Corporate Law – Law is Cool The law school blog and podcast from Canada Wed, 30 Sep 2015 13:10:01 +0000 en-US hourly 1 1338880 Federal Securities Regulation: The Saga Continues Mon, 18 Apr 2011 17:34:39 +0000 The concept of Federal Securities Regulation in Canada is perennial. It keeps on coming back, most recently via a reference to the Supreme Court of Canada. Pundits will talk, industry insiders will cross their fingers and hope for a favourable ruling, yet I doubt very much the story will end here.
It seems likely that securities regulation is permissible under various head of power in the Constitution. However federal regulation makes no sense if all of the provincial regulators remain in place. There is nothing to be gained gain by adding yet one more layer of regulation. The entire point of the exercise is to unify nationally so as to simplify. The real issue is whether the federal government can succeed in accomplishing this (whether through the Courts or through other channels).
Given the historical absence of federal legislation and the obvious connections with property and civil rights, it seems unlikely (in my opinion) that the SCC would declare, at the request of parliament, that suddenly all that was once provincial is now exclusively federal. This would be a massive restructuring of the federal-provincial power balance, something that the SCC would likely be very reluctant to “ordain” from the bench. Instead, the Court would likely hold that there is significant room for overlap. I wrote a research paper called “Constitutional Complexities Involved in the Implementation of a Federal Securities Regulation Regime in Canada: The View from 2009” that explores this topic in greater detail.

If this view is correct, then the real issue is political. It would be up to the Federal Government to negotiate with the provinces to ensure that regulation becomes unified and not multiplied. This would be difficult, to say the least. Arguably, with Ontario on-side the Feds could go “go it alone” and let the other provinces face the screams of protest from their local investment communities. Meanwhile, the possibility of the London Exchange buy-out adds yet another complicating factor to the politics. This might not be a “Canadian” industry for long.
My prediction: Regardless of the outcome of the reference to the SCC, this issue is far from settled.

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Take-Back Laws… Tue, 23 Nov 2010 05:36:16 +0000 Are you aware of “Take-Back Laws”?

Well, view the video below, and then you’ll understand why we need them!

Aligning Interests in Investment Industry Mon, 04 Oct 2010 19:58:44 +0000 Just a brief post in response to the presentation of Claire Hill (from U of Minnesota) at Queen’s Law today.

Ms. Hill diagnosed as a major contributor to the financial crisis the misalignment of interests – i.e. if it was in the investment advisors’ interests to do the right thing, they would do the right thing. Her presentation surrounded the development or change of society’s norms as a possible solution (from a societal perspective) to the problems in the financial industry and as a method of prevention of future crises. Achieving this would come from things like the writing of (and subscription to) professional codes of conduct, ethics training in business schools, etc.

Upon further thought, however, I am left with an uneasy feeling regarding points about the aligning of interests, while at the same time advocating more ethicality on the part of financial advisors.

If the reason people misbehave is a misalignment of interests, and we can simply fix the problem by realigning them, then who is to blame when things go wrong – individuals who make selfish choices or the state/regulators who do not create proper systems to manage and align interests?

To put it another way, we want people to stop acting in their own interests, while we are trying to make their interests the same as (or at least overlapping with) the interests of others. Ultimately, we’re trying to make it so that people can have their cake and eat it too – they can be selfish because in doing so, we’ve made it that they are necessarily taking others’ interests into account as well.

But where does ethicality factor into this?  Are we sure the main problem is misalignment, and do we want to train people to focus on aligning interests?

Wouldn’t a better approach be to remind people that interests may overlap but regardless of whether or not they do, an actor should take others’ interests into account or risk ethical or legal sanctions? to separate interests (at least in theory) and not roll them all into one line of self interest along which individuals may proceed?

I realize that it is always in your best interests to want to do what you should do, and aligning interests is one way of achieving that. But at the same time, sometimes an attitude adjustment is what is needed, and not a shift in interests alignment.

