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Corporate and Commercial
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| Q: |
If I want to raise money privately to fund my start-up company without having to file a prospectus, are there any legal requirements that I need to be aware of? |
| A: |
Yes. If you intend to do so through the private placement of your company’s securities, while avoiding the cost and effort of filing a prospectus, you would need to ensure that the issuance of such securities qualifies under the exemptions to the prospectus filing requirements of the Securities Act (Ontario).
Some common exemptions include the “closely-held issuer” exemption which permits trades of securities of companies whose outstanding securities are beneficially owned by not more than 35 holders (subject to some exceptions) and whose shares are subject to certain transfer restrictions, where, following the trade, such company will continue to be a closely-held issuer and the aggregate proceeds received in reliance on the exemption will not exceed $3,000,000.00. Another common exemption is a trade to an “accredited investor”, a category that includes companies with high net assets and individuals with high net worth.
The availability of the various exemptions will depend on the nature of the proposed trade and the identity of the prospective purchaser(s) and should be discussed with one of our corporate lawyers who can identify and analyze the appropriateness of the available options.
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| Q: |
Why do I need a shareholders agreement? |
| A: |
It is advisable to have a properly-drafted shareholder's agreement to provide for a "divorce" mechanism if in the future one shareholder wishes to end the relationship with the other shareholder(s). If there is no shareholder's agreement and the parties are unable to agree, the only alternative may be a court proceeding with its attendant uncertainty, cost and distraction.
Other matters commonly dealt with in a shareholder's agreement include: providing for the situation where one shareholder wishes to sell the business to a third party and another shareholder does not, the death or disability of a shareholder, veto rights in favour of a significant minority shareholder relating to fundamental matters, the ability to transfer an individual's shares to a family trust or holding company without the approval of the other shareholder(s), and an agreement by a selling shareholder not to compete with the company.
It is generally advisable to have a shareholder's agreement whether it be comprehensive or simply covering the basics. BrazeauSeller.LLP can assist you in designing the type of agreement that best suits your needs. |
| Q: |
Is it true that non-competition agreements are "not worth the paper they are written on"? |
| A: |
Sometimes yes and sometimes no. However, the courts generally uphold a non-competition agreement that is carefully and properly drafted. The problem is that by its nature a non-competition agreement is a restraint of trade and is therefore carefully scrutinized by the courts to ensure that it is no more widely drafted than is necessary to protect the legitimate business interests of the employer or business purchaser. This is an area of law that requires a keen understanding of both legal and business considerations that BrazeauSeller.LLP is uniquely qualified to assist you with. |
| Q: |
In this age of globalization, how does a local firm such as yours handle national and international transactions? |
| A: |
We have lawyers who have been involved since the early 1980's with national and international mergers and acquisitions and public offerings and have had a great deal of experience servicing the day-to-day needs of public and private companies of various sizes. In addition, as the Ottawa member of Meritas Law Firms Worldwide we have immediate and direct access to the services of pre-qualified affiliated law firms throughout Canada, the United States and more than 70 countries worldwide. |
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