Lancaster Brooks & Welch LLP, St. Catharines Office will be closed today at 2:30 pm.
We will reopen at 8:30 am on Wednesday March 15, 2017.
Holiday Office Closure: Our Firm will be closed at 3pm on Dec 23, 2016 reopening at 8:30am on Wednesday Dec 28th 2016.
We are also closed on Monday January 2, reopening on Tuesday January 3rd 2017 at 8:30am
By Matt Leask
Short term rental websites such as Airbnb provide an increasingly popular service to the travelling public, but the short-term rental market is not without its pitfalls. Most people would have heard about the couple in Calgary who rented out their house in the Calgary area and came home to find damage in the range of $150,000. Guess what? The owner’s insurance didn’t cover them for occupation by short term renters. In what was undoubtedly a public relation move, Airbnb reportedly covered the bill, but you can bet others won’t be so lucky.
The short-term rental market operates in a legal grey zone, meaning there are no clearly defined rules and regulations. As a result, renting out your home or condo could get you into hot water. The Provincial government tabled Bill 131 titled “Opportunities in the Sharing Economy Act, 2015” last year. Bill 131 seeks to amend the Municipal Act, so that property owners cannot be required to obtain licenses provided they have proper insurance, and the renters do not stay at the property for more than 120 days in a calendar year.
Bill 131 is currently on hold with the Standing Committee on Finance and Economic Affairs. In the absence of Provincial legislation, municipalities continue to use tools such as zoning and licensing by-laws to regulate their local short term accommodation markets. In an area like Niagara, where tourism is such a major part of the local economy, we may see more municipal by-laws that attempt to control the ability to offer short term rental accommodations in residential areas. Noise complaints from aggrieved neighbours are often the catalyst for municipalities to take action against the property owners renting out their house.
Municipal Zoning By-laws typically function by prohibiting all uses of land in a defined area, except those that are expressly authorized. The argument has been made that providing short term accommodation in exchange for money, does not fit within the typical definition of residential use, or residential occupancy which is permitted in residential zones, and therefore municipalities are entitled to prohibit this type of use in residential zones without even changing their by-laws. A recent case suggests it is not so easy for municipalities.
The Township of Puslinch brought an application against the owner of a detached dwelling on the shores of Puslinch Lake seeking an order restraining the owner’s use of the property as a tourist establishment. The property owner used the vacation property for her own use, and rented it out on a short-term basis when she was not there. The Town argued that this contravened the zoning by-law, as it was not a residential use. The town was responding to several complaints about noise from the short-term renters. The Superior Court of Justice concluded that the Puslinch by-law did not regulate the use of the property for short-term accommodation. The by-law was found to be vague, uncertain and insufficiently specific with respect to its regulation of short-term accommodations. The major problem was that the Town tried to use its existing by-laws to address a new problem. The by-law was never intended to prohibit short-term rentals, and the municipality could only regulate this type of use with clear and specific language in a by-law.
The import of this court decision, is that municipalities that want to deal with short-term rentals using zoning by-laws will have to pass by-laws that clearly define whether or not short-term rentals are permitted in a given zone. By-laws in other municipalities have held up to judicial scrutiny because they clearly define what a short-term accommodation is, and limit the types of properties on which those uses are permitted.
Municipalities also have other tools at their disposal for regulating short-term rentals, such as the power to require licenses for the carrying on of any business, and the power to enact property standards by-laws. Property owners who plan on renting out their house or condo to a short-term renter should determine whether such a use is permitted under the applicable zoning by-law. Your neighbours may not always be as welcoming of your travelling house guests as you are.
Matthew Leask is an Associate Lawyer at Lancaster, Brooks & Welch LLP, practicing within the Corporate and Commercial law department. Matt may be reached at 905-641-1551.
PART 1, By Kristi Collins
One very common source of estate litigation today stems from a key misunderstanding about how the law treats assets held jointly by elderly parents and their adult children.