For more information about Claire Hill and her research, visit:

~ Joy

Legal Domestic Dispute Is Brewing… Tue, 11 May 2010 01:17:07 +0000 I have to admit that I called this one.  As my wife and I were watching CBC’s Dragon’s Den an interesting segment began.  Before I go into the relevant legal issues in this case, some background is required.

One of the “Dragons” is Jim Treliving is, among other numerous ventures, a co-owner of Mr. Lube.

Fast forward to the episode that I was watching.  Out comes Jessica Gilbank, who is the owner of Ms. Lube by Mechanchik.  She is the owner of an oil changing garage that employs women, because she found it hard for female mechanic apprentices to break into the male dominated field.

Although I know little about copyright law, Treliving clearly indicated in the episode that he did not even want to participate in the segment because he clearly felt that Ms. Lube was infringing on the Mr. Lube brand.

Fast forward again to this week, where my prediction came true.  The Globe and Mail has reported that Mr. Lube has filed a $250 000 lawsuit alleging that the use of the name Ms. Lube should be prohibited based on copyright law.

As this legal domestic dispute unfolds we shall see how the court rules.

What is more interesting to me is how this may affect the CBC and potential “contestants” on Dragon’s Den.  For this, too we will have to wait and see as the next season of Dragon’s Den is currently filming.

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Brand Management Law Tue, 27 Apr 2010 10:10:52 +0000

First posted on Commercial Law International on April 26, 2010.

So what is brand management law?

The best definition that I can give is the law or legal practice that facilitates a company or companies managing their band or brands. Yes, I know, I know the definition is a bit circular but hey what do you expect, I am a lawyer after all.

Then what is brand management?

Brand management according to is: the process of maintaining, improving, and upholding a brand so that the name is associated with positive results…Brand management is built on a marketing foundation, but focuses directly on the brand and how that brand can remain favorable to customers.

Brand management law (BML) is thus defined as the legal facilitation of the above process. It is a multi-disciplinary practice area and brings together many differing areas of law (Intellectual property (IP), litigation, contracts, tax, etc) but more importantly by its very nature also encompasses the non-legal (marketing, public relations, consumer care, business sensibility/sensitivity, etc).

BML is not just a simple matter of commercial awareness or knowing your clients business – both of which are important very important aspects of this area of law, however BML goes beyond either of them. That is to say it is not just a matter of discerning what the client’s interests are, then moving to put in place the requisite legal instruments that establish some right “to” or “in” and then defending said right or rights. Take for example a client that has expended millions on research and development, this client clearly has an interest in seeing a return on this expenditure, a lawyer would move to protect the client’s work product by intellectual propertizing it as much as possible (e.g. registering patents and trademarks), the lawyer would then act as a kind of sentinel, safeguarding the client’s IP through the threat (real or potential) of legal action.

BML is this but much more. Its is practice area that requires a lawyer to be able to keep the legal and non-legal in sync – always remembering that it is the brand that matters.

This practice area requires from a lawyer certain degree of intellectual flexibility. From the nature of our profession lawyers are problem solvers – some might beg to differ – to be more specific we are legal problem solvers. To put it succinctly we will find the legal solution to your business problem. And here lays the problem for many a lawyer when it comes to BML.

Lawyers are good at finding legal solutions to business problems; well that’s what we were trained to do after all. However, BML requires a lawyer to go beyond this and to realize that some times what is in fact needed is a business solution to a legal problem.

What is the difference between these two approaches, isn’t it just matter of semantics? Well, you will just have to stay tuned.

George Lucas Doesn’t Like Legal Bloggers… Tue, 06 Apr 2010 06:50:53 +0000 Ewok! At times I feel like legal blogging is like Mark Hamill’s career. It will lead to Broadway and cartoon voiceovers rather than Bay Street or serious advocacy.

I look after my brother who is a big Star Wars fan. I’ve been to two Star Wars conventions because of him. So when Star Wars Celebration V (“SWCV”) was announced for Orlando, August 12 – 15, 2010, I thought it may be an opportunity to do some legal blogging among one of popular culture’s leading franchises. My brother had already booked the room and I had enough airmiles to make the trip cost effective.

