Please note that the information provided herein is not legal advice and is provided for informational and educational purposes only.   If you need legal advice with respect to drafting or reviewing Articles of Incorporation, you should seek professional assistance (e.g. make a post on Dynamic Lawyers).  We have Toronto business lawyers registered on the website who can answer your questions or help you draft and submit articles of incorporation for Ontario or Federal corporations.

Incorporating a business: a few words should be written about the roles and responsibilities of those involved with and acting on behalf of or for the corporation.

A corporation is created by having the initial directors file articles of incorporation in the jurisdiction in which the corporation is going to have its head office (provincial licenses will also be required to operate the corporation in particularly provinces).

After this, the directors have got a few things to do to get the corporation organized and up and running.  For example, they will need to pass a By-Law (which gives the corporation’s directors power-making authority), pass director resolutions, issue shares to shareholders (and have the shareholders subscribe to shares), have the shareholders ratify the by-law, have the shareholders vote in the new directors, etc.  Without these essential steps and documents, a corporation is not a legally operational entity.

The board of directors is comprised of individuals and typically a chairperson who oversee the affairs of the corporation , but not typically on a day-to-day basis.  The directors are typically paid to sit on the board, but it’s not a lot of money (as compared with the corporate officers) because they don’t meet that often and are not responsible for the day-to-day affairs of the corporation (as officers are).  The board is typically comprised of individuals with expertise in certain areas and who sit on a number of corporate boards.  They offer their insight and are accountable to the shareholders who vote them in.

For their part, shareholders are the owners of the corporation and have the power to vote in the directors of the corporation.  If there is only one sole shareholder holding all of the shares of the corporation then that person could vote in all of the directors.  It is possible to have only one shareholder and one director of a corporation.

Finally, officers of a corporation are appointed by the board of directors in order to oversee the day-to-day management of the corporation’s affairs.  The titles of officers are not that important, although traditionally most people have come to know officers as one of the following: President, Chief Executive Officer, Treasurer, Chief Financial Officer, Secretary, Vice-President, etc.  It does not really matter what these individuals are called.  Often, their titles, roles, and responsibilities will be outlined in a corporate by-law, which establishes their position and sets out their qualifications, powers, duties, etc.  Officers can be replaced by the board of directors, to whom they are accountable.

So to summarize: shareholders with voting power will vote in the directors on an annual basis (or sooner in certain circumstances), directors have the power to manage the corporation and they meet only a few times a year, and officers (e.g. CEO, VP, CFO, Treasurer, President, etc.) are the people who run the corporation on a daily basis and who are appointed (not elected) by the directors on an annual (or sooner in certain circumstances) basis.

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Please note that the information provided herein is not legal advice and is provided for informational and educational purposes only.  If you need legal advice with respect to creating a limited liability company, you should seek professional assistance (e.g. make a post on Dynamic Lawyers).  We have Toronto business lawyers registered on the website who can answer your questions or help you draft and submit articles of incorporation for Ontario or Federal corporations.

Want to know to incorporate?  First, if you’re trying to do it yourself, it’s pretty straightforward.  You just need to figure out which jurisdiction you’re trying to incorporate and then use a website service provider that will allow you to submit articles of incorporation, conduct a NUANS name search and submit a NUANS name search report, etc.  While the government fees are not high to incorporate (e.g. $200 for a federal corporation, plus $20 for a NUANS name search report), there are a number of questions arise which may lead you to seek out answers to questions relating to how to incorporate.

For example, you may have questions concerning what exactly goes into the Articles of Incorporation.  You can find a previous blog about Articles of Incorporation here. “Articles of Incorporation” is the name of the document that must be submitted to the Federal Government to create a corporation.  A corporation is a separate and distinct legal entity from its incorporators and from its owners, managers, employees, etc.  A corporation has its own rights and obligations; must file its own taxes (at both the provincial and federal levels); has its own income, assets, and liabilities; and can be sued and sue other parties.  These things being said, a corporation must act through other parties (e.g. owners, managers, employees, directors, etc.), who can in turn be held liable for their actions (e.g. negligence, breach of contract, etc.), although the corporation will likely be sued in these circumstances because of things like vicarious liability, insurance, and its otherwise deep pockets.