In this Part 1, I briefly define “joint tenancy with right of survivorship” and explain the difference in the way the law treats joint tenancy of married spouses as opposed to joint tenancy between parents and their adult children. The difference between joint tenancy and beneficiary designations is also explored.
Joint Tenancy with Right of Survivorship
Most people understand that when assets are held in “joint tenancy with right of survivorship”, this means that each owner owns an undivided 100% of the asset, and when one of the joint owners dies, the surviving owner(s) will automatically take 100% ownership in their own name. This is different than a “tenancy in common”, where each owner owns their own percentage (often 50% each) of an asset. When one dies, 50% ownership will go to his/her estate and the other 50% ownership will remain with the survivor.
Married spouses often hold their real property, bank accounts and investments as joint tenants and expect that when one of them dies, the other will automatically take 100% ownership of the asset without the asset forming part of the estate. This avoids the need to administer an estate and/or to pay Estate Administration Tax (more commonly known as ‘probate fees’). What they may not realize is that this only goes so smoothly because family law legislation specifically provides a legal presumption that married spouses who hold their assets in joint tenancy intend for this transfer outside of the estate to occur.
In the same way, many aging parents are transferring their homes and/or their accounts to the joint names of themselves and their adult children during their lifetimes, thinking that this will allow the assets to go to the children after death without having to pay probate fees. THIS IS NOT THE LAW.
The Supreme Court of Canada has made clear that when assets are held jointly by parents and their adult children, the law in fact presumes the OPPOSITE: specifically, the law presumes that any assets gratuitously transferred by the parent into joint ownership with their adult child are intended to form part of the parent’s estate after death, to be administered in accordance with their will.
Lawyers frequently hear: “but our bank/financial planner told us that ownership of assets held in joint tenancy passes entirely to the survivor.” Technically, that is correct – this is the meaning of joint tenancy with right of survivorship. Nonetheless, the law presumes that adult children hold assets jointly with their parents in a “resulting trust” for the benefit of their parent’s estate. (Note that joint assets of parents and their minor children are treated differently than those discussed here.)
One reason why the law does this is because it can sometimes be unclear whether a parent added their adult child to a bank account or home as a joint tenant for the parent’s own convenience or whether it truly was intended to pass on their death to that child.
The following is a common scenario that illustrates the difference in the way the law treats joint ownership of married spouses as opposed to joint ownership of parents and their adult children:
Dad and Mom have three adult children (let’s call them “Al”, “Bob”, and “Charlie”). Dad and Mom own a house in joint tenancy. Dad and Mom also own a joint bank account. Dad solely owns a classic car. Mom solely owns various items of jewellery. Dad and Mom have made wills that each leave their estate to the other or, if the other predeceases them, to be divided evenly between their three children.
Dad dies. Mom takes the house and joint account by right of survivorship, outside of the estate. Mom takes the classic car through the estate in accordance with Dad’s will.
Over the next few years, Mom requires more assistance at the house and in managing her finances. Al begins to assist Mom. He may or may not move in with her. He may or may not be appointed under a Power of Attorney. (None of these facts change the legal presumption.) In any event, Mom decides to add Al as a joint tenant on title to her home and as a joint holder on her bank account. CONTINUED ONLINE
Then Mom dies. Very often the “Al” in this scenario believes that the house and the joint account belong to him. Maybe Mom had even thought this would be the result. But this is incorrect. The law presumes that Al holds the home and bank account in a resulting trust for Mom’s estate. In fact, the home, the bank account, the car and the jewellery (and anything else Mom owned) fall into her estate which, after probate fees are paid, will be distributed equally between Al and his two brothers in accordance with Mom’s will. If Al refuses to accept this, then Bob and Charlie will likely sue, as their shares in the estate would be minimal without the house and the joint account being included in Mom’s estate.
There is still hope for parents who wish to use joint tenancy as a tool for estate planning. The presumption of a resulting trust can be rebutted by evidence that the parent intended that the surviving child would take the joint asset and it would not fall into the estate.