When SWCV’s official web page was launched, I immediately applied for media credentials. As a law student and a legal blogger, the idea of writing stories of importance to the legal profession from the Star Wars universe was literally out of this world for me.

I pitched my involvement in terms of the great depository of legal material available at the convention. Issues of intellectual property, copyright, trademarks, contract, and entertainment law have obvious importance. The geek in me asked, “Could Luke sue in tort for having his hand sliced off by his father?” Or for that matter, “Could Anakin have a claim as well when he lost his right arm years before during a duel with Count Dooku?” Then there was the ever complicated contractual issue involving the clone armies produced by the Kaminoans for the Jedi Council, commissioned by a Jedi long since dead.

I waited for the three week turnaround for approval but nothing. I email the contact at Reed Exhibitions, the company running the convention, and who I must say was always prompt and professional. Eventually I was notified that my request for media credentials was declined. Being a bit of a tie-fighter, I appealed. Lucasfilm’s press department through Reed Exhibitions made it known that did not match “the criteria that they’re looking for to provide a media badge to the event”.

What? I was at Indianapolis and Los Angeles in 2005 and 2007. My bar tabs nearly killed me. What did George Lucas have against law students or lawyers for that matter? Then the asteroid in the room hit me.

Reed Exhibitions is owned by Reed Elsevier who also owns Lexis Nexis, its legal publishing wing. The quicklaw of conspiracies entered into my mind. None of the six motion picture Star Wars films, nor the Clone Wars animation series, and not even the cult favourite Star Wars the Christmas Special featured lawyers. Sure they have bounty hunters, the Sand People, and Hutt mobsters but alas none from the learned profession.

George doesn’t like lawyers. The darth of examples are abundantly clear. It is like lawyers were the Jar Jar Brinks of the money-interested professions, trying to blow up the Star Wars world through the death star of blogging.

By experience, I understand that the Star Wars Celebration gatherings are a wretched hive of scum and villainy but then I went to law school. By Princess Leia’s slave costume, in Indianapolis I even had coffee at Starbucks across the street from the event with Barrie Holland, the English actor who played the Imperial Officer who quipped to Han Solo, “You Rebel Scum” in The Empire Strikes Back. A nice chap, we both were taking a time out from Star Wars fandom.

I’m sorry to droid on like this but I feel like a rebel challenging the dreaded empire. What does the Lucas brand have to lose by giving a legal blogger a media pass? I might increase the interest level in an active and professional market while addressing legal issues affecting more than just the Star Wars universe? I will never force the issue but I do look forward to a new hope.

The Author at Celebration IV in Los Angeles, 2007

Two AIG Subsidiaries Agree To Settle Racial Discrimination Case Mon, 08 Mar 2010 18:42:59 +0000 This  is part of the Middle Passage Law Series  and is cross posted on Commercial Law International .

American International Group, better know by its acronym AIG, it seems these days can rarely catch a break. It just seems negative news follows negative news for this company. This time the negative news for this too big to fail company – deeply wounded by the global credit crunch and later recession – has two of its units being accused of racial discrimination in their lending practices.

It is important to note that AIG has not been found guilty of anything; in fact it wasn’t even accused of any wrong doing.


I know, I know, it seem like I am saying that AIG is involved yet not involved in this case. And yes that is exactly what I am saying.

All of this may seem totally contradictory but let me assure you it is not. What we have here is a classic illustration of legal reality vs. public perception of a company’s brand. In order to be successful companies have to be mindful of the differences between these two concepts and effectively manage their interrelation.

The Department of Justice (DOJ) allegations were never directed at AIG, the parent company, but were instead directed at two of its subsidiaries –AIG Federal Savings Bank (FSB) and Willmington Finance Incorporated (WFI). Both banks were accused of not sufficiently monitoring the activities of mortgage brokers who sold mortgages that they funded. The brokers were, according to the DOJ, offered African-American borrowers less favorably borrowing terms than similarly financially situated whites. The two have agreed to settle the case with the DOJ and have agreed to pay at least $US6.1 million without admitting liability as part of the terms of settlement.