But simply submitting and having the government approve of your incorporate package is not sufficient to have your company up and running.  In fact, the cheap incorporation companies out there that promise to incorporate your company may not help you establish by-laws (which are power-giving or authority-giving documents that make corporate actions legal), prepare director and shareholder meetings and minutes (which establish accountability and transparency by letting stakeholders know what was decided upon), and finish explaining each party’s (i.e. shareholders, directors, officers, employees) roles and responsibilities vis-a-vis the corporation. Knowing how to incorporate is a good start,  but it’s always wise to consult with a business lawyer (e.g. by making a post on Dynamic Lawyers) with respect to questions about these and other things corporation related.

The roles of the various parties in a corporation will be discussed in the next post…

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Toronto law firms can help answer your legal questions, facilitate your transaction (e.g. business, real estate, wills and estates, family, etc.) or even represent you in court.  To find a Toronto lawyer or law firm, go to Dynamic Lawyers and make a post.  It’s free and anonymous and Toronto lawyers and law firms will respond to you with information and quotes for you to compare.

Here are some of the different types of law that Toronto law firms can assist you in:

• Accidents and Injuries: Involved in an accident where you suffered personal injury?
• Business: Need corporate or commercial agreements? Need to have a lawyer help you do a transaction?
• Charities and Not-For-Profit: Need to establish a Not-For-Profit corporation or obtain charity status?
• Civil Litigation – Higher Court: Have a serious legal claim that needs to be litigated in the Superior Court, Divisional Court, etc.?
• Civil Litigation – Small Claims Court: Have a legal claim (e.g. breach of contract, negligence, etc.) for less than $10,000?
• Constitutional / Human Rights and Freedoms: Challenging a law or government action / inaction?
  Criminal: Charged with a criminal offence? Appealing a conviction?
• Employment and Labour: Need an employment agreement? Unjustly terminated? Need to know your rights?
• Family: Going through a separation or divorce? Fighting to get custody or access? Dealing with spousal and child support?
• Government: Need to lobby the government? Need to resolve a dispute with a government agency?
• Highway Traffic Tickets: Charged with speeding or DUI? Need to fight traffic tickets?
• Immigration: Need to immigrate to Canada? Fighting against deportation?
• Insurance: Having difficulties with your Insurance company?.
• Intellectual Property: Need to register a copyright or trademark? Need help with a patent?
• Landlord and Tenant: Need a resolve a dispute? Need to know your rights?.
• Notary Public / Commissioner: Need to notarize or commission your documents?
• Real Estate: Need someone to facilitate your residential or commercial purchase, sale, or lease?
• Tax: Need help structuring your tax affairs? Need help resolving tax disputes with the Canada Revenue Agency?
• Wills, Estates and Trusts: Need a will? Need to update your will? Find out why having an up-to-date will is a must.

Try to consult with a couple of Toronto law firms and Toronto attorneys until you’re comfortable with whom you’re speaking with.  Toronto law firms differ in size, location, expertise, and reputation.  Go to Dynamic Lawyers and save time and money finding the right Toronto law firms and Toronto attorneys who specialize in the legal area you require!

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In Kate Lunau’s most recent article in MacLean’s magazine (entitled “How to Pay for Some Justice – Special Report – Legal insurance could be just what Canadians need” on March 9, 2009), she discussed how legal insurance could benefit Canada’s middle class – who earn too much money to qualify for legal aid but who can’t afford high hourly rates of typical lawyers (as the rich upper class and large organizations can).

I’ve heard about pre-paid legal insurance before.  The idea I believe is a good one.  Having people spread and share the costs of legal services seems to make absolute sense.  It’s already being done to a large extent in the U.S. and Europe.  So why hasn’t it taken off here?  Well, some could blame the Law Society of Upper Canada for not adocating for or otherwise actively promoting the public to buy into legal insurance.  Perhaps, in the Law Society’s own defence, that it not its proper role.  But perhaps it should be?