In order to avoid litigation over jointly-held assets, parents should clearly document their intentions in placing assets in joint ownership with their adult children. If litigation ensues, a court will look at all the evidence on all sides to try to determine what the parent’s true intentions were. This will include a consideration of any memoranda, letters or other documents demonstrating intent, the wording of the will, witnesses who may have discussed the parent’s intentions, and how the parent and child treated the assets during the parent’s lifetime (for example, were the assets solely used for the parent’s benefit until death? How were the joint assets reported on the parent’s tax returns?). The evidence of the surviving child will not be sufficient on its own. In other words, the court will not just take Al’s word for it that Mom intended the house and bank accounts to go to him.
To avoid inconsistent evidence, parents should document their intentions with respect to joint assets with the assistance of legal counsel as part of their estate planning.
The use of beneficiary designations on insurance, RRSPs/RRIFs and other investments is another way to transfer your assets after death outside of your estate (thereby avoiding probate fees on those assets). The legal presumption with beneficiary designations is that the asset is intended to go to the named beneficiary. Generally, you do not need to worry about separately documenting your intentions when you name a spouse, an adult child or anyone else as a surviving beneficiary.
There is therefore a key difference in legal presumptions between naming an adult child as a joint holder of your investment accounts rather than naming the adult child as a surviving beneficiary of those accounts.
Similarly, there is a key difference between naming an individual as beneficiary of your life insurance rather than naming your estate as beneficiary.
Even where you use and document joint ownership and beneficiary designations correctly, you should be aware that the law provides that these can be “clawed back” to your estate if you do not adequately provide for one of your dependents in your will. This issue will be the subject of Part 2 of this series.
In conclusion, your intentions in planning your estate may not be carried out if they are based on a misunderstanding of the law. You should thoroughly discuss your plans with respect to jointly-held assets and beneficiary designations with your legal and financial advisors as part of your estate planning. Careful planning now will minimize the risk that your assets will fall into estate litigation later. If such transfers have already taken place, you should speak with your lawyer to sufficiently document your intentions.
Kristi Collins is an Associate at Lancaster, Brooks & Welch LLP and she may be contact for discussion on Estate Litigation matters at 905-641-1551
Follow link to full presentation made by Jean Beaton.
By Leanne Standryk
In March 2015, Premier Kathleen Wynne released the report “It’s Never Okay: An Action Plan to Stop Sexual Violence and Harassment”. The Plan was aimed at raising awareness and addressing sexual harassment and violence in the workplace, schools and the community. The Plan recommended the introduction of a new definition of sexual harassment and express requirements for Employers to investigate and address sexual harassment and violence in the workplace with the further obligation for Employers to take every reasonable effort to protect workers from harassment.
Several of the recommendations outlined in the Plan were introduced on March 8, 2016, when the Ontario Government passed Bill 132, Sexual Violence and Harassment Action Plan Act (the “Act”) aimed at preventing sexual violence, sexual harassment and domestic violence. The Act amends several pieces of existing legislation including the Occupational Health and Safety Act (the OHSA). The focus of this bulletin shall be on how the Act will impact the OHSA when Bill 132 takes effect on September 8, 2016.
The highlights of Bill 132’s amendments to the OHSA are as follows:
Bill 132 adds to OHSA’s existing definition of ‘workplace harassment’ so that it expressly includes workplace sexual harassment defined as:
(a) engaging in a course of vexatious comment or conduct against a worker in a workplace because of sex, sexual orientation, gender identity or gender expression, where the course of comment or conduct is known or ought reasonably to be known to be unwelcome, or
(b) making a sexual solicitation or advance where the person making the solicitation or advance is in a position to confer, grant or deny a benefit or advancement to the worker and the person knows or ought reasonably to know that the solicitation or advance is unwelcome.
Finally, Bill 132 also sets out that reasonable actions taken by Employers or supervisors related to the management and direction of employees or the workplace is not workplace harassment.
