I'm a Lawyer, ask me anything about business law - I'll try my best to answer.

[onehair]

Hi All,

I am a lawyer practicing in corporate/commercial law and a little bit of litigation. The purpose of this message is NOT to provide you with legal advice. Anything posted in here is NOT legal advice.

Rather, the purpose of this post is to open a discussion about legal issues faced by SMEs, which is an area of interest for myself. We can talk about different business vehicles (e.g. sole proprietorship, partnership, joint venture, incorporation), commercial agreements, due diligence, corporate law, real estate, bankruptcy/insolvency (my favourite). Another purpose is to help me enhance my own knowledge in a relevant medium by hearing concerns of small business owners and doing some research to try and help you out.

I hope I can be of some assistance in pointing you in the right direction (and NOT providing you with legal advice).

[onehair]

Another purpose is to help me enhance my own knowledge in a relevant medium by hearing concerns of small business owners and doing some research to try and help you out.

I should say that I am a new lawyer, so some questions may be beyond my knowledge (which is partly what I am hoping for because I can use that as a chance to learn more myself).

That said, if I don't know the answer, I'm not afraid to say "I don't know" lol.

[3dholdings]

I should say that I am a new lawyer, so some questions may be beyond my knowledge (which is partly what I am hoping for because I can use that as a chance to learn more myself).

That said, if I don't know the answer, I'm not afraid to say "I don't know" lol.

Hello,

Should do a video of each question, if your interested let me know, might be able to help you out.

[onehair]

Hello,

Should do a video of each question, if your interested let me know, might be able to help you out.

What do you mean by "do a video"? Like a video response? That would be cool lol

[NEMESIS_2008]

Question to the op:

In regards to contract takeovers from one building service provider to another, let's say my cleaning company wins a contract from a condo over an existing cleaning company who was serving the condo for 3 years. The cleaning company who lost the contract is unionize. Mine is not. If I continue to employ them, and does the union transfer to my company?

Secondly,

Considering that I have about 5 contracted locations to provide cleaning services, does just that one condo location become unionize (should they decide to form a union) or are all my contracted sites subject to a vote to unionize the entire company?

[onehair]

Question to the op:

In regards to contract takeovers from one building service provider to another, let's say my cleaning company wins a contract from a condo over an existing cleaning company who was serving the condo for 3 years. The cleaning company who lost the contract is unionize. Mine is not. If I continue to employ them, and does the union transfer to my company?

Secondly,

Considering that I have about 5 contracted locations to provide cleaning services, does just that one condo location become unionize (should they decide to form a union) or are all my contracted sites subject to a vote to unionize the entire company?

Thanks for the first question. What I have done is look at the legislation and interpreted the provision. Case law could have manipulated the plain meaning of the statute, but it would take hours to sift through cases from all of the relevant provisions.

How was it a "contract takeover"? In other words, did the building simply cancel one contract with the former company and establish a new contract? Or is the contract somehow being "transferred" to you. What you are really concerned about is whether you would be deemed a "successor employer", which is section 68 of the Labour Relations Act (the "LRA"). In brief, on the sale, lease or transfer of a business where the employees are unionized, the subsequent employer is bound by the CBA currently in place until the Board declares otherwise. Did you agree with the condo to be bound by the previous CBA? You may want to check your agreement for any provision as such, although I would be surprised if that was the case. From what I gather, it seems like in your case that there was one contract with the old cleaning service, which was cancelled, and then your company entered into a new contract with the condo. In that case, my sense is that the employees in that location will not be automatically unionized. However, this question is extremely complex and would require considerable research to ensure a completely accurate answer.

As for your second question, the way it works under the statute is that a trade union seeking to be the bargaining agent of a group of employees applies to the Board for certification [LRA, s.7]. The application for certification will inform the Board of the proposed bargaining unit and the number of employees affected [LRA, s.7(12)]. So in your situation, if the new location wants to unionize and sends you a notice of an application for certification, the notice will let you know whether the proposed unit is just the new location or the employees in all locations. The employer may disagree with the proposed unit, and provide such notice of disagreement to the Board as well [LRA, s.7(14)]. The Board then determines the voting constituency and conducts the certification vote [LRA, s.8].

It seems to me that the answer to your question is, as normally is in law, "it depends". Check your Agreement, consider the transaction (are you buying the company or just entering into a contract?), and consult an employment lawyer for a more detailed answer (if you need a referral, send me a PM and I will help you out). If there is a certification application, you will have to look at the specifics in the notice to determine whether it only affects employees at a specific location or all 5 of your locations.

In my experience, I don't think when you hire new employees from the old cleaner that they are automatically unionized (unless the successor rights provisions apply to your case, i.e. LRA, s.68-69). I actually worked on a few employment issues for a company in the health care field that had multiple locations where some of the locations were unionized (I think the company bought locations from a previous company that had unionized employees, i.e., successor employer) and some weren't.

Hope that points you in the right direction.

[adeel]

is there a way to structure ownership of the corporation such that each owner has the same percentage of ownership and control, but can be issued differing amounts of dividends (or none at all)?

Something with multiple classes of shares perhaps?

[3dholdings]

What do you mean by "do a video"? Like a video response? That would be cool lol

yes something like that email me at darylpemberton@hotmail.com, I will tell you what I have in mind, maybe we can work on something.

[onehair]

is there a way to structure ownership of the corporation such that each owner has the same percentage of ownership and control, but can be issued differing amounts of dividends (or none at all)?

Something with multiple classes of shares perhaps?