I tried looking into the advantages and disadvantages of pre-paid legal insurance and here are my thoughts:

Advantages

• It offers members of the middle class the ability to pursue claims with merit by being able to afford legal counsel.  Sometimes a plan will subsidize the hourly rate of a lawyer (e.g. to $100/hour or $195/hour).  Sometimes a plan will cover up to a certain amount (e.g. $100,000 worth of legal fees) so long as you pay the monthly or annual premiums (at a cost, for example, of a few hundred dollars).  Perhaps you’ll have to a pay a premium.  This is all typical insurance stuff…

Disadvantages

• I have yet to come across a theoretical argument for why pre-paid legal insurance, as a way of promoting access to justice, should not be pursued.  I believe, at the moment, that the disadvantages to this service would arise more in the context of the practical execution of providing legal insurance.  Such problems could, for example, arise in the way in which legal insurance is promoted, how claims are assessed by legal insurance companies when they arise, what the plans actually cover, and the services ultimately provided by lawyers.  No doubt, there will be complainers and not everything will go smoothly.  But these execution issues arise in the provision of most services and they can be worked out at the appropriate time.

written by admin \\ tags: absolute sense, canadians, execution, hourly rate, insurance, Kate Lunau, law society of upper canada, lawyer, lawyers, legal aid, legal counsel, legaltheoretical argument, maclean, MacLean's Magazine, middle class, pre-paid legal, premiums, recent article

One of the most common and most damaging misconceptions I hear as a family lawyer is the idea that people in common law relationships have the same legal rights as married spouses do. No, no, no! If you’re in a common law relationship and think you have the same rights as if you were married, you’re wrong. And that mistake could cost you very dearly if your relationship ends.

At the end of a relationship, whether marriage or common law, the five main issues are custody of children, visitation rights for the non-custodial parent, child support, spousal support and division of property. There are many other issues that may come up as well – possession of the matrimonial home, life insurance, immigration status, wills and powers of attorney to name a few – but those are the big five.

In the first three categories there is not much difference between being married and living common law. The law tries to treat all children equally so the rights of children born in common law relationships are generally the same as those born into marriages. However, when it comes to spousal support and dividing property accumulated during a relationship there are very important differences between marriage and common law relationships.

Spousal support

If you are married you can claim spousal support under either the Divorce Act or under the Family Law Act. If you cohabit you don’t have spousal support rights under the Divorce Act. And the difference between the rights of married spouses and the rights of common law spouses under the Family Law Act is apparent right in the definition of spouse. A married spouse is a spouse – and hence has spousal support rights – from the instant they are married. A person is not even considered a spouse in a common law relationship unless they have been cohabiting continuously for three years or they are in a relationship of some permanence and are the natural or adoptive parents of a child. In other words, at the end of a common law relationship you can’t even seek spousal support unless you cohabited for more than three years or you and your partner have a child together.

Property rights

The difference in spousal support rights is minor compared to the difference in property rights between married and common law spouses. This is where I see people seriously hurt by the common assumption that the law treats married couples and common law couples equally.

In Ontario the Family Law Act gives married spouses very specific property rights; it does not give any property rights to common law spouses. A common law spouse can assert a property claim under a doctrine called constructive trust but these claims are difficult and costly to prove and are far less generous than the rights given to married spouses by the Family Law Act. In other words, if you let your partner put all or most of the property in his or her name in a common law relationship you may find he or she gets to keep it all, even if your income and work helped buy it.

The lesson in this is that if you live in a common law relationship you must make sure that you accumulate property in your own name. Don’t let all property go into the name of your spouse on the assumption that if your relationship ends, the property will be divided between you. That is not how the law works for common law relationships. Another solution is to enter into a cohabitation agreement setting out how property will be divided if the relationship ends. But please don’t assume you have the same property rights as your married friends.

Ingrid van Weert is a compassionate and dedicated family lawyer with extensive experience in both divorce law and in all forms of dispute resolution available in the divorce process – negotiation, mediation, arbitration and litigation. She can be reached at ingrid@ontariodivorcelaw.ca or at 416-214-1501.

written by Ingrid van Weert \\ tags: agreement, arbitration, common law, continuings, custody, damages, family, insurance, lawyer, lawyers, litigants, litigation, marriage, mediator, negotiating, Negotiations, parents, property rights, relationships, spousal support

A while back, I looked into what was required to form a multi-disciplinary partnership with non-lawyers (e.g. accountants, bankers, insurance agents, consultants, Realtors, etc.) to offer legal services.  I thought it would be great to have connections with professionals who could provide me with constant and good quality referrals.