Employers will be required to develop and maintain a program to implement the harassment policy in consultation with the workplace’s health and safety committee or representative, if any.
The policy and program must include procedures for workers to report incidents of workplace harassment to persons other than the employer or the supervisor, if the employer or supervisor is the alleged harasser. This new obligation may impose challenges to smaller workplaces where there is no human resource department or where members of the management team are relatively few.
The program and the policy must be reviewed as often as necessary but at least annually to ensure that it adequately implements the workplace harassment policy.
In addition to the new reporting measures, the Employer policy and program must also:
In addition to the foregoing, Bill 132 requires Employers to protect workers from harassment by ensuring that an investigation is conducted into incidents and complaints of workplace harassment that is “appropriate in the circumstances”. This provision certainly opens the possibility for the Ministry of Labour to consider whether or not the employer’s investigatory process was appropriate thereby lending to the potential of further litigation surrounding the “appropriateness of investigations”.
Ministry of Labour inspectors are also provided with the power to order that the investigation be redone or that an impartial third party conduct the investigation. The third party must have the necessary knowledge or qualifications, as determined by the inspector, to conduct a workplace harassment investigation at the employer’s expense.
Employers may have the right to appeal any such order which again, would lead to more litigation surrounding investigations. It is specified that reports from the impartial person also will not constitute a report respecting occupational health and safety for the purposes of 25(2) of the OHSA.
Bill 132 is effective September 8, 2016 and, accordingly, Employers are advised to review their policies and seek the necessary advice to ensure future compliance.
Leanne Standryk is a senior partner at Lancaster, Brooks & Welch and she may be contacted for advice on any Labour and Employment matter at 905-641-1551.
At Lancaster, Brooks & Welch LLP, we value your business and are committed to keeping you informed about matters affecting your business with us.
As you may know, Canada Post may experience a labour disruption as of Aug 28, 2016. We are writing to you today to let you know how you can continue to ensure the delivery of information and/or payment of your accounts during the Canada Post labour disruption.
As you know, you may deliver the materials to our Offices during regular office hours 8:30 a.m. to 5:00 p.m. Monday to Friday. As an alternative, please feel free to fax or scan and email any documentation to the lawyer handling your file.
As you remain responsible for paying your bills on time, and to avoid late fees, or disruption of services
please ensure you use one of the following payment methods:
Suite 800 – 80 King St., St. Catharines, ON
We accept in person:
Cheques (if you are on a plan, drop off several post-dated)
Credit Cards (Visa or MasterCard)
EFT: Please call us to set up your Electronic Funds Transfer account.
Wire Transfer Please call us to set up Electronic Transfer protocols. (Transfer from your personal computer cannot be retrieved; we must set up an account with you first)
Lancaster, Brooks & Welch LLP
PO Box 790, 80 King Street, St. Catharines, Ontario Tel: 905.641.1551, Fax: 905.641.1830
If you are injured in a car accident in Ontario you are entitled to accident benefits through either your own insurance or a third party’s insurance, depending on the circumstances. Accident Benefits provide such assistance as medical, rehabilitation and attendant care, income replacement benefits, non-earner benefits, etc. A “car accident” includes any injuries sustained in the use of a car, so you may be eligible for these benefits if you were hit by a car while a pedestrian or bicyclist and even when slipping and falling as you are exiting a car. Injuries sustained from these types of accidents entitle you to accident benefits, whether or not you are personally insured under an automobile insurance policy and whether or not you have a drivers’ license.
As of June 1, 2016, the amount and types of benefits have been reduced significantly by the Ontario government. When purchasing automobile insurance, ensure you speak to your broker or insurance representative about “optional benefits” available to you in order that you ensure you are appropriately taken care of in the event that you are injured.
