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What is a voting trust?

A voting trust is an arrangement under which legal ownership of shares belonging to one or more shareholders are transferred to a trustee, along with the voting rights attached to those shares, usually for a specified period of time. The shareholders retain beneficial ownership of the shares and all other rights and benefits, except for the right to vote the shares. At the end of the trust, the shares are re-transferred back to the beneficiaries (i.e., the shareholders).

To establish a voting trust, the shareholders enter into a trust agreement with the trustee, setting out the provisions of the trust, transferring legal title of their shares to the trustee, and granting the trustee the right to vote the shares. In some voting trusts, the trustee may also be granted additional powers in order to accomplish the purposes of the trust (such as the authority to sell or redeem the shares).

What are the benefits of a voting trust?

A voting trust arrangement can offer a number of benefits to a company's shareholders. By consolidating the voting power of their shares, they can collectively hold a sufficient percentage of the company's voting shares that they would not have individually, which - as a voting bloc - would give them the power to force the calling of meetings, elect specific directors, and generally exert or safeguard control of the company.

Locking shares up in a voting trust can be used as a means to facilitate a corporate reorganization - or to avoid a hostile takeover of the company - by aggregating a certain percentage of shares into the trust, consolidating their voting power, and protecting them from being acquired in connection with a potential takeover bid.

A voting trust can also operate as a short-term proxy solution for a period of time during which the shareholders will be unavailable to attend and vote at meetings, or as a convenience. By appointing a trustee to vote their shares, the shareholders free themselves from the necessity of attending meetings, voting on key issues, and dealing with other responsibilities associated with share ownership.

A discretionary voting trust (also known as a "blind trust") can be used as a mechanism to resolve conflict of interest situations. In a blind trust, the trustee has full discretion over the trust assets (i.e., the shares) and votes the shares at arm's length from the beneficiaries of the trust (i.e., the shareholders).

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Every business, no matter the size, should conduct employee performance reviews at least once a year. This process gives employers a chance to let employees know that they are valued and that their efforts are appreciated, and it also affords an opportunity to address any areas that may need improvement.

Every business needs competent legal counsel. The bigger the business, and the more widespread the scope of the business, the more complex the legal issues facing it will be. Failure to cover all the legal bases of a transaction at the outset can result in dire and costly consequences. So it's crucial to find the right lawyer to handle your company's legal affairs. The task can seem daunting, but getting satisfactory answers to the following questions will help you narrow down the possibilities.

1. What business courses have you taken at the university or graduate school level?

A lawyer who had academic exposure to subjects such as corporate finance, cost accounting, human resources, risk management, and marketing demonstrates an early career choice to serve the needs of business.

2. What is your experience in managing or building a business like mine?

You may take comfort in learning the person you trust with providing legal services to your company possesses empathy resulting from having ‘walked in your shoes’. A person with this type of experience is more likely to appreciate the management context of the decisions within the company’s legal environment.

3. Have you ever been responsible for buying legal services for a business?

There is no better way for a lawyer to get to know a business client’s needs than to be on the buying end of the transaction – just like you are. This type of experience adds value and is likely to develop the service-centric attitude you seek.

4. What percentages of your services are ordinarily delivered at your client’s site as opposed to at your office?

You may value having your own business premises as the primary point for legal services delivery, as this would give you and your employees easier access to your lawyer, akin to the advantages of hiring an '‘in-house'’ lawyer. You may prefer your lawyer to work on site to save time lost for staff to go to an external lawyer’s office when services are sought.

5. In your firm, what is your authority to make immediate changes respecting pricing of the work product, the technology used to process it, and the way it is delivered?

As a businessperson, you may feel more comfortable knowing that the lawyer you deal with is positioned to decisively act ‘on-the-spot’ in these areas, just as you likely are in your own realm of business.

6. Besides business law, in what other areas of law do you personally practice?

It is worth knowing whether the law firm under consideration restricts their practice to serving the needs of business or also practices in other fields like real estate, employment law, intellectual property and tax matters.

7. What has been your exposure to globalization, creation of efficiencies through new technologies, and outsourcing?

The so-called ‘new economy’ is in large part a product of these factors. You may feel that significant exposure to and experience in these areas will provide a real-time context to the advice you receive, as you confront these issues in the evolution and competitive environment of your business.

8. Name concrete steps you have personally initiated in the last 3, 6, and 9 months to reduce your overhead, and how has each step affected pricing to your clients?

You may feel that a lawyer who manages his or her own internal costs and in a manner consistent with your own values reflects the innovative spirit you seek.

9. How does your fee structure demonstrate that you, as a supplier, share the same risks that I incur in carrying on my business?

If hourly billing is not your preferred pricing model, you may wish to explore billing methods involving fixed fees to perform specified work, or one of a number of arrangements described above. Typically, in such arrangements the up-front and ongoing costs of a legal project are reduced in return for some sort of incentive on project completion or related to success of the outcome, as defined in a fee agreement.