But I quickly dropped the idea after discovering a simple truth: compliance with the Law Society of Upper Canada Rules of Professional Conduct and By Law 7 was more than I imagined I could handle!  Being a sole practitioner as it is – with trust fund accounting, insurance and law society filings, etc. – is already burdensome enough when compared with other occupations and professions.  But it’s got to be down-right scary for lawyers (in my humble opinion) in my position who are considering forming affiliations and multi-disciplinary associations/partnerships with non-lawyers.   Here’s why…

For starters, lawyers are ethically and legally not permitted to share, divide, or otherwise split any revenue, cash flows, or profits with non-lawyers generated in the context of providing legal services (LSUC, Rules of Professional Conduct, Rule 2.08(8); see also LSUC, Knowledge Tree, “Fees, Billings and Collection: Referral Fees, Fee Splitting and Division of Fees”).  Lawyers can do so through multi-disciplinary partnership, but not through affiliations or multi-disciplinary associations.

Affiliations

So what if a lawyer or law firm started paying non-lawyers for certain business services that facilitated the delivering/promoting of the former’s services?  Well this business structure could lead to an “affiliation” under the LSUC’s Rules of Professional Conduct (Rule 1.02) and By Law 7.  Simply put, an affiliation exists where one entity (e.g. person, business, organization, etc.) joins a lawyer or law firm to deliver/promote the latter’s services.  If this is the case, then the lawyer or law firm would still not be able to share, divide, or otherwise split revenue, cash flow, or profit generated in the context of providing legal services to the affiliated entity (LSUC, Rule 2.08(9)).

Furthermore, the lawyer or law firm would be subject to additional onerous ethical/professional obligations and reporting requirements, such as:

• Informing clients about the nature and scope of the lawyer or law firm’s affiliation with the affiliated entity and obtain their consent to proceed (Rules 2.04(10.1 ) and (10.2));
• Establish a system to search for conflicts of interest with the affiliated entity (Rules 2.04(10.1 ) and (10.3));
• Ensure that the lawyer or law firm’s advertisements do not mislead the public about who is providing the legal services (Rules 3.04(3), Commentary);
• Ensure that the lawyer or law firm own and maintain control over the law practice and that such practice is not operated on premises used by the affiliated entity for the delivery of the affiliated entity’s non-legal services (By-Law 7, s. 32); and
• Disclose to the LSUC a report disclosing information between the lawyer or law practice and the affiliated entity with respect to financial agreements, ownership/control/management of the law practice, the lawyer’s compliance with conflict-of-interest requirements, and the lawyer’s compliance with confidentiality requirements (By Law 7, s. 33(2)).

The bottom line is that forming an affiliation with non-lawyers is too burdensome and not worth it (because fees cannot be split).

What about a multi-disciplinary association? Well, if non-lawyers teamed up with lawyers to support/supplement the latter’s provision of legal services to clients, then the Law Society of Upper Canada’s multi-discipline rules could be triggered.  Such rules impose obligations on all of the members of the association.  For example, the non-lawyers would:

• Not be able to practice their profession, trade, or occupation except to support/supplement the lawyer or law firm in providing client services (By Law 7, s. 18(2)(1)).
• Have to give effective control to the lawyer or law firm over its practice of its profession, trade, or occupation (By Law 7, s. 18(2)3);
• Not be able to practice its profession, trade, or occupation independent of its agreement with the lawyer or law practice on the premises used by the association (By Law 7, s. 18(2)5); and
• Have to agree to be bound by the Law Society of Upper Canada’s Rules, Guidelines, By-Laws, etc. (By Law 7, ss. 18(2)2).

For their part, the lawyer or law practice would have to agree to comply with various onerous obligations, such as being responsible for ensuring that the non-lawyer members of the association use appropriate skill, judgment, and competence in performing its profession, trade, or occupation and in complying with the Law Society of Upper Canada’s Rules, Guidelines, By-Laws, etc. (By Law 7, s. 19).  As aformentioned, lawyers would not be able to split or share their revenues, cash flows, or net income with the non-lawyer members of the multi-disciplinary association.  So again, the costs far outweigh the advantages of this structure.

