On February 2, 2021 the Office of the Privacy Commissioner of Canada released a report into its findings surrounding the operations of Clearview AI. A joint investigation brought together the federal privacy watchdog with provincial counterparts in Quebec, British Columbia, and Alberta. The investigation examined whether Clearview AI had breached Canadian and provincial privacy laws through the collection, use, and disclosure of personal information. The report concluded that biometric information was collected without consent, that Canadian privacy rights were violated, and that Clearview AI failed to comply with Canada’s Personal Information Protection and Electronic Documents Act (PIPEDA). The findings should be taken into account by any business within Canada or with a “real and substantial connection” to Canada to ensure compliance with Canadian privacy standards and laws.

Geography Does not Constrain Canadian’s Privacy Rights

The first issue the privacy Commissioners had to contend with was whether they had jurisdiction over Clearview given that it was based outside of Canada. Clearview alleged that the legislation did not apply to it given that its services were not actively aimed at the Canadian market, it did not have servers in the country, and that images were collected indiscriminately from around the world.

The Commissioners rejected those claims, finding that Canadian privacy laws will apply to organizations outside of Canada if a “real and substantial connection” to Canada exists. Referring to A.T. v. Globe24h.com, the report reiterated that a physical presence in Canada is not required to establish a real and substantial connection. Rather, the threshold can be met so long as a significant amount of data is sourced from Canadians. The Commissioners are asserting that privacy rights must be observed regardless of where an organization is based, and if organizations or corporations collect information on Canadians with a view to operating outside of national borders, they will still engage Canada’s privacy laws.

Publicly Available Data Engages Privacy Interests

Canadian privacy laws require that organizations obtain consent for the collection, use, and disclosure of personal information unless an exception applies (For example, section 4.3 of PIPEDA’s Schedule 1). Clearview did not obtain consent from the individuals whose images were collected and argued that it was exempt from the requirement because the information was publicly available. Clearview relied on the “publicly available” exception set out in Section 1(e) of Regulations Specifying Publicly Available Information, which applies to information in a publication such as a book, newspaper, or magazine in print or electronic form that is available to the public. The Commissioners rejected the argument, finding that social media is distinct from the types of publications listed in the Regulations. In their view, following Clearview’s submission would lead to an overly broad exemption so that any publicly accessible content on websites could be deemed a publication. The report reiterates a distinction between information that is “publicly available” and that which is merely “publicly accessible”.

Personal Information Must be Used for Appropriate Purposes

Under section 5(3) of PIPEDA, an organization can collect, use, and disclose personal information “only for purposes that a reasonable person would consider are appropriate in the circumstances”. Clearview alleged that its use of the information was legitimate given potential benefits to law enforcement and national security. Clearview marketed its services to Canadian organizations with the RCMP and other law enforcement agencies using Clearview’s services. Once again, the report rejected Clearview’s argument, finding that while some information may have been used for law enforcement, the primary objective was to operate a commercial technology.

In evaluating whether the use of information is reasonable the Commissioners must complete a “balancing of interests” between the individual’s right to privacy and the commercial needs of an organization. The report accepted that facial biometric data is sensitive and unique to an individual. Clearview’s use of this data amounted to “mass identification and surveillance of individuals”. As Clearview’s use of the information was unrelated to the original purposes for which the images were posted and could be used to the detriment of individuals, Clearview’s use could not be deemed legitimate. Moreover, the images were obtained in a manner that contravened privacy laws.

Leveraging Data Within Canada’s Privacy Regime

The joint report recommended that Clearview stop offering facial recognition services in Canada, with Canada’s Privacy Commissioner, Daniel Therrien, alleging the company placed Canadians in a continuous “police lineup”. The Commissioners also recognized shortcomings in Canada’s privacy legislation. Therrien has noted that federal laws could be clearer that surveillance of this kind should be prohibited to preserve privacy rights.

What Does This Mean for Canadian Companies & Privacy Compliance?

This decision will be consequential to businesses in Canada that wish to exploit advances in biometric technologies as well as sectors that wish to leverage available data sources. The report also made clear that biometric information is particularly sensitive, and organizations may wish to refine their understanding of how data intersects with consent requirements. The condemnation aimed at Clearview AI is one example of privacy authorities pushing back against data surveillance, indicating how Canada’s legislation may evolve to balance privacy protection with ongoing innovation.

The business lawyers at GLG LLP in Toronto would be pleased to help you evaluate risk and guide your business through complex and changing legal obligations. Call the firm at 416-272-7557 or reach out to us online to schedule a consultation.