There are basically 3 classifications of injuries that a person can suffer, and for some benefits the type of injury dictates the amount available to you. The 3 classifications are:
As of June 1, 2016, the following benefits are available to people injured in a car accident:
Medical benefits include any treatment required as a result of the accident, including: surgical, dental, optometric, hospital, nursing, ambulance, chiropractic, psychological, occupational therapy, physiotherapy, medication and so on.
Rehabilitation benefits are available to assist you to reduce or eliminate the effects of any disability resulting from the accident and to facilitate reintegration into family, the rest of society and the labour market. Rehabilitation may include life skills training, family counselling, social rehabilitation counselling, financial counselling, employment counselling, vocational assessments, workplace, home and vehicle modifications, etc.
Attendant Care benefits are available to provide the services of an aide or attendant or by a long-term care facility.
If you suffered a non-catastrophic injury you may be entitled to a combined maximum of $65,000 in medical, rehabilitation and attendant care benefits over the next 5 years.
Minor injuries are only entitled to $3,500 in medical and rehabilitation benefits and catastrophic injuries are entitled to a combined maximum of $1,000,000 in medical, rehabilitation and attendant care. “Optional benefits” can be purchased when purchasing or renewing your automobile insurance policy to increase the amount you may be eligible to receive.
If you were employed or self-employed at the time of the accident and cannot return to work, you may be entitled to 70% of your gross income to a maximum of $400 per week. When purchasing or renewing your automobile insurance policy, you can purchase an “optional benefit” enhancing the income replacement benefit which will increase your monthly amount up to a maximum of $1,000 per week, but is still based on 70% of your gross income. Higher income earners may benefit from purchasing the “optional benefit” for income replacement benefit. Though you may be better to have private disability coverage for long and short term disability that covers you for any manner in which you are injured, i.e., falling off a roof and not just car accidents. Any of the above classifications of injuries may entitle you to receive income replacement benefits.
If you were not employed at the time of the accident and suffer a complete inability to carry on a normal life, you may be eligible to receive the Non-Earner Benefit in the amount of $185 per week which now starts four weeks following the accident.
This benefit is available for those injured people who were enrolled full time in school and have incurred expenses for tuition, books, equipment and room or board in respect of the program term or year at the time of the accident to a maximum of $15,000.00 regardless of the classification of injury sustained.
Following an accident and during your treatment or recovery (i.e., hospital stay), you may be able to recover the expenses of family members who have to travel to visit you, but you will need to keep all receipts.
The insurance company may pay to replace any clothing that was damaged at the time of the accident, or prescription eyewear, dentures, hearing aids, prostheses and any other medical or dental devices that were lost or damaged as a result of the accident.
People who suffer CATASTROPHIC INJURIES may be entitled to the following additional benefits:
If you were the primary caregiver and were living with a person in need of care, you may be eligible to receive up to $250 per week for the first person in need of care and $50 per week for each additional person in need of care.
You may be eligible to receive a maximum of $100 per week in order to hire assistance in completing the housekeeping and home maintenance tasks that you performed before the accident.
Death and Funeral Benefits
In the unfortunate circumstance of a death as a result of a car accident, there is a death and funeral benefit available.
WHEN PURCHASING OR RENEWING AN AUTOMOBILE INSURANCE POLICY, ALWAYS DISCUSS WITH YOUR BROKER OR INSURANCE REPRESENTATIVE THE “OPTIONAL BENEFITS” THAT ARE AVAILABLE IN ORDER TO ENSURE THAT YOU ARE PROPERLY COVERED FOR YOUR UNIQUE CIRCUMSTANCES.
Just because certain benefits are available doesn’t always mean you are necessarily eligible for them or that your insurance company will be agreeable to paying for them. Contact Sheila after an accident to ensure that you are receiving the maximum benefits you are entitled to receive. Sheila may be contacted at 905-641-1551
By Jamie Strashin, CBC Sports
In the wake of the latest investigation into widespread doping by Russian athletes, many reached what they thought was an obvious conclusion:
the traditional athletic superpower would be sidelined for the Rio Olympics because of its numerous, grievous and brazen violations.
