Getting Business Done

By Joanne McPhail, Partner, Certified Specialist in Corporate and Commercial Law at Barriston LLP, and

Reginald Brown, Articling Student at Barriston LLP.

There is growing support for the principle that what employees write on social networking sites can indeed result in disciplinary action from their employers. This is true of an employee’s conduct both in and out of the workplace. As social networking sites continue to grow in popularity, many courts and administrative tribunals have already considered whether employers are justified in terminating employees for their off-duty conduct, be it for making disparaging remarks about an employer or fellow employees outside of the workplace, or even for making comments that may not align with an employer’s policies or expectations.

Regardless of the scenario, the main question a court or a tribunal will commonly ask is whether the degree of discipline imposed by the employer is an appropriate penalty given all the circumstances of the case. This is fact specific and will therefore vary from one case to the next. What is clear, however, is that postings on social networking websites are not considered private, even when an employee has taken steps to ensure that their posts are unavailable to the public (i.e. through restricting access, through private messaging, etc.).

To justify disciplinary action for an employee’s off-duty conduct, which includes social networking activity, an employer must consider whether the conduct is sufficiently business related so as to be harmful to the employer’s business interests and environment. Discipline may also be warranted when the postings made are so damaging that they poison the workplace and make it difficult for the employee to work productively with other employees or for the company.

The fact that a disciplined employee was under a misapprehension about who could access their Facebook or other social networking profile, will not relieve them from responsibility for what they have written. Even if postings are restricted to or made between friends online, this is not a guarantee of privacy, as there is nothing to prevent friends from forwarding messages to other individuals. Nor will it matter if the postings were made outside of working hours or with a non-work device, as social networking activity becomes a workplace issue when there is a real connection between the workplace and the postings in question.[1]

To avoid these issues, employers may wish to consider implementing workplace policies explaining the potential consequences of employee misconduct on social networking sites, as many are unaware that what happens on Facebook does not necessarily stay on Facebook.

[1] Canada Post Corp. v. Canadian Union of Postal Workers (Discharge for Facebook postings Grievance), [2012] C.L.A.D. No. 85. 

By Joanne McPhail, Partner, Certified Specialist in Corporate and Commercial Law at Barriston LLP, and

Reginald Brown, Articling Student at Barriston LLP.

Exemption for an Executive Officer

Generally speaking, Executive Officers are exempt from Workplace Safety and Insurance Board (WSIB) coverage. This is in accordance with the Workplace Safety and Insurance Act (WSIA), which states that the WSIB insurance plan does not apply to workers who serve as Executive Officers of a Corporation. As a result, Executive Officers are not obligated to pay WSIB premiums and may instead apply to the WSIB for optional insurance coverage if they desire to do so.[1]

Exemption for an Executive Officer in the Construction Industry

Following changes to the WSIA, it is mandatory that independent operators, sole proprietors, Partners and Executive Officers involved in the construction industry have WSIB coverage. However, ONE Executive Officer in each company may be exempt from coverage if:

a)      the individual is an Executive Officer; and

b)      the Executive Officer does not engage in any construction work.

“Construction work” means any skilled or unskilled manual work, the operation of equipment or machinery, or the direct on-site supervision of workers. Periodic site visits are permitted, provided the Executive Officer does not perform any construction work while on the site.

Executive Officers who satisfy WSIB’s criteria and who do not do construction work may request an exemption from compulsory coverage by completing Form 1208WA.[2]

WSIB’s Criteria for “Executive Officer”

The WSIB considers Executive Officers to be a select group of individuals who control the direction of the company, rather than just a department or a branch of the organization. The key to Executive Officer status is that the person be empowered or appointed to act as an Officer of the organization. The WSIB reserves the right to determine who is an Executive Officer by reviewing the person’s responsibilities and authority within the Corporation.