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An Update to Directors’ and Officers’ Obligations to the Corporation

The CBCA outlines the fiduciary duty that every director and officer owes to a corporation, requiring that in order to properly discharge their duties they must “act honestly and in good faith with a view to the best interests of the corporation.” The long-standing convention was that this could be met by acting in the best interests of the shareholders of a corporation. However, the 2008 decision of the Supreme Court of Canada in BCE Inc. v. 1976 Debentureholders revised this, with the Court holding that the “best interests of the corporation” are not synonymous with the interests of shareholders. Instead, directors may consider the interests of numerous stakeholder groups.

Bill C-97 updated the CBCA to account for the 2008 decision by acknowledging the additional interests for directors and officers to consider. Section 122 of the legislation was expanded with a new subsection stating that directors and officers may consider the following factors:

1. the interests of shareholders, employees, retirees and pensioners, creditors, consumers, and governments;
2. the environment; and
3. the long-term interests of the corporation.

Enshrining this broader view of the interests of the corporation in the statute should not significantly alter the director’s decision-making, though it does make the CBCA consistent with judicial precedent.

New Disclosure Requirements Raise Corporate Governance Standards

The amendments within Bill C-97 also include several new disclosure requirements for CBCA corporations. Collectively, these serve to increase accountability and transparency surrounding management decision-making.

Diversity and Well-being

At each annual meeting directors of prescribed corporations will need to provide shareholders with information outlining diversity among directors and senior management as well as information concerning the well-being of employees, pensioners, and retirees.

Review of Executive Compensation

Prescribed CBCA corporations will be required to develop an approach to Director and senior management remuneration. This approach must be disclosed to shareholders before each annual meeting, allowing shareholders to vote via a non-binding “say-on-pay” resolution, with the results to be disclosed. In Canada, these votes previously existed for public companies on a voluntary basis. The amendment follows an increased focus on executive compensation and can be expected to act as a gauge of shareholders’ views on compensation, increasing shareholder activism.

Bill C-97 also requires prescribed corporations to provide shareholders at each annual meeting with information concerning the recovery of incentive benefits or other benefits (“clawbacks”) previously paid to senior management or directors.

Consultation on the Regulations to Bill C-97

Some of the amendments reviewed have already been added to the CBCA, although additional details still need to be set out in regulations. According to Corporations Canada, the amendments arose in response to concerns around the security of workplace pensions, with the objective of enhancing retirement security, while ensuring a strong platform for growth and innovation. Accordingly, Innovation Science and Economic Development Canada (ISED) sought feedback from stakeholders on the proposed regulations.

The ISED consultation specifically sought feedback on the following:

A) Prescribing the corporations subject to the new obligations

The current intention is for the new amendments to apply to distributing corporations, defined as publicly-traded CBCA corporations.

B) Defining “members of senior management”, “retirees”, and “pensioners”

The amendments will use new terms that need to be defined. Currently, only “members of senior management” is already defined, appearing in subsection 172.1(1) of the CBCA. ISED proposes having the same definition apply to the new obligations respecting remuneration disclosure.

The proposed new definitions for “retirees” and “pensioners” aim to distinguish between those who receive a pension and those who receive other benefits from a corporation. A person may be both or only one.

“Retiree” could mean “a person who has concluded their working or professional career with a corporation, and receives or will receive post-employment benefits other than a pension from that corporation.”

“Pensioner” could be defined as “a person who receives regular payments from a corporation from a fund accumulated during that person’s employment with that corporation, or a spouse or dependents of such a person receiving the payments after the person is deceased.”

C) Determining the time and manner for disclosing the results of say-on-pay votes

ISED suggests that prompt communication of results will facilitate shareholder engagement in relation to corporate remuneration. It proposes that results be reported 1) at the annual meeting, 2) posted on the corporate website no later than 30 days after the meeting, 3) set out in the next annual general meeting’s management proxy circular.

D) Determining what information to disclose to shareholders regarding clawbacks

ISED notes that clawbacks can mitigate risk by allowing corporations to recover undeserving incentive payments. It suggests corporations should be required to indicate if they have adopted a policy, and if not, provide the reasons why. For corporations that have a policy, they must provide a summary including key provisions.

E) Prescribing the information to disclose regarding the well-being of employees, retirees and pensioners

According to ISED, this disclosure will ensure better oversight of corporate behaviour while promoting the interests of human resources. The proposal is that corporations should indicate whether they have a policy relating to the well-being of employees, retirees and pensioners and if not, must indicate why. If a policy exists, it should provide a summary of the objectives and key provisions, and the elements of the policy covering well-being, as well as a description of the progress in achieving the policy goals.