If you read Richard McLaren’s damning report on Russia’s government-supported cheating, anything less in terms of punishment would be
a full ban on Russia’s Olympic team would have been problematic on a number of fronts.
For one, a blanket ban on Russian athletes would likely have been derailed by numerous legal hurdles. The Court of Arbitration for Sport,
among others, would likely overturn a universal ban that included athletes who haven’t been implicated in doping.
“We were mindful of the need for justice for clean athletes,” IOC vice-president John Coates told reporters. “We did not want to penalize
athletes who are clean with a collective ban and, therefore, keeping them out of the Games.”
Instead, the IOC opted to punt the decision on whether to allow Russian athletes to compete to the 28 federations that govern summer
Olympic sports. Those federations are reviewing Russian athletes’ records and deciding who can compete in Rio next month.
It was a wise move by the IOC, says Canadian lawyer Leanne Standryk, who specializes in sports law.
“A blanket ban would not have been upheld,” she says, noting that McLaren wasn’t mandated to determine whether a full ban would
best deal with the systematic issue of Russian doping. He was simply commissioned to investigate allegations made by Russian whistleblowers.
“From a legal perspective, the IOC is required to ensure that it upholds the principles of natural justice and procedural fairness,” Standryk says.
“In Canada and in most common law jurisdictions, the principles are in part depended upon to maintain public confidence in our legal system.
Presumption of guilt
It’s no different in the context of sports law, where the concept of fair play applies, says Standryk. McLaren’s report does not directly name
any athletes and does not link specific evidence to individual athletes. At a basic level, Standryk says, Russian athletes have no knowledge of
the actual case against them, nor any chance to present any evidence on behalf of themselves.
“The blanket ban would presume that all Russian athletes were guilty of a doping violation. This is contrary to the notion of natural justice,
” Standryk says. “The IOC, rather than declining to make a decision, as has been reported, sought to balance the competing interests, including
the right to protect clean athletes and the integrity of the sport.”
Even without an all-out ban, the IOC decision may not stand up. There is already debate around the ruling that any Russian athlete who has ever
served a doping suspension will be barred from competing in Rio. This is more punitive than the World Anti-Doping Code, which usually allows
athletes to return to competition after serving a suspension.
‘You need strong competition’
Legal reasons aside, other factors may have influenced the IOC’s decision.
Perhaps, for instance, the organization decided that Russia is too important to the Olympics to be sidelined. Fans, television networks and sponsors
may talk about integrity and doing the right thing, but in the end, many of them just want to see the most compelling event possible.
“At the end of the day, [Olympic partners] want really good performances,” says Cheri Bradish, an Olympic marketing expert who teaches at Ryerson
University in Toronto. “Once the Games start, the focus is on the field of play. For the partners, they want to ensure the best athletes are there. “
In the United States especially, a residual Cold War rivalry still exists. The idea of an American beating a Russian athlete (as opposed to, say, a
Canadian) makes for a better story and more exciting television. And leave it to a Russian athlete to remind the world that the Olympics just
wouldn’t be the same without them. “How can a country win and consider itself a full Olympic champion now?” asked modern pentathlete
Aleksander Lesun, who is allowed to compete in Rio while two of his teammates who have been implicated in doping are not.
“They’re weak countries and weak athletes.
“You need strong competition for it to count.”
When incorporating a corporation with other individuals or purchasing shares in an existing corporation as a way of partnering in business with others, taking the time to negotiate a Shareholders’ Agreement is always strongly advised. A Shareholders’ Agreement is a highly valuable document that not only sets out the current organizational structure of a corporation but also ensures that the shareholders of a corporation are in agreement as to how various issues will be dealt with should they arise.