The case broke no new ground as far as banks in the US being accused of racial against minorities, namely African-American and Latino-Americans, in fact similar settlements or even full blown litigation involving other US banks will surely be making the headlines in the near future. The case however did break new legal ground in that for the first time US authorities held a lender directly responsible for the racial discriminatory acts of brokers. As a consequence, from now on banks will have a positive duty to monitor the activities/policies of brokers that they fund, to the best of their ability, in order to ensure that they are not using race to determine borrowing terms. This duty also of course carries with the co-duty to take positive action whenever a bank believes that a broker is using race.

From a strict legal perspective AIG, the parent, hands remain totally clean is this matter. It is important to reiterate that AIG was never accused of anything; the allegations were solely directed at the two subsidiaries. And no this is not a simple matter of splitting hairs, while related all three companies are separate. The legal concept of the corporate veil – the independent legal identity of companies, even if related – is a fundamental one in corporate law. The corporate veil is best understood as a shield that is used to protect all the right that come with incorporation. This is not to say that it can never be lifted/pierced, for it can, but this is only done in rear and specific instances where for example fraud is alleged or where for some reason the directing/controlling mind of a corporation needs to be identified.

However, these allegations go beyond strictures of the corporate veil and this is where public perception of the brand and effective management of that brand become important. AIG and its army of brand management specialists both know that the general public are often not so discerning as to make the distinction between parent and subsidiary; as far as the public is concerned AIG is AIG. This is the reason I believe that there was such a quick settlement – the last thing AIG, the parent, needs is a protracted legal battle involving accusations of racial discrimination, albeit involving subsidiaries. This would be a public relations nightmare.

As companies battle the recession, bartering comes in handy Thu, 25 Feb 2010 16:45:39 +0000 First posted on Commercial Law International on Feb 24, 2010.

By: Carsten Lexa

Money helps a lot when it comes to exchanging goods. One buys the goods, pays with cash and takes the goods away. So far, so good. But what if free cash to spend is a rare thing? For example in times like today, when the economy is not doing well and money is scarce?

Today, more and more companies turn to third party networks to contribute and use barter schemes. Of course, bartering is nothing new: It is a medium in which goods or services are directly exchanged for other goods and/or services without a common unit of exchange, e.g. money (according to Wikipedia). Firms routinely arrange exchanges on their own. But cultivating relationships with business partners in such a way, that barter schemes can be discussed and established among each others takes time and presents numerous hurdles. Let´s assume the owner of a restaurant needs printing services with a value of $ 10.000,00. Where can he find a printshop with an owner who is hungry for a $10.000,00 meal?

Formal barter schemes can help. One of the biggest providers for example is Bartercard, the largest exchange network with trades through its network worth more than $ 2 billion and 75.000 members in more than 9 countries. By using such a provider, the restaurant owner in the example above would owe $ 10.000,00 to the exchange network, not the printshop. The provider provides the business partners and makes sure that every member of the network honors the services of the other members. It therefore provides security and accountability, something informal bartering cannot provide in an adequate way.

What are the additional advantages of such barter schemes, other than security and accountability? The biggest advantage is the fact that no money is needed to “pay” for services and goods. Another one is the fact that a member can “buy” services first throught the network and pays later in his own services and goods – sometimes months later, if nobody wants his services or goods earlier. And finally such a scheme can work not only in one country, but – ideally – worldwide, as long as the members accept the scheme.

Even in Germany such barter schemes are tried and – especially among small and midsize compamies – found helpful. But currently, no big exchange networks exist. So, member of traditional business networks try to establish their own barter networks. Reason is that a company owner who knows another company owner through a traditional business network and has done business with him in a traditional way using cash will be more open towards doing barter transactions with this person than with a total stranger.

Is barter the holy grail for companies in recession times? Probably not. But it can be a helpful to do business if cash is scarce. The difficulty is to find the right partner.

