Ontario Limited Partnership Agreement Lawyer: Using Limited Partnerships to Invest

Please keep in mind that this is not legal advice. The information provided herein is for educational purposes only. If you would like to get in touch with a lawyer to help you draft, interpret, negotiate or resolve a dispute about an Ontario limited partnership agreement, then you are encouraged to seek a professional (e.g. make a post on Dynamic Lawyers). We have Ontario lawyers who can assist you in this regard (I would know, I’m one of them!). If you want to get in touch with me directly, feel free to email me directly to discuss all your limited partnership agreement needs!

So in this blog,I’ll be talking about how a Limited Partnership can be used as an investment vehicle.  So we start off with the idea that a Limited Partnership is a regular partnership (called a general partnership) that has filed a declaration with the Ontario government (and complied with other rules) in order to become a LIMITED PARTNERSHIP.  What’s the big deal about having a limited partnership, you ask?  Well, the biggest benefit is that the limited partners (i.e. the passive investors) will generally have limited liability – akin to shareholders of a corporation!  That’s great news.  I say “generally have limited liability” because there are ways in which they can lose it – specifically if they take part in the control of the business of the limited partnership (which I previously blogged about here).  But assuming they’re passive, it’s all good.

So the limited partners sign onto the limited partnership agreement and contribute money, property, services, etc. in exchange for an interest in the limited partnership.  Now the general partner is the one running the show.  They have all the powers, duties, and responsibilities to act on behalf of the limited partnership.  They have unlimited liability and are typically a corporation for this purpose.

Now here are a few things to keep in mind when thinking about using a limited partnership as an investment vehicle.

For starters, let’s talk a little bit about TAX.  Yes, that’s right: TAX!  Unlike a corporation, there is no double taxation when you’re using a limited partnership.  The limited partnership is a flow-through entity (because it’s a partnership first and foremost).  This means that the income or loss of the partners is computed at the partnership level as if the partnership were a separate person.  Income and losses are then allocated to the partners.  Now there are a few nuances you should know about that apply specifically to limited partnerships when it comes to tax and you can read about them here in a previous blog I wrote.  So the bottom line is that a limited partnership is not required to pay tax under the Income Tax Act; it merely computes its profit or loss for each fiscal year as if it were a legal person and then allocates the income or loss to the partners.

OK, now what about securities laws implications?  As I’ve previously blogged about here and here, a Unit from a Limited Partnership held by a Limited Partner is likely considered to be a “security”; therefore, Ontario’s securities laws will kick in and govern the Limited Partnership and the Limited Partners’ dealings.  Failure to comply could lead to a prosecution under the Ontario Securities Act!  Specifically, “trading” in a “security” requires the issuer (the Limited Partnership) to be registered and, if the trade amounts to a “distribution”, then the Limited Partnership will be required to issue a prospectus and follow all sorts of other securities laws.  It’s all very complicated and expensive!  To avoid these results, the Limited Partnership will need to find an exemption to the registration and prospectus requirements.  I’ve previously spoken about some, and will mention 2 of the here: (1) accredited investor exemption and (2) private investment club exemption.

Accredited investor exemption: Basically, if you issue Limited Partnership Units to certain wealthy / sophisticated / resourceful persons, you can avoid having to register or issue a prospectus.  Accredited investors include (but are not limited to):

• an individual (i.e. human being) who, either alone or with a spouse, beneficially owns financial assets having an aggregate realizable value that before taxes, but net of any related liabilities, exceeds $1,000,000;
• an individual (i.e. human being) whose net income before taxes exceeded $200,000 in each of the 2 most recent calendar years or whose net income before taxes combined with that of a spouse exceeded $300,000 in each of the 2 most recent calendar years and who, in either case, reasonably expects to exceed that net income level in the current calendar year;
• an individual who, either alone or with a spouse, has net assets of at least $5,000,000; or
• a person, other than an individual or investment fund, that has net assets of at least $5,000,000 as shown on its most recently prepared financial statements.

Private investment club exemption:  In this situation, the Limited Partnership would have less than 50 partners, would not seek to borrow money from the public, would not distribute its Units to the public, would not pay or give any money for investment management or administration advice in respect of trades in securities (except normal brokerage fees), and would require its Unit holders to make contributions in proportion to the value of their securities for financing purposes.

Overall, assuming you comply with securities, tax, and partnership laws concerning establishing and maintaining your Limited Partnership, you may have found a great structure to use to raise money and invest.  Again, if you need help in this regard, give me a shout!

written by admin \\ tags: general partner, general partners, legal advice, limited liability, limited partners, limited partnership agreements, limited partnerships, mississauga, ontario business, ontario limited partnership, ottawa, professional assistance, toronto, unlimited liability

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, reviewing, interpreting or resolving disputes concerning partnership and limited partnership agreements, you should seek professional assistance (e.g. make a post on Dynamic Lawyers).  We have Toronto, Ottawa, Hamilton, Mississauga, Brampton, and other Ontario business lawyers registered on the website who can answer your questions or help you with your partnership and limited partnership agreements.  I should know – I’m one of them and you can contact me directly.

As a follow up to a previous blog I wrote about limited partners losing their limited liability status, in this blog, I’ll be discussing this matter in more detail.  So we start off with the idea that, in Ontario, a general partnership does not confer limited liability status on the partners.  That means they will be personally liable for the debts and obligations of the partnership.  Now, if that general partnership register as a limited partnership and complies with the Limited Partnerships Act, then the limited partners’ liability will be limited while the general partners’ liability will be unlimited.  There is an exception to this rule, however: if a limited partners “takes part in the control of the business” of the limited partnership, then they shall be fixed with the same UNLIMITED LIABILITY as a general partner: s. 13(1).  Keep in mind that a limited partner, simply by exercising their other rights and powers granted to them under the Act (as discussed in my previous blog post), will not assume the liability of a general partner.  Such liability only attaches to them exercising control beyond the scope of what they are allowed to under the Act.

So, given this, the question comes up: what if the general partner of the limited partnership is a corporation and the director or officer of the corporation is the limited partner?   So, in this example, the limited partner is an individual (e.g. John Doe) and is also the director or officer (e.g. President) of the general partner.  If the individual acts on behalf of the general partner, will he or she have personal UNLIMITED LIABILITY for the limited partnership?

This is a tricky situation.  The limited partner is essentially trying to go around the rules of the Limited Partnerships Act by being a controlling the general partner.  Now since the general partner is a corporation, and because corporations are assumed to be separate legal entities, the limited partner would think that he or she is personally NOT the general partner and therefore not subject to unlimited personal liability…that’s the idea, at least…  Well, lets see what the courts have said, shall we?

In Laplante v. R., [1995] 1 C.T.C. 2647, the Federal Tax Court of Canada had to deal with an interesting situation that arose in the context of tax law.  A taxpayer claimed certain losses arising from a partnership.  The partnership had incurred certain losses and the taxpayer wanted to take advantage of those losses.  The Minister of National Revenue, however, claimed that the partnership was actually a limited partnership (not general partnership).  As such, the Minister argued that certain tax-rules (known as ‘at risk’ rules – which I’ve previously blogged about) limited the amount of losses which that taxpayer could deduct.  So the issue for court to decide was whether the taxpayer was a general partner or limited partner during the relevant time period (i.e. when the partnership incurred the losses)?  Ultimately, the Court agreed with the tax payer: he was not a limited partner for 2 reasons.  First, a general partnership existed but had not been registered with the government (recall: to have a limited partnership, you must file a declaration with the provincial government).  Since a limited partnership is not recognized at common law, and because nothing had been filed during the relevant years, there was no limited partnership.

The second reason the taxpayer was not a limited partner was because he had taken part in the control of the business (which would make a limited partner have unlimited liability like a general partner).  Specifically, the taxpayer had been a director and officer of the general partner,had authority to effect banking transactions, and had rendered personal services as a sole proprietor in respect of the partnership.  The tax court cited Zivot as authority for this proposition and concluded:

23          The evidence in this case indicated the appellant was the principal if not the sole person in control of the operation. This is also indicated in the partial agreed statement of facts, supra, even to the extent that the appellant was operating as a sole proprietor. Surely this is indicative of control.

So based on these two reasons, the Court allowed the taxpayer’s appeal and sent the matter back to the Minister of National Revenue for reconsideration as to the taxpayer’s tax liability (in light of the fact that he was NOT a limited partner).

So what’s the moral of this story?  Well, this is another example – in addition to Zivot – that shows that a limited partner who is a director or officer of a general partner may have unlimited liability because they take part in controlling the business of the limited partnership.

So what about contracting out of this position?  In other words, could a limited partner use contracts to have control over the business of the limited partnership but still maintain limited liability?  A 1992 British Columbia Court of Appeal case  offered limited support for the idea that a party could do so: Nordile Holdings Ltd. v. Breckenridge (1992), 66 B.C.L.R. (2d) 183 (B.C. C.A.).  But the better view is that it is unsettled law.  That’s what the Saskatchewan Court of Queen’s Bench said in Stillwater Forest Inc. v. Clearwater Forest Products Ltd. Partnership 2000 SKQB 110:

Loss of Limited Liability by SGGF

7          The plaintiffs allege that SGGF took part in the control of the business of the Limited Partnership and that pursuant to s. 64 of the Act it is therefore liable for the debts and obligations of the Limited Partnership. Section 64 states:

8          On the nonsuit, SGGF argues that even if the plaintiffs are successful in establishing a factual basis for a claim under s. 64 of the Act (which, of course, it does not accept), any potential liability of SGGF is completely answered by the contractual provisions of the agreements. According to SGGF, the parties contracted out of any liability that might arise under s. 64 of the Act. It argues that the specific contractual terms of each of the agreements unequivocally preclude it from having any liability for the general partner’s or the Limited Partnership’s obligations thereunder and it therefore submits that the claim against SGGF in relation to such liability should be dismissed.

9          There are no Saskatchewan cases interpreting s. 64 of the Act and only two Canadian cases that deal with similar statutory provisions in other provinces: Haughton Graphic (Graphics) Ltd. v. Zivot (1986), 33 B.L.R. 125 (Ont. H.C.) and Nordile Holdings Ltd. v. Breckenridge (1992), 66 B.C.L.R. (2d) 183 (B.C. C.A.). As to its argument based on contract, SGGF relies on the chamber judge’s decision in Nordile which supports its position that a party may contract out of liability that would otherwise arise under limited partnership legislation. It is noted however, that although the Court of Appeal upheld the chamber judge’s conclusion in Nordile, the appeal court found it unnecessary to deal with the contract issue. There is therefore very limited authority to the effect that a limited partner may contract out of the statutory consequences of participating in the control of a limited partnership’s business.

10          I am satisfied that the plaintiffs have led sufficient evidence which, if uncontradicted, could reasonably support a finding that SGGF participated in the control of the Limited Partnership. As the contractual argument that SGGF relies on is far from being well settled law; and, given the paucity of case law interpreting s. 64 of the Act generally or more particularly, its effect, if any, on contractual provisions acknowledging limited liability, I am not prepared at this early stage of the proceedings to preclude the plaintiffs from pursuing this aspect of their claim. The nonsuit will therefore not be granted with respect to the plaintiffs’ claim that pursuant to s. 64 of the Act, SGGF is liable as a general partner of Clearwater.

So because the idea of whether you can contract out of the clear language of the Ontario Limited Partnerships Act has not been resolved, it is best to comply with the act and not try to get around it through contracts.  It’s unsettled law and you could find yourself in hot water!

written by admin \\ tags: blog, brampton, business lawyers, cor, debts, educational purposes, general partner, general partners, legal advice, limited liability, limited partners, limited partnership agreements, limited partnerships, mississauga, ontario business, ottawa, professional assistance, scope, toronto, unlimited liability

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, reviewing, interpreting or resolving disputes concerning partnership and limited partnership agreements, you should seek professional assistance (e.g. make a post on Dynamic Lawyers).  We have Toronto, Ottawa, Hamilton, Mississauga, Brampton, and other Ontario business lawyers registered on the website who can answer your questions or help you with your partnership and limited partnership agreements.  I should know – I’m one of them and you can contact me directly.

In this blog, I’ll be discussing some of the things you should think about concerning registering an Ontario limited partnership if you’re outside of Ontario.  There are a few ways this could go down…so lets talk about ‘em, shall we?  Now keep in mind that I’m only talking about registering and maintaining a limited partnership from the perspective of the Limited Partnerships Act (not tax laws, securities laws, corporate laws, etc.).

Extra Provincial Individual General Partner
First, if you are an individual who does not live in Ontario and you want to register an Ontario Limited Partnership, you can still do so.  You can register the limited partnership such that you are personally going to be the general partner.   The danger here, clearly, is personal liability: general partners have unlimited liability for the limited partnership’s debts, losses, liabilities, etc.  Be sure to contact me or make a post on Dynamic Lawyers if you need help filling in the Declaration (Form 3).  You’ll also need to have someone in Ontario be your attorney to deal with your interest in the limited partnership here.  They will need to keep a copy of the completed power of attorney (Form 4) at the address set out in the declaration: section 25(5).  The attorney will have the power to act as attorney and representative (e.g. sue, be sued, accept service of process, receive all lawful notices, execute all deeds, etc.) with respect to the limited partnership.

Extra Provincial Corporation
If you have a corporation that wishes to be the general partner (for liability purposes) of the limited partnership, then that corporation will first need to obtain an extra-provincial license.  I’ve been told by the Ministry of Consumer and Business Services that they won’t register a limited partnership unless they have this license (simply because the corporation won’t be in their database otherwise).  To get this license, you need to pay a government fee, fill out appropriate forms, and you may need to obtain (if the corporation was created outside of Canada) a certificate from the incorporating authority (i.e. the government body usually) showing information about the corporation and the present status.  Originals are required!  Also, translations into English may be required too!  If you need help with this, contact me or make a post.  Again, I should mention that there may be important tax considerations with respect to how the corporation will be taxed.  Treaties may become relevant, etc.  You should consult a lawyer as this kind of thing gets complicated.

Once an extra-provincial license is secured, the next step is to apply for a declaration for an an-extra provincial limited partnership.

Extra-Provincial Partnership?
Interesting thought: could a partnership outside of Ontario be the general partner of an Ontario limited partnership?  Think about that one for a second.  You basically have a partnership being a partner of a partnership…

The answer, as far as I can tell, would lie in the Interpretation Act.  The reason is because the Limited Partnerships Act says that a “person” can be a general partner.  So who then is a “person”.  Well, the Intrepretation Act says: “person” includes a corporation and the heirs, executors, administrators or other legal representatives of a person to whom the context can apply according to law”.  Did you see partnership?  Nope.  Not there.  So an extra provincial partnership cannot be the general partner of a partnership.  So it won’t be able to apply.  Only humans, companies, and their representatives.

Records
Now, it’s important to keep in mind that, regardless of who the general partner is, records of the limited partners MUST be kept at the limited partnership’s principal place of business in Ontario.  So what if the limited partnership does NOT have a principal place of business in Ontario?  What if the limited partnership is simply a business structure used elsewhere in the world?  Well, then the Act (section 26(3)) says that the records of limited partners must be kept by the attorney and representative of the extra-provincial limited partnership at the address stated in the power of attorney.

Right to inspect: remember: any person may inspect the records of the limited partners during the business hours of the limited partnership or its attorney and representative.  Any person can also make copies of and take extracts from it: section 26(4).  Even the Registrar appointed under the Business Names Act may require these things.

OK, so the power of attorney and record of limited partners must be kept at the Limited Partnership’s principal place of business in Ontario.  What about other records – for example, a copy of the partnership agreement, limited partnership declaration, court orders, written authorities?  Well, those would need to be kept at its principal place of business in Ontario: section 33(1).  But what if the Limited Partnership doesn’t have a principal place of business in Ontario?  In that case, then those documents must be kept by the attorney and representative in Ontario at the address stated in the power of attorney.  Any partner may inspect these documents during normal business hours and so too can any person who has a business relationship with the partnership: sections 33(2) and (3).

Remember: if you are outside of Ontario and need help registering a limited partnership here, feel free to contact me or make a post on Dynamic Lawyers.

written by admin \\ tags: limited partnership, limited partnerships act, ontario limited partnership, partnership, toronto, toronto business lawyers limited partnerships, toronto limited partners, toronto limited partnership lawyers

Here comes Legal Form + Video Guide #2:

Auto Accident Settlement and Release Agreement (One-Sided)

The “One-Sided” at there’s only One party at fault and only that party wants a release (in exchange for paying).  If both parties may have been at fault, then you can use an Auto Accident Settlement and Release Agreement (Mutual).  Here’s the sample Video Guide that comes with this Auto-Accident Settlement and Release Agreement (One-Sided):

written by admin \\ tags: auto-accident settlement and release agreement, canada, legal agreements, legal forms, online legal forms, ontario, toronto

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, reviewing, interpreting or resolving disputes concerning partnership and limited partnership agreements, you should seek professional assistance (e.g. make a post on Dynamic Lawyers).  We have Toronto, Ottawa, Hamilton, Mississauga, Brampton, and other Ontario business lawyers registered on the website who can answer your questions or help you with your partnership and limited partnership agreements.  I should know – I’m one of them and you can contact me directly.

In this blog, I’ll be discussing some of the things you should think about concerning terminating the limited partnership.

Recall that the limited partnership is governed by the Limited Partnerships Act and the terms and conditions of a limited partnership agreement.  So those are two sources that could govern the intended or unintended termination of a limited partnership.

Cancellation vis-a-vis Limited Partnership Agreement
Sometimes, the limited partnership agreement that governs the conduct of the parties to a limited partnership will deal with the issue of termination.  For example, termination may arise as of a certain date, after a certain time (e.g. 5 years), on the occurrence of a certain event or situation arising, or upon agreement in writing (for example) by all of the parties.  There may be notice requirements that must be followed with respect to the latter.  There may also be issues as to how many (e.g. majority, unanimity) of the partners – be they limited or general – are capable of requesting termination of the limited partnership.  A limited partnership agreement may also discuss those not so great situations where the limited partnership is terminated for ’cause’ (i.e. because of an act or omission of one of the partners).

Cancellation vis-a-vis General Partner
First, under this Act, a limited partnership is dissolved on the following events happening to the general partner:

• death of a general partner
• mental incompetence of a general partner
• dissolution of a corporate general partner

These things being said, any remaining general partner can continue the business of the limited partnership IF it has right to do so in a partnership agreement and the consent of all remaining partners is obtained. So what if all the partners in the limited partnership agreed that a majority of the remaining partners – not unanimous consent – was required?  What if they agreed to that unanimously in a limited partnership agreement?  That’s an interesting point.  Just to clarify: the idea is that any percentage less than ALL of the remaining partners can consent to a remaining general partner from continuing on as the general partner.  Can this be done?  Some might say: couldn’t those remaining partners simply consent that not everyone’s consent is required in these circumstances?  Perhaps majority consent?  Recall that limited partnerships are also governed by the Partnerships Act, which says that the default clauses of that Act can be varied by the consent of all the partners: s. 20.  But the problem with that is that the Partnerships Act only applies insofar as it does not conflict with the Limited Partnerships Act: s. 46.  Since the Limited Partnerships Act doesn’t allow for partnership agreements to vary the requirement that ALL remaining partners consent (as discussed above), you’d be violating this statute by doing otherwise.

Interesting (or mind-bogglingly confusing) stuff, eh?

So how could a general partner be dissolved if it’s a corporation?  Well, it could be dissolved for failure to comply with corporate or tax laws.  It could also be dissolved by court order under the relevant statute.  It could be wound up as part of an agreement by the shareholders (e.g. pursuant to the terms of a shareholders’ agreement).

Cancellation vis-a-vis Limited Partner
Limited partners can try to dissolve the limited partnership through a court order: s. 10(c).  That said, this right should be looked at in light of the limited partnership agreement, which may create contractual rights between the parties concerning the dissolution of the limited partnership by applying for a court order.

A limited partner also has the right to have the limited partnership dissolved and its affairs wound up where the limited partner is entitled to the return of its contribution but, upon demand, that contribution is not returned to the limited partner.  Note: I’m curious as to what form the demand must take and how long it must go unreturned for this provision to be applicable.   Just some side-thoughts….  Furthermore, a limited partner can have the limited partnership dissolved if the OTHER liabilities of the limited partnership have not been paid (i.e. not liability to the limited or general partners) or the limited partnership assets are insufficient for their payment and the limited partner seeking dissolution would otherwise be entitled to the return of their contribution. I know that’s a mouthful, but you get the idea: (1) OTHER liabilities have not been paid and limited partner wanting dissolution would otherwise be entitled to the return of their contribution or (2) limited partnership assets are NOT ENOUGH to pay OTHER liabilities and the limited partner wanting dissolution would otherwise be entitled to the return of their contribution.

Filing Declaration of Dissolution
In these three examples (i.e. termination pursuant to agreement, or dissolution because of something to do with the general or limited partner), the limited partnership must file a DECLARATION OF DISSOLUTION with the registrar under the Business Names Act.  This declaration must be filed when the limited partnership is dissolved or when all of the limited partners cease to be limited partners: s. 23 of the Limited Partnerships Act. Furthermore, the declaration of dissolution must be signed by at least one of the general partners.  When it’s filed, the declaration of the limited partnership is canceled: s. 23(3).

Cancellation vis-a-vis Registrar
Under s. 23.2 of the Limited Partnerships Act, the Registrar under the Business Names Act can cancel a limited partnership declaration – thereby eliminating the limited liability enjoyed by the limited partners as of that point – for failure to pay the required fee.  This can only be done, however, if the Registrar gives the limited partnership 21 days notice of the intention to cancel.

At the end of the day, there’s a lot of guidance you’re going to need (going through the partnership agreement, the legislation, and shareholder agreement for the general partner, etc.) if you’re thinking about dissolving or terminating the limited partnership.  Your best bet is to get professional help: make a post on Dynamic Lawyers.

written by admin \\ tags: limited partnership, limited partnerships act, ontario limited partnership, partnership, toronto, toronto business lawyers limited partnerships, toronto limited partners, toronto limited partnership lawyers

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 as a dependent, you should seek professional assistance (e.g. make a post on Dynamic Lawyers).  We have Toronto, Ottawa, Hamilton, Brampton, Mississauga and other Ontario lawyers registered to help you in this regard.

What if you have been inadequately provided for in someone’s Will?  Well, if you’re a dependent in Ontario, you might have some legislative recourse.

Section 58(1) of the Succession Law Reform Act allows a deceased’s dependents to apply to the court for support where the deceased (either through a Will or absent one) has not made adequate provision for their proper support.  A dependent is defined under s. 57 of that Act to include your spouse, former spouse, common-law spouse, parent, grandparent, child, grandchild, brother, and sister. A dependant may have to prove that they are a dependent and entitled to financial support under s. 58(1) in court. If the court decides that the person is a dependant and that person can show a need for financial support, then it may order that a certain amount of money be paid to them out of the estate.

If you think that you may be entitled to more from an estate than the amount provided for in a Will, or if you need to determine the rights of others when preparing your Will, consult with a lawyer (by making a post on Dynamic Lawyers).

written by admin \\ tags: adequate provision, brampton, brother and sister, common law spouse, dependant, dependents, educational purposes, legal advice, ontario lawyers, professional assistance, regard, succession law reform act, toronto, Wills and Estates

Please keep in mind that this is not legal advice.  The information provided herein is for educational purposes only. If you would like to get in touch with a lawyer to help you draft, interpret, negotiate or resolve a dispute about a joint venture, then you are encouraged to seek a professional (e.g. make a post on Dynamic Lawyers).  We have Toronto and Ottawa lawyers who can assist you in this regard (I would know, I’m one of them!).

So this blog will deal with the basics of a joint venture agreement or contract.  In other blogs, I’ll get down to the nitty gritty.

Definition
Plaint and simple, a joint venture is a contract between two or more parties to share resources, knowledge, skills, etc. towards a common objective.

Parties
As usual in these types of agreements, the parties are identified at the get-go (make sure this is done properly or else your contract won’t be worth the paper it’s written on!).

Recitals
This is the background story you want to tell that leads up to the formation of the joint venture.  It could go something like: Party X does Y and has Z.  Party A does B and has C.  The two would now like to join forces to make even more $$$.  So they’re agreeing to have a joint venture in accordance with the terms and conditions set out in the joint venture agreement or contract…

Definitions
It’s a good idea to set out the definitions you’re going to be relying upon near the top of the joint venture agreement (for ease of reference and good organization).  You could include definitions here about “Confidential Information” (assuming there will be confidential information passed between the parties as a result of the joint venture), what constitutes “Force Majeure” (e.g. act of God that relieves a party of liability under the agreement in certain circumstances), etc.

Business Structure
The joint venture agreement or contract will generally state how the joint venture is structured.  Is it simply two separate entities acting in concert through the joint venture agreement or contract?  Will there be a new corporation formed?  Will there be a partnership formed?  Will that partnership be a general or limited liability partnership?  For more discussion about the general forms of business one can structure in Ontario, check out this free information about business structures we’ve been accumulating.

Nature of the Relationship
So will the joint venturers be partners (capable of binding each other), corporate shareholders, or simply joint venturers (i.e. their rights and obligations are limited to the terms of the joint venture agreement or contract).

Term and Termination
How long will the joint venture last for and what events give rise to its premature termination?  Will the parties simply be able to give each other notice?  Will the joint venture dissolve by operation of law, by one party filing for bankruptcy, by one party attempting to illegally assign their interest in the joint venture to a third party, etc.?  Again, you should consult with a lawyer to find out what kinds of things typically go in this section.  Also important is what to do in the even of default.  Does one of the joint venturers become liable to pay the other if they are at fault?  Who determines fault and according to what test (e.g. sole and absolute discretion)?  There’s a lot to think about here…

Joint Venture Assets and Benefits
How will these things be deal with?  Will there be a percentage of ownership?  Will the benefits be based on revenues or profits?  Can these interests be assigned?

Operations
How will the joint venture be operated on a day-to-day basis?  Will the joint venture committee have the power to enter contracts on behalf of the joint venture?  Perhaps the joint venture committee will create a new corporation to take on a certain responsibilities and simply own equally the shares of the new corporation.  That new corporation would operate as a separate business, but its shareholders would be the joint venturers (who would elect the directors, who in turn would appoint the day-to-day officers).  This would be a good place to put reporting and record-keeping requirements too.

Joint Venture Responsibilities
Here, we get to the nitty gritty of who will be responsible for what in the joint venture. Separate paragraphs will be needed for each of the parties.

Joint Venture Management
Will there be a committee?  Will representatives from each of the parties be on the commitee?  Will there be a chairperson?  How will meetings be managed, votes and decision made?  Will there be direction from owners and delegation to the committee?  In my opinion, and as I’ve previously blogged about, businesses should be run as dictatorships with consultants, not as democracies (too many voices means things won’t get done).  

Representations and Warranties
What kinds of true, fair, and complete statements must the parties make to induce the other parties to enter the agreement?  The parties want to know that their joint venturer partners have the authorization and operational wherewithall to do what it is they are about to do.  If these representations and warranties no longer hold true, then what’s the consequence?  Notice?  Termination?  This should be spelled out here…

Liability and Indemnification
Will the joint venturers try to limit their liability from each other in connection with the joint venture?  Will they indemnify each other for their own wrongdoing – whether in contract, tort, negligence, misconduct, breach of statute or otherwise?

General Terms and Conditions
This section of the Joint Venture Agreement will deal with things like (which I’ve previously touched on in teh context of an independent contractor agreement):

• Notices
• Entire Agreement
• Governing Law
• Interpretation
• Assignment
• Waiver
• Cumulative Remedies
• Counterparts
• Enurement
• Entire Agreement
• Time of Essence
• Independent Legal Advice
• Force Majeure
• Severability
• Survival
• Currency

written by admin \\ tags: agreement, assets, bankruptcies, bankruptcy, blog, breach, business, circumstances, confidentiality, contracts, corporation, indemnification, lawyer, lawyers, liabilities, negligence, negotiating, Negotiations, partnership, percentages, relationships, separation, shareholder, shareholders, shareholdings, toronto

I was practically in the yelling match with a (prospective) client and good friend about target marketing.  I wanted to know, plain and simple, who his target market was.  He gave me some fluff.  I kept asking: “Please be specific”.  He kept giving me general answers.  “We’re targeting everyone.  We’re targeting professionals and their families.  But we also do niche targeting to students and seniors”.  Geeze man!  Could you be any more vague?!?

The purpose of my sharing this little story with you here and now is simple: to have a clear strategy on how to use your limited resources to target your market, you must first identify that target market with precision.  I want to know, demographically speaking, as much as humanly possible about your ideal client.  The best way I’ve found to make this determination is to come up with a number of scenarios whereby everyday individuals (and perhaps groups and organizations) would use your product(s) and/or service(s).

Take the following example.  I sell candy.  A small boy who lives in Toronto around a candy shop would buy candy from my store.  That’s a scenario.  A young man who wants to get his girlfriend some candy as a gift would buy candy too.  That’s a scenario.  A group of women looking to quench a craving would buy candy.  So too would avid candy collectors looking for the latest craze.  You see: there are lots of different people who would buy my product for different reasons.  I have to figure out, by grouping these and other scenarios together, who my PRIMARY, SECONDARY, and even TERTIARY target markets are.   Perhaps the small boy buys the most candy, so I should cater my store to him.  Remember: 80% of your profits come from 20% of your customers.  So make your strategy count!

written by admin \\ tags: beautiful thing, candy shop, different reasons, fluff, girlfriend, good friend, group of women, latest craze, limited resources, match, niche, prospective client, scenario analysis, scenarios, seniors, target market, target marketing, target markets, toronto, young man

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 dissolving a partnership, you should seek professional assistance (e.g. make a post on Dynamic Lawyers).  We have Toronto and Ottawa business lawyers registered on the website who can answer your questions or help you with your partnership dissolution.

The Ontario Partnerships Act contains various provisions dealing with circumstances in which a partnership can end.

First, a partnership can end by notice or by a contractual term in the partnership agreement: ss. 26 and 32.

Second, a partnership can terminate by death, insolvency, charge on a partner’s share or illegality of business: ss. 33 and 34.

Third, a partnership can be terminated by court order: s. 35.  This method of dissolving a partnership requires that an application be brought for one of the following reasons:

1. one of the partners is found to be mentally incompetent;
2. one of the partners becomes permanently incapable of performing his or her part of the partnership;
3. one the partners has been guilty of conduct that prejudicially affects the carrying on of the business;
4. one of the partners willfully or persistently permits a breach of the partnership agreement or otherwise so conducts him or herself in a manner relating to partnership business that it is not reasonably practicable for the other partners to carry on the business partnership with him or her;
5. when the business of the partnership can only be carried on at loss; or
6. when in any circumstances have arisen that in the opinion of the court render it “just and equitable that the partnership be dissolved”.

In conclusion: a partnership can only be terminated according to the terms and conditions of the partnership agreement and under one of the provisions of the Partnerships Act.

written by admin \\ tags: dissolving a partnership, ottawa business lawyers, partnership, partnership agreement, partnership business, partnership dissolution, partnerships act, toronto, toronto business lawyers

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 transferring shares from a limited liability company or amending a corporation’s articles of incorporation, you should seek professional assistance (e.g. make a post on Dynamic Lawyers).  We have Toronto and Ottawa business lawyers registered on the website who can answer your questions or help you with your  Ontario or Federal corporation.

So you want to sell your shares, eh? Well, the first step to actually selling your shares is to determine if the corporation’s Articles of Incorporation have anything to say about transferring the shares.

Many a time, you’ll find standard boilerplate language that says the following in part 8 of the Ontario corporation’s Articles of Incorporation:

The right to transfer shares of the Corporation shall be restricted in that no shareholder shall be entitled to transfer any share or shares of the Corporation without the approval of:

1. The directors of the Corporation expressed by resolution passed by the votes cast by a majority of the directors of the Corporation at a meeting of the board of directors or signed by all of the directors of the Corporation; OR

2. The shareholders of the Corporation expressed by resolution passed by the votes cast by a majority of the shareholders who voted in respect of the resolution or signed by all shareholders entitled to vote on that resolution.

So the articles of incorporation are basically saying that a resolution is required by those in charge of the corporation to permit the share transfer.  Otherwise, someone could yell ‘foul’ and put the whole share transfer up into the air (leading to court case).  This shouldn’t be a problem if there’s only 1 shareholder, 1 director, and 1 officer (all happening to be the same person).  But disputes may arise where a group of shareholders try to transfer their shares without the directors’ or other shareholders’ approval.

So, make sure you read the Articles of Incorporation to see if there are any restrictions on transferring the shares.   The key thing to keep in mind is that if, for some reason, it’s too difficult for a shareholder to obtain the approval necessary to have their shares transferred, then they might make a case to amend the Articles of Incorporation to remove those restrictions.  Attempting to amend the Articles is not easy: you need a resolution from two thirds of the shareholders entitled to vote and who cast their vote at a special meeting.

As an alternative to having restrictions on share transfers in the Articles of Incorporation, shareholders could simply place such restrictions in a Shareholders Agreement.  Amendments could be made without the need to have the corporation file Articles of Amendment.

written by admin \\ tags: articles of incorporation, board of directors, business lawyers, court case, limited liability company, ontario corporation, share transfer, toronto