Among the many issues that may be addressed in these types of agreements, some of the main ones are as follows:
Generally, one of the first things a Shareholders’ Agreement will address will be the operation and control of the corporation – who will the Board of Directors consist of, who will hold the officer positions of the corporation and what duties/ responsibilities will those individuals have. A Shareholders’ Agreement will also outline those decisions that will require unanimous approval of the Board of Directors and of the shareholders of the corporation in order to ensure that no one individual director, officer or shareholder will have the power to make major corporate decisions without the knowledge and consent of the other directors or shareholders. Unanimous consent is often required for the following:
If one of the shareholders should die, a Shareholders’ Agreement will often stipulate that the corporation shall purchase and the executor of the deceased shareholder’s estate shall sell all of the deceased shareholder’s shares in the corporation as at the date of his/her death. Once the corporation has purchased the deceased shareholder’s shares, these shares are generally then cancelled by the corporation so that the shareholding percentages of the remaining shareholders remains unchanged. Often, this type of transaction will be scheduled to take place within a few months of the deceased shareholders’ death in order to minimize any potential disruption to the carrying on of business by the corporation. Provision is usually made that between the date of death of a shareholder and the closing of the purchase and sale transaction that the parties are only to cause or permit to be done things within the ordinary course of the business of the corporation. Thus, the executor of the deceased shareholder’s estate would be prevented from doing anything out of the ordinary course of business during the period of time it would take to complete the purchase and sale transaction. Generally, it is also advised that a corporation take out life insurance policies on all of its shareholders in order to ensure that upon the death of any shareholder, the proceeds of the deceased shareholder’s life insurance policy will be available to the corporation to ensure that at least part, if not all, of the necessary funds will be available to the corporation for the purchase of the shares.
A Shareholders’ Agreement may provide for the occurrence of a breakdown in the relationship of the shareholders of a corporation and the process they can go through in order to discontinue their business relationship. If the buy/sell provision of a Shareholders’ Agreement is triggered by one of the shareholders, this shareholder must be equally prepared to either purchase all of the shares of the corporation held by the other shareholders or to sell all of their shares in the corporation to the other shareholders. When this provision is triggered the shareholder triggering the provision (the “Offeror” in this instance) will deliver notice to all the other shareholders of the corporation. The Buy/Sell notice will outline the fair market value of the shares and contain both an offer to purchase all of the shares of the corporation owned by the other shareholders on specific terms and conditions as well as an offer to sell all of the Offeror’s shares to the other shareholders proportionately on the same terms and conditions. Upon receipt of a buy/sell notice, the decision making power shifts into the hands of the other shareholders, who will have a limited amount of time to decide which option they would like to choose. Hypothetically, if there are two remaining shareholders in the corporation then any one or both of them may decide to purchase the Offeror’s shares. If one of the remaining shareholder’s chooses to purchase the Offeror’s shares while the other remaining shareholder chooses to sell his/her shares, then the remaining shareholder who chose to purchase the Offeror’s shares will also be required to purchase the other remaining shareholder’s shares, thus becoming the sole shareholder of the corporation in the process. If all the remaining shareholders jointly fail to choose either option within the specified time period, they will all be deemed to have accepted the first offer, being to sell all of their shares to the Offeror so that he/she would become the sole shareholder of the corporation.
A Shareholders’ Agreement also generally provides for a number of situations, the occurrence of any of which would require a shareholder to sell his/her shares to the other shareholders of the corporation. If any of the events provided for are triggered, the shareholder triggering the event will be deemed to have offered his/her shares to the other shareholders of the corporation in their proportionate share on the day before the triggering event took place so as to prevent an outside individual or corporation from gaining access or control of the shares. Triggering events often include the situation where:
While shareholders can at times be reluctant to spend the time and incur the expense of negotiating a Shareholders’ Agreement, this document enables the shareholders of a corporation to make adequate provision at the outset of their business relationship for the potential occurrence of various situations to ensure that the business of the corporation will continue to run seamlessly when faced with certain internal corporate challenges.
As a part of the Lancaster, Brooks & Welch Corporate and Commercial team, Jillian Ali assists clients in all aspects of their business legal needs. She may be contacted at 905-641-1551.
Connect with us: