
security for your loan. Make sure you do this when you advance
funds. Non-arm's length security taken within a year of
insolvency is effectively void.
If you have a business partner you need a Unanimous
A shareholders agreement should deal with, among other things,
the governance of the company and the transfer and disposition of
shares. Think of it as a compass for your company, guiding its
future direction. A company without a shareholders agreement is
like a ship without a compass. A properly drafted shareholders
agreement addresses how problems will be dealt with before they
arise. Shareholders of a company without a unanimous shareholders
agreement often have to go to court to resolve their differences.
This is not only costly and time consuming, but a lack of strategic
direction can threaten the very existence of a company. One other
point: get your shareholders agreement negotiated as soon as
possible. Shareholders' positions can become entrenched as time
passes. It's like a marriage contract – it's a lot
easier to negotiate from the get-go.
Keep abreast of changes in employment law.
There have been many changes to employment law in this province
in recent years – and the changes have generally favoured the
employee, not the employer. Make sure any employment and
independent contractor agreements you have are reflective of the
current state of law. One of the major new developments is the duty
of employers to "accommodate" employees with a
disability, which can include employees on stress leave. Failure to
accommodate can prove to be costly. However, at the same time,
employers want to be proactive to address unproductive employees
– and avoid human rights claims and other employment related
Make sure your "standard form" agreements are
Making sure that invoices, bills of sale and other related terms
of sale documents are current may seem trivial. However, minor
"tweaks" to these documents can avoid huge problems. For
example, limitation of liability clauses can be inserted that limit
damages that can be claimed. If you are selling goods in the United
States, it is important to have a choice of laws clause that states
any dispute will be resolved by the Canadian courts, where,
generally speaking, the cost to litigate is much more economical.
These are just a couple of examples of situations where small
changes can make a big difference.
Make sure your policies and procedures are in order.
Canada's anti-spam legislation? One Quebec company that ignored
Canada's anti-spam legislation was levied a $1.0 million fine.
There have been thousands of complaints registered under this
anti-spam legislation. The federal government is currently working
through them – expect more fines. These are but two of many
examples of where failure to have policies can prove to be
A wise person once said "an ounce of prevention is worth a
pound of cure". Being proactive now can avoid a lot of
problems down the road.
Under the Income Tax Act, the Employment Insurance Act, and the Excise Tax Act, a director of a corporation is jointly and severally liable for a corporation's failure to deduct and remit source deductions or GST.
Under the Income Tax Act, the Employment Insurance Act, the Canada Pension Plan Act and the Excise Tax Act, a director of a corporation is jointly and severally liable for a corporation's failure to deduct and remit source deductions.
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