First thing, what are you trying to accomplish? What type of decision making are you referring to when you say "control"? For example, some decisions of the company are made by the directors (i.e. declaration of dividend), while other decisions require shareholder approval (i.e. sale of all or substantially all assets, amalgamation, etc.).

Different classes of shares with voting rights but different dividend rights may be able to accomplish what you want (I'd have to look into the legality of this, but at first blush it seems acceptable). Depending on your ultimate goal, there may be a better way to structure your affairs (i.e. using director's fees and other methods of remuneration). Perhaps a little detail would be helpful.

[adeel]

First thing, what are you trying to accomplish? What type of decision making are you referring to when you say "control"? For example, some decisions of the company are made by the directors (i.e. declaration of dividend), while other decisions require shareholder approval (i.e. sale of all or substantially all assets, amalgamation, etc.).

Different classes of shares with voting rights but different dividend rights may be able to accomplish what you want (I'd have to look into the legality of this, but at first blush it seems acceptable). Depending on your ultimate goal, there may be a better way to structure your affairs (i.e. using director's fees and other methods of remuneration). Perhaps a little detail would be helpful.

Essentially, the idea is that there is a SBC that earns income that is paid at the low rate for small business. Ownership is divided among a family of four, so that each is entitled to dividends (since individuals without income can make upto roughly 30k in non-eligible dividends tax free).

However, the goal is to have control over when and how much of a dividend is paid to a given family member/shareholder, so that a dividend that makes sense for one family member without other sources of income can take a full dividend, but doesnt require the other shareholders to take the exact same amount (proportional to their ownership interests) any time a dividend is declared.

[Hansol]

is there a way to structure ownership of the corporation such that each owner has the same percentage of ownership and control, but can be issued differing amounts of dividends (or none at all)?

Something with multiple classes of shares perhaps?

OP, don't mean to step on toes, but as I see this a lot in my line of work, so to add to your response:

Adeel, this is easily done by making sure you have your ducks in a row with regards to the articles of incorporation when you first incorporate the company. So given your scenario, you would set up the following share structure, given that you want equal control and ownership:

Person A: issued 25 Class A common voting shares at $1.00/share
Person B: issued 25 Class B common voting shares at $1.00/share
Person C: issued 25 Class C common voting shares at $1.00/share
Person D: issued 25 Class D common voting shares at $1.00/share

The above allows you to independently pay dividends to the shareholders of choice, while still allowing equal control.

One thing to remember is that the above setup will be dependent on what kind of business you are running. ( For example, prof corps may possibly run into difficulties depending on who can actually own shares in the business.)

[adeel]

OP, don't mean to step on toes, but as I see this a lot in my line of work, so to add to your response:

Adeel, this is easily done by making sure you have your ducks in a row with regards to the articles of incorporation when you first incorporate the company. So given your scenario, you would set up the following share structure, given that you want equal control and ownership:

Person A: issued 25 Class A common voting shares at $1.00/share
Person B: issued 25 Class B common voting shares at $1.00/share
Person C: issued 25 Class C common voting shares at $1.00/share
Person D: issued 25 Class D common voting shares at $1.00/share

The above allows you to independently pay dividends to the shareholders of choice, while still allowing equal control.

One thing to remember is that the above setup will be dependent on what kind of business you are running. ( For example, prof corps may possibly run into difficulties depending on who can actually own shares in the business.)

Thank you. I figured this would be the way to do it, but as law school friend of mine (when i asked him some years ago) said there may be something incorrect about this structure.

But given that you say you have encountered this structure before, it would seem that is not the case.

[adeel]

I'll add a follow up question to OP (and hansol, if interested):

Assuming that a shareholder incorporated as a sole shareholder, but would like to add adult family to ownership (and as a result add the ability share of earnings) of the corporation, is there anything stopping them from simply issuing shares at $1 each (despite the fact that the market value of the business, and consequently shares, is much higher than $1 each)?

[Hansol]

I'll add a follow up question to OP (and hansol, if interested):

Assuming that a shareholder incorporated as a sole shareholder, but would like to add adult family to ownership (and as a result add the ability share of earnings) of the corporation, is there anything stopping them from simply issuing shares at $1 each (despite the fact that the market value of the business, and consequently shares, is much higher than $1 each)?

Adeel, you actually nailed the "problem" with that scenario, so long story short, it's a lot trickier than just adding a new shareholder.

The biggest issue is that of the current retained earnings in the corporation, in that by bringing on a new shareholder, you've essentially given them title to earnings prior to them being involved with the company. What is usually involved in such a scenario is a share "freeze" and a corporate reorganization, with the intention of "locking in" the original retained earnings value to the original shareholders while at the same time bringing on new shareholders who will have a say in future retained earnings. The "difficulty" of such a situation lies in that this is a tax issue rather than a corporate structuring issue.

The main things to consider in such a scenario are (1) current retained earnings in the corp and (2) the estimated future income/lifespan of the corp. If you have a corp with 5 years of retained earnings, but 30 more years to go in operation, then a freeze makes sense. If you have 30 years of retained earnings, with 2 more years before retirement, then a freeze might not be such an attractive option.

(The above is one of the more complex areas of tax, so consider this explanation more of a coles-notes blurb, as there are a lot of options/things to consider depending on the specific scenario.)

[Andex]

I have a small business that is incorporated. I'm told that no longer protects me from being sued personally. I know the taxman can come after me for unpaid corporate taxes and hst but what about a customer that trips and falls at my place of business or someone else for any other reason?

Also, when would someone register a LLC or LLP over Inc?