Corporate & Commercial Law in the Nelson Area
Whether you’re starting up or buying a business, looking to incorporate or reorganize an existing company, in need or a lease, or in the process of winding your business, Troy Trillo has the knowledge and experience to assist.
At Connolly, Trillo & Yates in Nelson, our commercial law services include:
Incorporation
Some people want to incorporate in order to take advantage of the tax benefits, while others are more concerned about the liability protection afforded a company. Regardless of your intention, we can help explain the pros and cons of the different business structures, from a legal perspective, be it sole proprietor, partnership or incorporation, and we will direct you to an accountant to ensure you understand the tax implications. If you decide to incorporate, we can help you choose and investigate a name. We can also arrange the share structure and organization, including who the shareholders, directors and officers are. We typically set all our companies up with classes A – K classes of shares, class A that only vote, classes B, C, D and E that are common shares and can participate in profits, but which may be issued at different rates (dividend sprinkling), and classes F, G, H, I, J and K preferred shares. While you may not think you need them right away, we don’t charge extra for this, and having the shares available should minimize the potential that you have to do an expensive share restructuring later.
Estimated Fees
Incorporation – fee $595, final account $1,140 for a numbered company, including taxes and disbursements, additional $35 if name reservation required. This does not include the cost of a shareholders’ agreement.
Acting as Registered and Records Office (including filing annual reports) – fee $140, final account including disbursements and taxes $210.
Shareholders’ Agreements
Shareholders’ agreements may seem an expensive and unnecessarily complicated process. However, anytime you have multiple people involved in a business (other than spouses, in which case they often skip this), it is a good idea to have a shareholders’ agreement. Even just starting the discussion can bring to light differing opinions on how the business is going to be run. Some of the key components to consider include:
- Matters requiring unanimous consent
- Job descriptions
- Non-compete terms
- Rights of first refusals
- Piggy-back and draw along rights on sale, life insurance or other terms in the event one party dies
- Shotgun clauses (in the event all else fails)
Each shareholder should have independent legal advice. As far as the timing goes, we always recommend it be done at the time of incorporation. In our experience, if you delay, it will fall into the “to-do” pile, underneath all the more “important” matters involved in starting and running the business, and it won’t resurface until a problem has arisen, at which point it is too late. If done in advance, a shareholders’ agreement should reduce disagreements and reduce the risk of unnecessary future litigation and legal fees.
Estimated Fees – fees starting at $950, based on hourly rate of $325/hr, plus GST, PST and disbursements.
Buying and Selling a Business
Whether you are buying or selling a business, you will want to have a lawyer involved. Whenever there is a purchase of a business, whether it’s an asset or share sale, there can be significant tax implications and due diligence required to minimize your risk of exposure to liability from past actions of the vendor. Accordingly, for purchasers, we start the process with a non-binding letter of intent, which is designed to establish some of the key terms, and before this is signed, both the purchaser and vendor should run it by their accountant. Once the letter of intention is signed, if we are acting for the purchaser, we then proceed with drafting the contract, and proceed with the due diligence. If financial statements are missing or look questionable, the lease is about to expire (and we discover the landlord isn’t intending on renewing), a seller won’t sign the customary due diligence letter for CRA, EI, WCB, or details on outstanding gift certificates are not available, it could mean walking away or renegotiating terms. Each deal is unique, so we bill based on the lawyer’s hourly rate of $325/hr.
Commercial Leases
Admittedly, many businesses in Nelson don’t give much thought to their lease, whether it’s a handshake agreement on a month-to-month basis, or a signed multi-year lease ranging from 3 pages to 60 pages long. However, the security of having a written lease that clearly sets out both parties obligations and responsibilities should not be underestimated as it can be the difference between your business thriving or folding. Our precedents are based on materials published by the Continuing Legal Education Society of BC. In drafting our leases, we try to ensure they are clear and easy to read. They may be a little longer, but with that comes more detailed terms with respect to each party’s rights and responsibilities, plus proven clauses that have been carefully reviewed and interpreted, leaving less room to argue. Some terms to consider include: base rent, triple net, term (possibly shorter for a new business, with rights of renewal, to ensure you aren’t liable for a 5 year term if the business doesn’t survive the first year), damage deposit, guarantor, discounted rent during renovations, renewal terms (one or more), and how to negotiate rent for renewal terms without having to go to commercial arbitration or court.
Estimated Fees: fees starting at $575, based on hourly rate, plus GST & PST and disbursements, final accounts from $675.
Dissolution
There comes a time when some businesses are no longer viable and cease to operate. Some people choose to let their company lapse by not filing annual reports for 2 years, others elect to formally dissolve. There can be pros and cons to each option. If you try to save money by letting the company lapse, you need to be aware the company is still required to file taxes during this period, even if it is a nil return. The cost of having your accountant file these nil returns can vary significantly, so we recommend you consult your accountant, as it can often exceed the cost of doing the formal dissolution. The formal dissolution can be quick and simple, but will be more complicated if there are any outstanding creditors. There are also benefits to directors in reducing their exposure to liability in doing the formal dissolution.
Estimated Fees – simple dissolution – final account from $395 assuming annual reports are up to date
For more information on our commercial law services, please contact Troy Trillo at 250-352-3125.