The CBCA amendments seek to update corporate governance best practices while engaging an expanded group of stakeholders which may encourage shareholder activism.

The lawyers at GLG LLP in Toronto are skilled in providing strategic business advice and helping clients achieve their long-term objectives. Our focus is on providing pragmatic solutions and guiding clients through complex transactions. To learn how we can help you call 416-272-7557 or complete the online form to schedule a consultation.

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Although some sports betting has been legal since the 1990s, single-game betting remains prohibited under sub-section 207(4)(b) of the Criminal Code. Under the legislation, most gaming is classified as “lottery schemes” which is defined to prohibit single-event or single-contest betting. This restricts individuals from placing a bet on the outcome of just a single game. However, there are exceptions for parlay-stye betting, which allows wagers involving the outcome of more than one match or game within a single ticket.  There are currently two bills progressing through the House of Commons which would amend the prohibition on single-game betting.

The Road to Legal Single-Event Betting

Bill C-13, An Act to Amend the Criminal Code (single event sport betting) was introduced by Justice Minister David Lametti and had its first reading on Nov 26, 2020. The Bill would remove the current restrictions, giving the provincial and territorial governments the discretion to manage single-event sports betting within each jurisdiction. Rather than repealing subsection 207(4)(b) of the Criminal Code, it would leave the section in place, removing some single-event betting acts from falling under the “lottery scheme” classification.

Similar to the government-sponsored bill, Bill C-218, Safe and Regulated Sports Betting Act also attempts to decriminalize single-event sports betting. This private member’s bill was sponsored by Member of Parliament Kevin Waugh and was introduced in February 2020. As presently drafted, the proposal would completely repeal sub-section 207(4)(b). Bill C-218 currently has widespread support across political parties and was recently adopted at second reading with 303 votes in favour and 15 against, before being referred to the Justice and Human Rights Committee.

These recent initiatives are not the first attempts at legalizing single-game wagering in Canada. An earlier private member’s bill, Bill C-290, was proposed in 2012 by NDP Member of Parliament Joe Comartin. The Bill received widespread support and passed through the House of Commons before languishing in the Senate. An almost identical proposal resurfaced in 2016 as Bill C-221. However, several professional sports leagues, including the NHL, NBA, MLB, and NFL opposed the Bill, and Liberal Party members voted against the Bill, citing concerns that the Bill would fail to discourage illegal gambling and could aggravate problem gambling. Significantly, the current Bill C-13 marks the first time that the lifting of single-event sports betting is proposed through a government-sponsored bill.

Is an Increasingly Competitive Environment Driving the Action?

The entertainment and gaming environment has undergone a transformation in the time since the failure of the previous attempts at legalization. The prospect of increased competition in the sector from the United States is likely fueling a renewed impetus this time around. In May 2018, the United States Supreme Court, in the case of Murphy v. National Collegiate Athletic Association, struck down as unconstitutional a federal law that had prohibited sports betting in most states. The Professional and Amateur Sports Protection Act originated in 1992 and banned sports betting except in Nevada, which was permitted to regulate and license betting. Since the decision, numerous states have passed legislation to legalize aspects of sports betting within their borders, Delaware being the first, with others including New York, New Jersey, and Pennsylvania. Even before the Supreme Court decision, American sports leagues began to acknowledge that a new regulatory approach was needed, with those organizations now forging partnerships with sports betting providers. Some of the same organizations had opposed Canada’s Bill C-290.

There is growing enthusiasm for allowing provinces to create legal and regulated single-event sports betting regimes. Sports organizations, broadcasters, and those in the gaming industry can look forward to developing new revenue sources. The Commissioners of the National Basketball Association, the National Hockey League, Major League Baseball, Major League Soccer, and the Canadian Football League issued a joint statement to the federal government encouraging an amendment to federal laws that would permit single-event wagering. They cited this as another way for fans to engage with the sports they love. The Canadian gaming industry acknowledges that increased competition from American jurisdictions and other entertainment options is a factor encouraging reform.

Sports Betting to Spur New Economic Opportunities

The Canadian Gaming Association has suggested that single-game sports betting would act as an economic stimulus, generating employment and new tax revenues for governments. There is also the prospect that it could support growth in tourism and prompt investment and innovation in the sector. A report by Deloitte has indicated that within five years sports betting could grow from a $500 million industry to nearly $28 billion. With governments facing fiscal challenges, new sources of economic activity like expanded sports betting could deliver economic results. Additionally, a legal and regulated market would hinder illegal gaming profits from flowing to organized crime. The Canadian Gaming Association has estimated that $15 billion was bet on sports in Canada with only $450 million of that going through legal channels.

Next Steps

Of the two bills that are currently before Parliament, Bill C-218 has cleared second reading in the House of Commons and is progressing slightly ahead of Bill C-13. With a greater chorus of voices now in favour of amending the Criminal Code prohibitions, it appears that Canada is closer than ever to moving forward with the legalization of single-event sports betting.

Our lawyers can assist you in navigating new business opportunities while managing risk. Contact GLG LLP in Toronto for considered legal advice. To speak with a lawyer please call our firm at 416-272-7557 or complete the online form to schedule a consultation.

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The new measures have come under fire from many sides, including business owners, customers and retail advocates. One argument is that the measures unfairly target small businesses, while ‘big box stores’ like Walmart can carry on business despite a good portion of their product falling into the ‘non-essential’ category, such as electronics and beauty supply items. We previously discussed these criticisms in a previous blog about the Hudson’s Bay Company bringing a claim against the provincial government in opposition to the measures.

Mixed Messaging Causes Confusion for Retailers and Customers

One of the most common critiques of the lockdown measures is the mixed messages many feel the restrictions convey. On the one hand, residents have been asked to remain in their homes unless they have an essential trip. The government has deemed certain activities essential, such as grocery shopping, exercise and medical appointments. However, non-essential retail stores are permitted to operate curbside pickup, meaning it’s feasible a person could leave their home to go pick up decorative items or a new video game system.

In addition, some have said the rules have been applied haphazardly. For example, government-run LCBO and Beer stores remain open for in-person shopping, yet privately-owned cannabis retail stores are only permitted to offer curbside pickup or delivery. Further, these curbside pickup transactions are limited to items purchased by the customer ahead of time online, limiting spontaneous shopping transactions.

Measures not Only Harm Businesses, But Place Residents at Risk: Critics

One major critic of the new measures is the Canadian Federation of Independent Businesses (CFIB), which sees the measures as unfairly punishing small businesses in favour of large corporations. CFIB’s president, Dan Kelly, said that the messaging about what is essential and what isn’t has created confusion among both retailers and their customers. Further, the organization claims the restrictions might actually do more harm than good from a health perspective.

By limiting the number of retailers consumers can visit and the opening hours, this means that there will be higher concentrations of people at fewer locations, increasing the risk of close contact. The organization’s belief is that allowing small businesses to continue to serve customers in person, would reduce pressure on big box stores, while also protecting small business owners during this extended period of financial hardship. The CFIB said it would like to see restrictions closer to what the province of British Columbia has enacted, where small retailers are permitted to open, so long as they observe the following protocols:

• Establish strict capacity limitations based on providing 5 square metres of unencumbered space per person
• Post occupancy limits where they are clearly visible
• Post directional signs to prevent people from passing each other in close quarters, where possible
• Require face coverings at all times

Notably, the measures implemented by the government have received praise from other industries, which are allowed to continue operations with health protocols in place, such as manufacturing and construction.

Our business lawyers can advise on how best to protect your business and maintain staffing through this period of uncertainty. Contact GLG LLP in downtown Toronto for efficient and skilled advice on the management of your business. Call the firm at 416-272-7557 or contact them online to schedule a confidential consultation.

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When the government announced new province-wide lockdown measures in late December aimed at curbing the rapid increase in new COVID-19 cases, the protocols once again called for a closure of all non-essential retail stores for a period of one month, from December 26th (typically one of the busiest and most profitable shopping days of the year) to at least January 23rd, 2021. With Ontario continuing to see record infection rates, it’s unclear whether this lockdown period will be extended further, particularly in areas with a high concentration of infection rates throughout the Golden Horseshoe region.

Prior to the provincial order, Toronto and Peel Region had been under these lockdown rules for several weeks already, with non-essential stores, services and malls shuttered since November. In response, a coalition of Ontario retailers, including the Hudson’s Bay Company, wrote a letter to the Ford Government arguing against the measures and saying that the move allows big box stores such as Walmart and Costco to thrive, while smaller businesses were suffering.

Which Retailers are Deemed “Essential” in Ontario?

In order to meet the criteria to be considered essential, and therefore remain open during the lockdown, a retailer must fit within one or more of the following categories:

• Businesses that primarily sell food, beverages and consumer products necessary to maintain households and businesses including:
  • Supermarkets and grocery stores
  • Convenience stores
  • Discount and big box retailers selling groceries
  • Beer and wine and liquor stores
• Pharmacies
• Gas stations and other fuel suppliers
• Vehicle retail, including auto
• Hardware
• Safety Supply Stores
• Garden Centres

These essential businesses are allowed to continue to keep their doors open to the public, even under the province’s most strict lockdown rules. These businesses may continue to sell non-essential products (such as electronics and home decor items) as well as essential products.