Title alone does not make an individual an Executive Officer. If the individual is not empowered by the organization to act as an Officer, the WSIB will not determine them to be an Executive Officer. If you are incorporated and you consider one (or more) of the individuals on your payroll to be an Executive Officer, you should be able to demonstrate that the individual in question:

a)      holds a position as Member, Chair, or Vice-Chair of the Board of Directors or serves as President, Vice-President, Chief Executive Officer (CEO), Chief Financial Officer (CFO), Chief Operating Officer (COO), Secretary, Treasurer or General Manager of the Company;

b)      is named in the Corporation’s minute books as holding one of the positions listed above;

c)      is enumerated, appointed or empowered to act as an Officer of the Corporation through corporate documents such as Articles of Incorporation, Charters, Bylaws and/or corporate profile reports filed with a federal or provincial agency;

d)      actually performs the duties and executes the responsibilities of an Executive Officer; and

e)      has significant functional responsibilities, demonstrating that the individual is in fact a “directing mind” and/or is wholly or partially responsible for the Corporation as a whole.[3]

Conclusion

To summarize, Executive Officers are generally exempt from WSIB coverage. Now, coverage is mandatory for Executive Officers in the construction industry, but construction employers with multiple Executives may exempt one Officer if that person does not perform construction work.   

Regardless of the industry they are involved in, employers should ensure that their Executives satisfy the WSIB’s criteria detailed above, as title alone does not make an individual an Executive Officer. As mentioned, the WSIB has the right to determine who is an Executive Officer by reviewing the person’s responsibilities and authority within the Corporation as well as Corporate documents empowering the individual to act as an Officer of the Company.

Written by Joanne McPhail, Partner, Certified Specialist in Corporate and Commercial Law at Barriston LLP, and

Reginald Brown, Articling Student at Barriston LLP.

The new Canadian anti-spam legislation (CASL) is expected to come into force on July 1, 2014, and it will prohibit the sending of unsolicited commercial electronic messages (CEMs), which are messages that encourage participation in a commercial activity. CEMs will be prohibited whether they be in the form of emails, texts, social media, or any other form of telecommunication.

However, a person will be able to send CEMs without violating CASL if the recipient has consented to receiving them. To get consent, the sender must deliver a preliminary message that identifies the sender by name, provides their business contact information, and directs the recipient to an unsubscribe mechanism or opt-out option enabling them to decline receiving messages in future.

In certain instances, the recipient’s consent will be deemed to be implied, for instance, if the sender and the recipient have either an existing business relationship, such as a relationship formed by contract or a business investment, or an existing non-business relationship, such as a relationship formed by membership in a club.

Next, CASL also prohibits a person from altering the transmission data in a CEM and causing it to be delivered to a destination other than that specified by the original sender unless the original sender or the recipient of the message consents to the alteration. As an example, it may be appropriate to give consent when an employee consults a company mailing list and sends the CEM to more clients or customers than their employer initially intended, especially if the CEM may be of interest to the added recipients.

Lastly, CASL bars a person from installing a program on any other person’s computer system if the program interferes with the user’s controls or settings (i.e. spyware), that is unless the user expressly consents to the installation. Before consent can be given, however, the installer must explain to the user the function and purpose of the program as well as the effects of installation.

Every person found to have violated CASL is liable to a maximum penalty of $1,000,000 for individuals and $10,000,000 for any other person (i.e. a corporation). Furthermore, an employer may be liable for a violation of CASL by an employee acting within the scope of their employment unless the employer can establish that they exercised due diligence to prevent the misconduct.    

For more information, please visit www.fightspam.gc.ca.         

By John Cockburn, Partner

For three years I have served on the Board of a Charitable Corporation which I know was incorporated without share capital under the provisions of the Federal Canada Corporations Act.  There have been rumblings recently around our boardroom table that we have to do something special because of new federal legislation.  Is that true?

Also, we don’t really like the name of our Charity as it does not describe our main charitable activities.  How can we change that name a little bit?

The rumblings are true, the Canada Not-for-Profit Corporations Act (CNCA) came into force October 17, 2011 and your Charity has until October 17 of 2014 to transition…..or to continue into the new Act.  If you fail to meet the deadline, your Charity’s corporate status may be dissolved.

You must arrange to file “Articles of Continuance” along with the other required supporting materials.

You will want to review your existing By-laws to be certain that they are in line with the new CNCA requirements.

You can change the name of your corporation as part of the continuance process….supported of course by an appropriate name search report.