So that leaves us with the Multi-Discipline Partnership

A multi-disciplinary partnership involves non-lawyers supporting/supplementing lawyers in providing legal services to clients.  The non-lawyer members of the partnership would, once again, have to comply with the same onerous conditions as non-lawyer members of a multi-disciplinary association.   And so too would the lawyer .  The only difference is that lawyers and non-lawyers would be able to share revenues, cash flows, and profits through the partnership.

Overall, if non-lawyers are going to get involved in promoting and delivering legal services, then the Law Society of Upper Canada is going to have to re-tool its Rules and By Laws to open up the market.  We’ve already seen the large Bay St. law firms hire business managers to help run their law practices more as businesses than as legal professions; let’s keep moving down that road so that we can make legal services more accessible to the general public.

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Part of why lawyers charge ‘so much’ has to do with (1) their unique education, knowledge, skill-set, and experiences, (2) the cost of their education, and (3) the cost of operating a law practice.  I’ll deal with each of these briefly in turn.

To begin, lawyers spend years developing a form of legal reasoning that the layperson lacks (and may never acquire).  Lawyers read all the time, and it’s not easy-reading either!  They have to comprehend vast quantities of legalese written throughout the century or longer.   They research cases and legislation, transcripts and documents, and even delve into the legislative debates to figure out the rationale behind a certain piece of legislation.  Apart from having done their due diligence, they have to present their case in a concise and compelling manner.  They have to briefly review the facts, identify the issues, and make arguments based on precedent or appeals to fairness/justice/efficiency and the like.  In doing all of this, lawyers are held to a high standard of professionalism and legal ethics and are a heavily regulated group.  They have to learn the legal process and the substance of the law and be able to explain both in a simple manner to their clients and others (e.g. opposing parties, judges, etc.).  The life of a lawyer is perhaps the most intellectually stimulating and challenging profession that anyone could ever aspire towards.  No two lawyers are alike and, while some lawyers can provide the same basic services as other lawyers (e.g. wills, incorporation, real estate transactions), people often need specialized lawyers to deal with their particular situation.  Hence, the cost of lawyers’ specialized education, knowledge, skill-set, and experiences are reflected in their seemingly high hourly rates or fixed fees.

The cost of a legal education is also worth mentioning.  I met a person who wanted to own part of my law practice.  I was a bit curious about the request.  Having never met the man, I musingly asked him whether he was a lawyer (since only lawyers can ‘own’ law practices).  “No”, he responded.  “Do I have to go to school for that?  And If so, how much would it cost?” he asked me.  “Sure you do”, I responded: “You need an undergraduate degree with killer marks, great references, and a high LSAT score.  It cost me roughly $25,000 for my undergraduate degree (with books and all) at U of T, then another $75,000 for my combined 4 year LL.B. and M.B.A. degrees at Osgoode Hall Law School and the Schulich School of Business (with books, residence and all).  So by the time I was finished school, I had spent over $100,000 on my legal education.  When students become lawyers, they are typically in significant debt and will look to the highest paying jobs to get them out the quickest (these ‘high paying’ jobs are typically at big bay street law firms which charge the highest fees to their clients).

Finally comes the issue of the costs of setting up and maintaining a law practice.  I can only speak for myself here.  Looking back, I must have spent between $15,000 to $25,0000 to establish Carabash Law.  The biggest expenses were technology purchases (e.g. laptop, website, PC Law, cell phone, printer/scanner/copier, keyboard/mouse, etc.), licensing and insurance fees (almost $3,000), stationary, travelling, bookkeepers, and new suits. After these initial expenses, the only recurring expenses will typically be office supplies, employees, and rent.

So there you have it: it takes a lot of time and money to become a lawyer and, while we do our best to give back to the community that supported us and allowed us to be in our special positions as empowerers and protectors of legal rights,  our fees often appear front and centre in the common person’s mind.  In any event, the next time someone complains that lawyers charge way too much for their services, please remember to keep in mind that their services are unique, their education was expensive, and that they have capital and operating expenses to pay for.  I’m not saying that this justifies lawyers charging astronomical amounts, but these factors should be kept in mind before the insults and derogatory statements begin…

written by admin \\ tags: bookkeeper, efficiency, fairness, insurance, judges, lawyer, lawyers, legal education, legal fees, money, precedents, s, technology, too expensive