10. What is your track record in designing and implementing plans aimed at controlling and reducing legal costs?

You may be interested in a commitment to put proactive advice in action to:

• avoid creation of legal disputes,
• manage the cost and progress of major lawsuits and projects, and
• push the legal learning down to the operating ranks of your company to support more knowledgeable decision-making.

If such issues are important to you, you may wish to seek concrete examples of how this has been achieved by this person in the past.

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It all started so well. You went into business with a friend or colleague, and for awhile everything was great. But as time went on you realized it wasn't working. Now you want to dissolve the partnership but you're worried it will ruin your friendship. You need to find a way out of the business relationship that doesn't leave you hating each other at the end of the process.

Sounds a lot like ending a marriage, doesn't it? And the fallout of terminating the relationship can be just as acrimonious as a failed marriage. But there are steps you can take to make the transition less painful for both of you.

1. Put everything in writing.

Hopefully you had the foresight to draw up a Partnership Agreement at the outset. A well written Partnership Agreement will cover how the parties are to proceed if the relationship is terminated, how profits and losses will be allocated and assets distributed, and an option for one partner to carry on the business if the other wants to withdraw. But if you didn't formalize the partnership in writing at startup, you can still formalize the breakup with a Partnership Dissolution Agreement.

2. Play nice.

It's never wise in business to burn your bridges, so keep a smile on your face, mind your manners, and treat your soon-to-be-ex-partner as you would like to be treated. The more civil you can be during your break-up negotiations, the smoother the transition will be. And it will make your mother proud.

3. Seek professional advice and input.

Your lawyer and your accountant should both be involved in the process. After all, that's why you hired them - to give you advice. They're the experts when it comes to the tax and legal implications of dissolving a partnership. They have no emotional attachment to the business, which is a distinct advantage because all breakups - professional as well as personal - are fraught with emotion for the parties involved. You should also hold a formal partners meeting to discuss the dissolution and have an outside third party present to take notes of the proceedings. The presence of outsiders often helps to allow cooler heads to prevail.

4. Be reasonable.

Don't be greedy and don't make unreasonable demands. Try to come up with an exit plan that works for everyone. Put the emotions aside (see points #2 and #3 above) and negotiate in good faith.

5. Keep the lines of communication open.

You would never have gone into partnership with these people unless you felt that your respective skills and talents meshed well. As mentioned above, never burn bridges if you can avoid it. The day may come when you need to call on the skills of an ex-partner for a project, so staying on good terms is essential. So long as you can keep talking, you can work your way through the bad feelings and get to a better place where you both feel more comfortable.

6. End it quickly.

Forget the long drawn-out drama and just cut to the chase as quickly as possible. That way you can all get on with your respective careers in a more positive and productive environment.

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Have you reached a point with your business where it's no longer desirable or feasible to continue operations? So many businesses, large and small, have faced that decision during the COVID-19 pandemic. It's very difficult to consider walking away from something that you have built with your own equity, sweat, love and passion. But if you have reached that crossroads and there is no hope of selling it and no family members or employees willing to take it over, then your only other course of action may be to shut it down, liquidate the assets, and pay your creditors.

Confidentiality agreements, non-disclosure agreements, NDAs, business protection agreements – no matter what you call them, they're an essential part of a company's internal and external contractual structure.

There is no good reason for your business not to use an NDA, and a number of good reasons why you should have at least one NDA template in your corporate toolbox. Many companies have several Non-Disclosure Agreements – one for employees, one for outside contractors, one for suppliers, etc. Let's discuss the top 4 reasons your business needs an NDA.

Reason #1: Protecting Your Customer Information

Reason #1 is an obvious one. You are legally responsible for securing your customers' personal information to ensure that it's not stolen or disclosed, whether accidentally or intentionally. Most countries have adopted privacy laws to protect consumers against fraud, identity theft, and invasion of privacy. A business that fails to comply with those laws can suffer serious consequences.

All employees, managers, and contractors who have access to your customer records should be required to sign a Confidentiality Agreement prohibiting any disclosure of any such information to anyone, including family members. You can choose to incorporate the confidentiality provisions into your standard employment contract, or use a separate agreement or confidentiality pledge form.

You should also adopt a company confidentiality policy that clearly states what the employee's / contractor's obligations are and what their liability will be if they breach the confidentiality provisions. The policy statement should also be distributed to any outside consultants that the company has contracted with, who may receive or have access to confidential information in the course of performing their services.

Reason #2: Keeping Your Financial Data Safe

A competitor could use your financial data to their advantage. So could an ex-employee. A 2014 white paper by Osterman Research revealed that "68% of information workers store work-related information in a personally managed file-sharing solution". And "89% of employees continue to have access to at least one application from their former employer now that they are working for someone else."

A 2021 article by SmallBizGenius.net quotes some alarming employee theft statistics. According to the American Bar Association, "59% of ex-employees admitted to stealing the company's sensitive information when leaving previous jobs".

While requiring your employees and contractors to sign a Non-Disclosure Agreement may not completely protect you from employee theft or fraud, it creates a contractual obligation on their part to protect and not disclose your confidential information, which will continue beyond the term of their employment with you.

Reason #3: Maintaining Your Competitive Edge

If you have a patented process, a unique business model, a "secret formula", or a software application you've developed specifically for your business, this is a valuable trade secret that your competitors would like to get their hands on. Trade secrets and intellectual property are some of your company's most valuable assets. If you used outside consultants (programmers, researchers, and the like) to assist in developing the trade secrets, every one of them should be bound by confidentiality agreements. Likewise everyone inside your organization who has knowledge of the trade secrets should also sign an NDA.

Reason #4: Preserving the Value of Your Business

If you're planning to sell your business, potential buyers will want all the information about your operations so they can do their due diligence. If you don't have a confidentiality agreement signed by the buyer before turning over that information, you run the risk of having your data stolen by someone who may just become your next competitor - with your trade secrets in their hands.

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If you operate a small business, you already fill a lot of different roles. Should Accountant / Bookkeeper be one of them? Maybe outsourcing is an option that will work for you. Here are some pros and cons to consider when deciding whether to outsource your accounting functions vs. doing them inhouse.

I just renewed my Canadian passport, and one of the questions on the renewal form was "Are you a naturalized Canadian?" Which started me wondering about what a "naturalized Canadian" is, and what the difference is between naturalization and Canadian citizenship.

Those of us who are lucky enough to have been born and raised in Canada get to enjoy all the rights, privileges and benefits of being citizens of this wonderful country. I believe that I live in the best country in the world. And apparently so do the quarter million new immigrants who arrive in Canada each year.

A naturalized Canadian is someone who has obtained citizenship by means other than being born in Canada or being born to or adopted by Canadian citizens. In other words, a naturalized Canadian is a person who became a permanent resident and then applied for and was granted full citizenship.

What rights does a permanent resident have (or not have)?

• Permanent residents are eligible for health care and most other social benefits, they can live and work anywhere in Canada, and they are protected by Canadian laws and the Canadian Charter of Rights and Freedoms just as any Canadian citizen would be.
• As a Canadian citizen, I have the right to vote. Permanent residents cannot vote, and they can't run for public office.
• I would not lose my citizenship if (heaven forbid) I was convicted of a criminal offence, but if I was a permanent resident, I might be deported for criminal activity. Which is not a bad thing. Too bad we can't deport a few of our more notorious Canadian criminals!
• Permanent residents also cannot hold Canadian passports. They must have a passport from their country of origin in order to travel, but they must attach official documentation showing that they have permanent resident status in order to get back into Canada.

How does an immigrant become a naturalized Canadian?

1. First of all, you must have acquired permanent resident status and you must be at least 18 years of age.
2. You must have lived in Canada for at least 3 years.
3. You must be able to speak and understand English or French.
4. You must have an understanding of Canadian government, history, geography and what the rights and responsibilities of Canadian citizenship are.
5. You must pass the citizenship test. The federal government will supply you with a guide that you can study in preparation for the test.
6. Once you've passed the test, you then are ready to take the oath of citizenship.

Who does not qualify for Canadian citizenship?

• Anyone who has been convicted of a criminal offence or an offence under the Citizenship Act in the 3 years prior to their citizenship application.
• Anyone who is in prison, on parole or probation, or who has been in prison, on parole or probation for a period of more than 1 year at any time in the past four years.
• Anyone who has a deportation order against them.
• Anyone who has been charged with or convicted of a war crime or a crime against humanity.
• Anyone who has had their citizenship revoked within the past 5 years.

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What is an indemnity bond?

An indemnity bond (also called a surety bond or fidelity bond) is a form of insurance purchased by one party to a contract as a means of compensating a second party to the contract, should the first party fail to deliver on its promises or perform its obligations. The bond is guaranteed by a third party (usually a bank) which agrees to pay the second party if the first party defaults.

Under what circumstances would an indemnity bond be used?

There are many scenarios in which an indemnity bond might be required by one or more of the parties to a transaction. For instance, bid bonds are commonly used in situations where projects are offered through a bidding process.

Bid bonds ensure that the successful bidder follows through on the promises set out in its bid. Payment bonds are used extensively in construction projects to guarantee that the general contractor pays all of its subtrades and suppliers, to protect the project owner against exposure to lien claims.

An indemnity bond could be used to avoid double payment by a company redeeming its shares in the event of a lost share certificate, or to indemnify a freight carrier for delivery of a shipment of goods if the bill of lading is lost.

Is an indemnity bond the same as a personal guarantee?

No - these are two different types of obligations. A guarantee (or guaranty) is a promise to pay the indebtedness of a corporation or business if it becomes unable to meet its financial obligations, up to the full amount of the debt. An indemnity is a promise to protect the indemnified party against any losses it may suffer in connection with the transaction, without limit.

Do I have to get a lawyer to prepare the bond?

No, you can purchase a bond from any financial institution or insurance company. But you should review it with your lawyer so that he/she can explain exactly what the legal implications are.

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