Don’t leave it too long to get your lawyer started on the continuance process.

By John Cockburn, Partner

You have been approached by a stranger (or a friend) and asked to consider selling your successful business to that person.  Neither you nor he want to waste money on a lawyer to put together any formal agreement until you have sized each other up and know you both want to proceed.

You have heard your friends boast about how easy it is to whip up a layman's “Letter of Intent” (LOI) to tide you over until you are ready to spend money on a lawyer.

Is this a good idea?......NO WAY!  Although an LOI has its place, there are two very significant considerations:

1.    If important terms are omitted from the LOI it is virtually impossible to work them into the ultimate “Agreement”, without losing credibility “that’s not the deal we discussed!”

2.    If the LOI is not very carefully drawn and you decide not to proceed further, you run a very real risk that the Courts will permit the stranger to enforce the LOI as a contract against you.

The Ontario Court of Appeal recently did just that and it cost the potential vendor hundreds of thousands of dollars in costs to learn that his homemade document - the parties called a Letter of Intent - was indeed an enforceable contract!

By Graydon Ebert, Associate

As its name suggests, a shareholders’ agreement is an agreement, among some or all of the shareholders of a corporation. But what is its purpose?

The Business Corporations Act allows for two or more shareholders to make an agreement in writing providing that when the shareholders exercise their voting rights with respect to their shares, they shall be voted as provided in the agreement. One example of a use of such an agreement may be that two or more minority shareholders of the corporation may agree to vote together on the appointment of directors of the corporation so their collective voting power may be stronger than their individual voting power.

More commonly, especially in private corporations with multiple shareholders, you will see all of the shareholders of a corporation agree, in writing, to a unanimous shareholder agreement. The Business Corporations Act provides that a written agreement among all the shareholders of a corporation may restrict in whole or in part the powers of the directors to manage or supervise the management of the business and affairs of the corporation.

The default for a corporation is that it is managed entirely by the directors (who are elected by the shareholders) and by the officers who are appointed and supervised by the directors. Essentially, a unanimous shareholder agreement allows the shareholders of a corporation to change that default and it gives the shareholders the power to manage or supervise the management of the corporation to the extent that the agreement allows. The agreement may allow for shareholder consent for changes to the constating documents of the corporation, any issuance or allotment of shares, any purchase or sale of real property, or any number of decisions typically made by the directors of a corporation.

In addition to restricting the power of the corporation’s directors, or setting out how shares may be voted, a unanimous shareholders agreement will often address several other important issues, like:

• How shareholder loans may be paid out;
• How shares may be dealt with upon the death, insolvency or marital breakdown of a shareholder;
• Provisions dealing with the purchase/sale of shares by a shareholder, i.e. rights of first refusal, forced buy/sale, requirements for a sale to a non-shareholder, etc.;
• Dispute resolution mechanism for dealing with shareholder disputes; and
• Provisions limiting a shareholder’s right to compete with the corporation or solicit clients or employees from the corporation.

Some other important things of note about unanimous shareholder agreements:

• A transferee of shares subject to a unanimous shareholder agreement shall be deemed to be a party to the agreement as if he/she signed it (although a purchaser, who is not a current shareholder, for value without notice of the agreement may rescind the purchase within 60 days after the purchaser actually receives a complete copy of the agreement);
• A shareholder who is party to a unanimous shareholder agreement has all the rights, powers, duties and liabilities of a director of the corporation to the extent that the agreement restricts the discretion or powers of the directors to manage or supervise the management of the business of the corporation and the directors are relieved of their duties and liabilities;

So, when should the shareholders of a corporation enter into a unanimous shareholder agreement? Unless the corporation is operated by and the shares are owned by only one person, a unanimous shareholder agreement in some form is usually a good idea. It is especially important in small private corporations owned by a small number of shareholders, or where a corporation previously owned by one person is taking on investors. The success of small private corporations is usually dependent on the people who control these businesses. Unplanned events can lead to changes in share ownership of a corporation that can negatively impact this success.  A shareholders’ agreement, which has restrictions on how and to whom shares can be transferred can be the best way to plan for the future of the corporation while protecting shareholders from unfavourable business transition or operational possibilities.

If you need advice on whether a shareholders’ agreement might be a good idea for your business, our business law professionals would be happy to discuss your options with you.

By Graham Knight, Partner

The Importance of Association

There is nothing more important in your business future than careful choice of those you associate with.  Successful ventures generally are made up of different people with different talents, and the most important qualities these people can possess are honesty, respect, a willingness to work hard, and a general disinterest in taking the credit for things that go well.  The joke around our firm for years has always been that we “stab each other in the front”.  If the character of the people you choose to work with is substandard, you will pay for that choice.  The question is only when.

Knowing your Business and the Business Side of your Business

Over my 30+ years of practicing business law, I have often seen business trouble or failure arising from the principals not studying the business of their business.  Stated another way, you may be the best computer technician in Ontario, but if you do not spend serious time looking at the mechanics of your business, including receivables, payables, plans for the future and the like, you may find yourself in trouble.  It is not necessary that everyone in your business be an expert on the accounting/financial/planning end, however, it is prudent that everyone in your business has a good working knowledge of same and makes a point of keeping in touch.

Another sad story that one sees far too often starts with a division of responsibilities in a business where, one person is out doing the job with the public, and the other manages the office or looks after the financial side.  If the person out in the field does not keep in touch with the business side, abuse can and does arise.  Whether or not you find the business side of your business exciting or boring, you will find that the return from your business will improve markedly if it is run properly.

The Importance of Good Advisors

It is vital to seek out competent professional assistance, particularly in the area of accounting/tax, banking, insurance, and law.  When you are starting a business, ask your associates or even competitors who they consider to be good and take the time to visit these advisors and get to know them.  A good advisor will return your calls promptly, offer you professional service that meets your needs, (not more or less than your needs), and is proactive to the extent that instead of simply answering the questions that you raise or doing jobs that you request, they will look a few moves down the board, anticipate where you are going, and make suggestions now to help your business in the future. 

Your advisors should stick to their area of expertise.  We see accountants doing legal work, lawyers doing accountant’s work and insurance agents also getting involved in areas that are not their primary expertise.  Form a team and let that team know that you expect them to work together for your benefit.  Always remember that you are the boss of the team.

I regularly provide client’s accountants with a “heads up” letter of what I am intending to do so the accountant not only knows what is going on with his/her client, but is in a position to add value if, for example, from a tax point of view, the accountant thinks some aspect of the proposed course should be more closely scrutinized.

A good advisor will give you advice in language you understand.  Be careful if you are receiving communications full of big words and bafflegab.  I am of the view that someone that really knows their trade can get the relevant points across to you in simply language.

Most businesses are short of funds when starting out and are consequently reluctant to seek professional input.  In my view, it is worth investing an hour with an accountant, a lawyer, and an insurance agent so that you establish a professional relationship, and can take suggestions from them as to how to appropriately launch your business.  It is easier to do something right the first time than it is to come back later and try to patch things up. Also, when you need to call them with a serious issue, they will be taking a call from a client, not a cold call.

By David Lucenti, Associate

I was recently contacted by a corporate client who runs a successful roofing business in Ontario.  He advised me that a company from British Columbia had recently entered the Ontario market with an intention to compete with his business.  My client was not calling me to seek advice on how he could best protect his business from competition but rather, he was concerned about the corporate name under which this new company was to operate.  He believed that their corporate name was too similar to his company’s name. 

My client has been in the roofing business for over 25 years in Ontario.  During that time, he has continuously advertised, promoted and used his company’s name in the normal course of business in Ontario, so much so that the corporate name has generated significant goodwill and reputation in Ontario.  As such, my client felt that by introducing a company name similar to his in the same Ontario market where he operates his business will likely deceive and/or confuse both suppliers and customers alike.  I agreed. 

Luckily, there are remedies available to my client under the Ontario Business Corporations Act (the “Act”).  The corporate name provisions are set out in section 9 of the Act and subsections 1-22.1 of the Regulations to that Act. 

Section 9 prohibits a corporation from having a name that is the same as, or similar to, the name of a known body corporate, or the known name under which any body corporate carries on business or identifies itself (it’s “trade name”), if the use of that name would be likely to deceive. 

In the event a party believes that a name is likely to deceive, the company can bring an application to the Director under section 12 of the Act.  The Director may, after giving the offending corporation an opportunity to be heard, issue a certificate of amendment to the articles changing the name of the corporation to a name specified in the certificate and, upon the issuance of the certificate of amendment, the articles are amended accordingly. 

There are however, various factors to consider when determining whether a name is contrary to section 9 of the Act.  Section 3 of the Regulations lists the following factors the Director may consider: 

• The distinctiveness of the whole or any element of any name or trade-mark and the extent to which the name or trade-mark has become known;
• The length of time the trade-mark or name has been in use;
• The nature of the goods or services associated with the trade-mark or the nature of the business carried on under or associated with a name, including the likelihood of any competition among businesses using such trade-mark or name;
• The nature of the trade with which a trade-mark or name is associated, including the nature of the goods or services and the means by which they are offered or distributed;
•  The degree of similarity between the corporate name and any trade-mark or name in appearance or sound or in the ideas suggested by them; and
• The geographical area in Ontario in which the corporate name is likely to be used.

In my client’s situation, I am pleased to report that before bringing an application, the offending party agreed to amend its Articles and change their corporate name.  It was a positive outcome for my client but there are many instances when a party is not so cooperative.

By John Cockburn, Partner

Our little company has grown to the point that our home can no longer accommodate our office needs so we have just leased the perfect office space on Collier Street in Barrie in an older but immaculate home.  There are only 6 steps up to our front porch which is the only access we have.  Both male and female washrooms are available for our use in the basement of this old house and they are also available to our clients.

After we signed a 5 year lease, we heard rumors that there is some sort of legislation in Ontario mandating certain accessibility standards for persons with disabilities….Is that true?

Does it sound like our little office is compliant?

Is the new Act really enforced?

Let’s start with your last question, the answer is: the Act is going to be enforced and is currently enforced with fines and orders.  It does not sound like your office would be compliant with the requirements of the new Act but you must, on a case by case basis, review the requirements of that Act and protect yourself from enforcement by making the required physical changes to your office property and buildings to comply.

There are a growing number of businesses that can assist you with interpreting the Act and bringing your premises into compliance.  You will want to work with your Landlord on those matters.  And take a look at the AODA Compliance Wizard to help you determine what you need to do to comply with the law. 

By Graydon Ebert, Associate

Recently our firm has acquired a collection of minute books from a local corporate lawyer and we are in the process of contacting the corporate owners of these books to notify them of their new location.

If you are a new business owner or thinking about starting a business, or even if you have been in business for years, you might be asking yourself, what is a minute book? Do I need one? What is it used for?

A corporation’s minute book is the official record of the corporation. Essentially it is a binder that contains all the importation information of the company all in one place. It holds the corporation’s articles of incorporation, its by-laws, and minutes of all company meetings. It holds all corporate resolutions, for such things as the election of directors, appointment of officers, authorization of any security documents, etc. It also has various registers showing current and former directors, officers, shareholders, and any share transfers that may have taken place. If the shareholders of the corporation have entered into a shareholders’ agreement, it should be kept in the minute book, as well as any notices and registrations filed with the government. The minute book is typically where the share certificates for the corporation are held, though the corporation may choose to put the original certificates in a more secure location, with only photocopies kept in the minute book.

While this may seem like a lot of work for a small corporation, having and maintaining a corporate minute book is very important. Most importantly, the corporate legislation, both in Ontario and for federal corporations, requires that all corporations keep corporate records and be able to provide them to shareholders upon request. Failure to keep up to date records may also cause delays and difficulties in the future when the corporation wishes to proceed with significant transactions such as share transfers, investments by third parties, or loans from financial institution. Time and money will need to be spent to bring the corporation up to date or to properly document certain corporate events.

Where should you keep your minute book? Typically for corporations that we represent, we keep the minute book at our office, but if you wish to have keep the book yourself, we suggest that it be kept in a safe, secure place at the corporation’s head office.

If you have a corporation and your minute book is not up to date, or you going to be incorporating a corporation soon and want to ensure that your records are properly kept, we can help get you on the right track, and keep you there!