When the November and December lockdown measures were announced, HBC filed an application for judicial review of the province’s decision, saying it was unfair and arbitrary and would punish retailers at the most profitable time of year. According to the court filing:

Ontario offered no explanation or justification for this about-face, which excluded HBC while allowing other big-box retailers like Walmart, Costco, and Canadian Tire to remain open and to sell all of their non-essential goods including those sold by HBC and many other closed retailers, large and small.

In a statement, the company said:

On behalf of thousands of large and small retailers in Toronto and Peel, we have been left with no choice but to ask the court to recognize the unfairness of the current situation. The situation is dire and untenable for thousands of retailers, but it’s not too late for the government to make a better decision for Ontario.

Superior Court Dismisses Application While Leaving ‘Wisdom and Efficacy’ of Province’s Decision Open to Question

On December 23, the Superior Court of Justice issued a decision on HBC’s application, ultimately dismissing it. However, the court did side with the retailer on the issue of big box stores being permitted to sell non-essential items to shoppers in addition to essential items such as groceries. The Court noted that it was required only to determine whether the lockdown policies were consistent with the Reopening Ontario Act, which they were. However, the Court did question whether the policies allowing shoppers to access even non-essential items were consistent with the purposes of the lockdown, pointing out that Quebec had limited the scope of these essential businesses to only the essential items, blocking customers from accessing other areas of the stores.

Our business lawyers can advise on how best to protect your business and maintain staffing through this period of uncertainty. Contact GLG LLP in downtown Toronto for efficient and skilled advice on the management of your business. Call the firm at 416-272-7557 or contact them online to schedule a confidential consultation.

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What is a Shotgun Buy/Sell Clause?

Shotgun buy/sell clauses are commonly used in business contracts such as shareholder agreements and partnership agreements. When multiple parties will be working together, there is a risk of disagreement on how to proceed which can result in project/business stagnation. If two parties with equal power are unable to agree on how to proceed with a major project or decision, it can be catastrophic for the business itself. Shotgun buy/sell clauses are intended as a means to solve this problem and allow the business to move forward by having one party buy out the other.

The clauses typically operate as follows:

1. One party (Party A) will trigger the clause by making an offer to buy out the other party (Party B) at a specific price.
2. Upon receiving the offer, Party B can either accept the terms presented or buy out Party A at the same price. This ensures that Party A will set a price that it would be willing to accept as well.

While the process is intended to create a fair deal for both parties, the financial positions of each party may create an imbalance, since one party may have considerably more means than the other.

Development Deal Sours

The case at hand involved two companies that had entered into a limited partnership agreement to rezone a property in Toronto and redevelop it as a luxury condominium. The parties had difficulty working together, and eventually, one party (FSC) opted to invoke the buy/sell clause in the partnership agreement. FSC triggered the clause by proposing a purchase of the other entity (ADI) for a set price. Two weeks later, ADI agreed to purchase FSC’s interest for $12,733,289, with the deal set to close three months later on April 8, 2020.

A few weeks ahead of the scheduled closing, ADI informed FSC it would not be closing as planned, due to the ‘unforeseeable delay’ caused by the COVID-19 pandemic. In response, FSC brought an application seeking the remedy of specific performance, which would require ADI to go through with the agreed-upon purchase under the buy/sell clause.

Court Rejects Claim of Frustration

ADI claimed it had not breached the buy/sell clause, as the contract to purchase FSC’s interest in the project had been frustrated due to the unforeseen problems created by the pandemic. ADI claimed that the market had taken a significant downturn and as a result, ADI was unable to secure the financing necessary to complete the purchase. However, the court rejected this claim.

The court found that while the pandemic was unprecedented, sharp economic declines are common. There are myriad issues that could affect the price of real property, and it is not unrealistic to expect extreme fluctuations in property values over even relatively short periods of time. Although in this case the uncertainty was largely tied to the pandemic, the cause could have been any number of reasons, which is a risk a developer takes when undertaking such projects.

Secondly, the court found that ADI had been lax in its pursuit of funding. The company had approached only a handful of lenders and had requested much more capital than what was required to complete the purchase from FSC. The court found that ADI could have opted to allow FSC to purchase ADI’s interest, and instead chose to buy out FSC. As a result, the court held ADI to its obligations and ordered specific performance of the contract.