For inquiries please contact the author:

Billing By The Hour Sat, 13 Feb 2010 04:28:55 +0000 There has been a great deal of discussion among legal commentators about the failure of hourly billing for legal services and the need for alternatives. The most recent article I’ve seen is in the CBA’s Jan/Feb issue of National. Although I’m a law student and have never billed a single hour as a lawyer, I have worked for more than a decade as an entrepreneur and I wonder … what are the alternatives, really, but masked versions of hourly billing? Given the limited amount of hours available to work in any day/week/year/lifetime, billing by the job MUST reflect the time that the task requires.

Flat fee services must have caps on the input of resources to succeed as business models and, as a result, will tend to put a floor rather than a ceiling on the cost of any given service. At best, a flat fee will reflect the average amount of time required to perform a service. Innovators can find ways of doing things more quickly through economies of scale, computer processing, outsourcing and so forth, but price reductions that service providers choose to pass on to the clients can be built into an hourly billing model just as easily as any alternative. Innovations might put pressure on hourly rates through competition, but this has nothing to do with the method of billing.

Frankly, I fail to see how alternatives to billing by the hour will change the cost of legal services. The real pressures on cost come from the the well-known forces of the marketplace … the rest is just packaging. And if clients are becoming more sophisticated, will they really be impressed by a fancy one-size-fits-all (unless you want more) gift bag?

The real issue is value.  Lawyers that provide it will gain clients and those that do not will lose clients. Those who insist on talking about how the billing is done, please explain (and be nice about it): What am I missing?

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Bill C-300 Thu, 08 Oct 2009 13:14:25 +0000 A single gold ring leaves in its wake, on average, 20 tons of mine waste.

Bill C-300


3. The purpose of this Act is to ensure that corporations engaged in mining, oil or gas activities and receiving support from the Government of Canada act in a manner consistent with international environmental best practices and with Canada’s commitments to international human rights standards. 

Barrick Gold Corporation, the largest Gold Mining Corporation in the world, and Canada’s largest publicly traded company put a lot of heat on the Canadian Government in the last year when Norway’s Ministry of Finance back in January of this year, sold shares of Barrick Gold from Norway’s pension fund for ethical reasons.

Norway is the best place to live. They must be doing something right.

Norway’s Council on Ethics conducted a fairly comprehensive investigation spanning four years regarding the use of a natural river system to transport and dispose of mine waste in Papua New Guinea.

The council established “the mining operation at Porgera entail[ed] considerable pollution.” The 2008 report went on to condemn the heavy metals contamination, particularly mercury, produced by the tailings. It concluded that severe and long-term environmental damage is likely to continue, and that it represents a serious health hazard for residents of the mining area and for the indigenous peoples living downstream from the mine.

As Marie-Claude Poirier of CCODP writes, in 2008 Canada was a base for 75% of the world’s exploration and mining companies. And Canadian mining companies accounted for 43% of all global exploration spending.

And at most, the Canadian government promotes mining companies to voluntarily conduct their activities in a socially and environmentally responsible manner that companies have failed to undertake.

The Canadian government does nothing more than endorse current CSR standards and create administrative mechanisms, rather than legal ones, within the Department of Foreign Affairs and International Trade and at Canadian offices abroad.

Recently, Minister Day Announces Appointment of First Counsellor to Promote Responsible Practices for Canadian Businesses Abroad.

This is where Bill C-300 comes in.

On April 22, 2009 Bill C-300, sponsored by Hon. John McKay PC, MP, passed second reading in the House of Commons with a vote sending it to the Standing Committee on Foreign Affairs and International Development for further study. C-300 passed by a close margin – Yeas: 137; Nays: 133.

Marie-Claude Poirier, notes that Bill C-300 doesn’t include provisions for an ombudsperson and independent investigation into complaints from overseas, since private member’s bills cannot require the support of a budget.

However, what the Bill does do is directly forward complaints to the Minister of International Trade and Foreign Affairs. Investigation ensues as to the alleged violations of the CSR standards. If any evidence of violations is found, then the stick of bad PR for those that are caught. The companies would be required to submit annual reports, which would fall under scrutiny of the House of Commons and Senate for review.

Bill C-300 has baby teeth, but it’s better than no teeth. Even baby teeth are sharp.