Businesses should exercise due caution when presented with a buy/sell option and undertake due diligence to secure funding prior to agreeing to buy out a former parter’s share of a contract. As demonstrated by the case above, courts are unsympathetic to a business that fails to do so, even in the face of an extraordinary circumstance such as COVID-19.

Our business and commercial real estate lawyers can advise on how best to protect your business and mitigate risk in the challenging financial landscape created by the pandemic. Contact GLG LLP in downtown Toronto for efficient and skilled advice on the management of your business. Call the firm at 416-272-7557 or contact them online to schedule a confidential consultation.

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Current Residency Requirements for Directors of Ontario Corporations

Under the Business Corporations Act, s. 118 (3)  currently requires that a percentage of a corporation’s directors must be resident in Canada:

(3) At least 25 per cent of the directors of a corporation other than a non-resident corporation shall be resident Canadians, but where a corporation has less than four directors, at least one director shall be a resident Canadian.

Bill 213 will repeal this section, removing the requirement for a Canadian director. The change brings Ontario in step with other provinces, such as Alberta, British Columbia and Nova Scotia, that had already done away with the residency requirements for directors. The purpose of the change is to encourage more foreign-owned or run corporations to bring their businesses to the province instead of bypassing Ontario in favour of more advantageous rules elsewhere in the country. The change will apply to both publicly and privately held corporations.

Changes to the Resolution Approval Process for Private Corporations

Under the Business Corporations Act, s. 104(1) currently states that a privately-held corporation may approve a resolution in writing so long as the shareholders unanimously agree, and each sign the written resolution:

104 (1) Except where a written statement is submitted by a director under subsection 123 (2) or where representations in writing are submitted by an auditor under subsection 149 (6),

(a)  a resolution in writing signed by all the shareholders or their attorney authorized in writing entitled to vote on that resolution at a meeting of shareholders is as valid as if it had been passed at a meeting of the shareholders; and

(b)  a resolution in writing dealing with all matters required by this Act to be dealt with at a meeting of shareholders, and signed by all the shareholders or their attorney authorized in writing entitled to vote at that meeting, satisfies all the requirements of this Act relating to that meeting of shareholders.

The purpose of the existing legislation is to allow the passing of resolutions without the need or expense of a shareholder’s meeting. However, the requirement for a unanimous agreement has proven to be onerous. If just one shareholder objects and refuses to sign, the corporation would be required to hold a meeting to vote in person, creating an undue delay in the process.

Bill 213 will amend the Business Corporations Act by removing the necessity for unanimous agreement among the shareholders in order to approve a resolution in writing. Instead, private corporations will now have the ability to approve an ordinary resolution in writing so long as the majority of shareholders agree to sign.

In addition to making the process to pass an ordinary resolution more convenient, this new process will allow corporations to move ahead with business decisions in the face of the COVID-19 pandemic when in-person shareholder meetings are inadvisable.

Exceptions to the Rule – Special Resolutions

The new rule allowing a majority of voting shareholders to sign off on a written resolution will only apply to ordinary resolutions. Special resolutions making significant changes such as a sale of assets, mergers, acquisitions or changes to the Articles of Incorporation will still be carried out as before. Further, a corporation is also free to enact more stringent requirements for the passing of written resolutions in its own Articles of Incorporation to require more than a simple majority of shareholder signatures.

Our business lawyers can advise on how best to protect your business and adapt your policies to reflect these new legislative changes. We will ensure you are aware of all updates to the law affecting your business operations so you can be sure you are compliant. Contact GLG LLP in downtown Toronto for efficient and skilled advice on the management of your business. Call the firm at 416-272-7557 or contact them online to schedule a confidential consultation.

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As we’ve seen with long-term care facilities, unfortunately, infections can spread quickly, resulting in civil litigation for failing to adequately protect patients and their families. These cases are in the early stages and have yet to be decided by Canada’s courts, but there is the risk of costly civil liability for those who own and operate these facilities. Could the same also be said of other establishments where outbreaks occur? For example, there have recently been stories in the news of outbreaks occurring at a spin class in Hamilton, and a wedding in Vaughan. Further, a study conducted by the Institute for Work and Health found that 1 in 5 infections can be attributed to the workplace. At what point does liability fall to the business owner in such cases?

Bill 218, “Supporting Ontario’s Recovery Act, 2020“

Bill 218, recently introduced by Ontario Attorney General Doug Downey, may assist business owners who make a ‘good faith’ effort to protect customers and employees, by limiting their liability for infections occurring at their establishments. Section 2 of the Act states:

2 (1)  No cause of action arises against any person as a direct or indirect result of an individual being or potentially being infected with or exposed to coronavirus (COVID-19) on or after March 17, 2020 as a direct or indirect result of an act or omission of the person if,

  (a)  at the relevant time, the person acted or made a good faith effort to act in accordance with,

         (i)  public health guidance relating to coronavirus (COVID-19) that applied to the person, and

        (ii)  any federal, provincial or municipal law relating to coronavirus (COVID-19) that applied to the person; and

  (b)  the act or omission of the person does not constitute gross negligence.

The Act does not protect business owners who fail to follow public health guidelines, as it explicitly states that the business involved must have made a “good faith effort” to act in accordance with all guidelines and regulations. The Act further defines “good faith effort” as an “honest” effort, whether or not the actual effort was reasonable. The Bill further states that acts of gross negligence are exempt from protection under the new law.

Protecting Employees and Employers

The Bill not only protects businesses from civil claims from customers or other visitors but from employees as well. Establishments making a good faith effort to protect their staff (by providing adequate personal protective equipment and social distancing guidelines, for example) will be sheltered from actions by employees who may become infected at work. Further, the Act also protects individual employees from liability. If, for example, an employee attended work at a retail store or gym while infected, but asymptomatic, they may expose others to infection during that time. However, if they were taking all recommended precautions and did not know they posed a threat, they would likely not be vulnerable to a civil claim from anyone they unwittingly exposed.

Some Express Concerns that the Bill is Too Broadly Worded

While the need to protect businesses from further financial damage due to the pandemic is clear, some fear the wording of the Bill may go too far in that direction, making it difficult for those who become infected to hold responsible parties liable. Kris Bonn, the President of the Ontario Trial Lawyers Association, fears that the standard of gross negligence will place too onerous a burden on claimants looking to recoup costs after becoming infected. Claimants may have to invest significant expense into the discovery period of a trial in order to fully ascertain the likelihood of success of their case, which may discourage parties from litigation overall.

The effect of the Bill on COVID-19 litigation for businesses and entrepreneurs remains to be seen, as the Bill has yet to receive Royal Assent. However, we will continue to monitor the situation and provide updates as they become available.

Whether you are a small business looking for options to manage financial stress during the pandemic or require representation in moving ahead with bankruptcy proceedings, GLG LLP can help. Our skilled business lawyers in Toronto regularly assist corporate clients with a variety of issues, including the configuration and structure of a venture in a way that is most beneficial to those involved. Further, we advise and represent corporate clients on related matters including commercial real estate ventures and litigation if necessary. If you are a business owner with concerns related to your financial obligations and responsibilities in light of COVID-19, we will review your situation and work with you to find your best path forward. Call 416-272-7557 or complete the online form to arrange a consultation with one of our lawyers today.

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This change opens up a host of new opportunities for agents and brokers, however, these changes also come with a number of financial implications. Before taking action, agents and brokers should seek the advice of experienced business incorporation and real estate lawyers. At GLG LLP, our lawyers will work with you to get your incorporation off the ground quickly in a way that maximizes your benefits, while ensuring you stay aware of your obligations under the law.

What is a Personal Real Estate Corporation?

A PREC is a form of business incorporation that allows real estate professionals to obtain the same tax and income benefits that other entrepreneurs enjoy. This is a significant change for real estate agents and brokers, who have previously been denied the same tax-saving opportunities that entrepreneurs in other industries have enjoyed for years.

In a press release on October 1st, the Ontario Real Estate Association (OREA), celebrated the news by highlighting some of the anticipated benefits it will have for realtors in Ontario:

OREA estimates that PRECs in Ontario will create 300 jobs in the province and save Ontario Realtors $14 million annually in deferred taxes – money that agents can use to reinvest in their business to hire more employees, offer better services to clients and grow their operation.

What the Benefits of Incorporating a PREC?

While the financial obligations of incorporating any business can be onerous, they also come with a number of benefits. Since realtors and brokers will now be able to take advantage of those benefits for themselves, it is important they understand just how the PREC could help them maximize profitability and grow their business more quickly. Some of the key advantages of incorporating include:

• Achieve tax deferrals: the difference between the highest and lowest tax rate in Canada is an astounding 41%. The lowest corporate is 12.2%, while the highest personal tax rate is over 53%. A PREC will enable a realtor or broker to keep income in the business and enjoy the lowest tax rate for as long as the income remains in the business. This will allow real estate professionals to reinvest into their own business with the extra funds, and see bigger growth more quickly.
• Lifetime Capital Gains Exemption: the LCGE allows a person who earns significant income from the sale of a small business corporation to deduct a significant amount, resulting in considerable tax savings. In 2020, for example, the exemption amount is $883,384.00. A person can use the LCGE on more than one occasion until they meet their lifetime cap.
• Income splitting opportunities: real estate professionals can lower their overall tax burden by paying a fair salary to family members such as a spouse or a child, whose personal tax rate will presumably be lower.

The Potential Pitfalls of a PREC

Incorporating a business is always a significant undertaking, requiring a lot of work and strategic planning. There are higher up-front expenses with incorporation, and increased obligations such as the requirement to provide annual filings as well as more stringent legal regulations. However, with the guidance of a knowledgeable business lawyer, it is possible to maximize the benefits of incorporation while limiting risk and minimizing your tax burden.

This is no doubt a significant opportunity for real estate professionals across Ontario to reap the benefits of incorporation that they have previously been denied. At GLG LLP, our team is standing by to provide you with the guidance you need to establish your PREC in the most beneficial way possible. We will ensure you are aware of all compliance and tax obligations and provide strategic advice to minimize your personal risk.

The skilled business and real estate lawyers at GLG LLP in Toronto regularly assist corporate clients with a variety of issues, including the configuration and structure of a new or evolving business in a way that is most beneficial to those involved. Call 416-272-7557 or complete the online form to arrange a consultation with one of our lawyers today.

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Employee With Former Employer for Over 30 Years

The issue began in 2017 when one business (ASCO) purchased the assets of an existing numbered company (637), a manufacturing business. The employee in question had been working as a braze welder for 637 since 1981. The Agreement of Purchase and Sale for the business included a clause stating that 637 had provided termination notice to all of its employees, as well as appropriate severance pay. The agreement also contained an indemnification clause, absolving ASCO from any liability stemming from a breach of 637’s warranties.

637 gave the employee a Settlement and Release document 2 months prior to the close of the sale, notifying her that the business had been sold, and saying she would be offered continued employment with ASCO. The Release terminated her employment ith 637 as of November 24, 2017, and included termination pay in the amount of $5,900. The Release stated the money “represent[ed] 8 weeks gross compensation in full satisfaction of all claims … including all severance pay, termination pay or other compensation howsoever arising”. The employee signed the Release and accepted payment.

ASCO then offered continued employment to the employee, along with 19 other 637 employees, and she stated it was her understanding that she would be employed as a braze welder, continuing her previous role without interruption and that the employment would be indefinite. She was also under the impression that ASCO would recognize her history of employment with 637. There was no written document setting out the terms of employment with ASCO. After the sale of the business, she was tasked with moving assets from one location to another, which is what she continued to do until she was laid off approximately one later.

Employee Sues New Employer for Wrongful Dismissal

The employee was never recalled back to work, and so she brought a claim against ASCO for wrongful dismissal and sought summary judgment. The judge found in the employee’s favour, pointing out that ASCO was not a party to the Release between the employee and 637, and therefore was not absolved from paying severance for the employee’s full work history. Further, the judge said the law required that the court view the employee’s employment as continuous. As a result, ASCO was ordered to pay the employee for a period of 20 months, which would be reasonable notice given the employee’s full work history.

ASCO appealed the decision. The Ontario Court of Appeal overturned the summary judgment, holding that the issues required a full trial to resolve. In particular, there is a fundamental disagreement between the parties as to the terms of the employee’s employment with ASCO. ASCO claims it hired the employee on a fixed-term basis as a general labourer, to assist with the relocation of assets, whereas the employee claims she understood she would continue her employment as a welder, and that the employment term was indefinite. She also claims she understood she would be credited with her time at 637. To property determine these issues, a trial is necessary. ASCO must establish its position unambiguously; failing that, it will fall to ASCO to refute the position that it should be liable for recognizing the employee’s history with 637 in assessing reasonable notice.

This case has already cost the parties significant legal fees and will continue to do so until the matter is resolved conclusively. The takeaway for any employers hiring staff from a purchased company is that a clear employment contract setting out the terms of the “new” employment is imperative. This way, there can be no discrepancy between the parties as to the length of employment, and how the employee’s previous work history with the purchased business will be treated in the event of termination.

If you are considering the purchase of an existing company, there are several issues to consider in addition to employment contracts. To discuss your potential purchase with experienced business and employment litigation lawyers, contact GLG LLP in downtown Toronto. Our firm will provide practical and comprehensive advice for all aspects of your commercial purchase, including potential employment issues that could trigger liability in the future. Call the firm at 416-272-7557 or contact them online to schedule a confidential consultation.

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