So, the federal government has introduced new record keeping requirements for private, federally-formed corporations governed by the Canada Business Corporations Act (“CBCA”). The amendments to the CBCA are being made in an effort to meet international obligations to increase corporate transparency and prevent tax-evasion and money laundering and will require corporations to track and report the individuals who are beneficial owners of shares with significant control.  Notwithstanding, these obligations will prove significant to all private companies formed under the CBCA, with specific exemptions for reporting issuers and corporations listed under a designated stock exchange.  The exempted corporations are already subject to disclosure requirements that pertain to beneficial ownership of shares at certain thresholds.

The new beneficial ownership requirements were passed into law with Bill C-86 in December 2018 and will come into force on June 13, 2019.  Please also take note of the possible tax implications for those identified as beneficial owners of shares with significant control.  In my experience, such individuals are unable to remain cloistered against potential directors’ liability if the corporation is targeted by Canada Revenue Agency (“CRA”).

What Constitutes an Individual with “Significant Control?”

The amendments will require corporations to create and maintain a register of individuals who hold “significant control” in the corporation. Individuals will be deemed to hold significant control if they, either by themselves or “jointly or in concert”, own or control 25% or more of the voting rights attached to a corporation’s shares, or 25% or more of a corporation’s shares by value.  For the purposes of the legislation, individuals are considered to hold significant control jointly or in concert if they hold an interest that meets this definition with another individual, or if they have an agreement to exercise their rights with another person (for example, a voting agreement or shareholders agreement).  Individuals who do not own shares may also be captured by these amendments if they have significant influence over the corporation.

The broad definition of “significant control” found in the amendments will require organizations to trace corporate structures (including tracing through shareholder entities such as trusts and partnerships) to determine the individual human being who ultimately holds rights and interests in an affected CBCA corporation. Further consideration will then be required to determine whether such individuals are “significant” for the purposes of the legislation.

Challenges may arise when determining whether a shareholder meets the threshold of holding 25% or more of all of the corporation’s outstanding shares measured by fair market value, as this may fluctuate over time (especially, with corporations holding complex share structures).

What is Included in the Register?

The amendments require federal corporations to create and maintain a register of current information of a corporation’s beneficial ownership. Corporations Canada has released an example of what a beneficial ownership register could look like, available through their website. However, at this time, there is no prescribed format for the register, so long as it contains the prescribed information. For each individual who holds significant control the register must include the following information:

• name, date of birth and address;
• jurisdiction of residence for tax purposes;
• date when individual obtained significant control and ceased to hold significant control of the corporation;
• description of how the individual has significant control over the corporation, including a description of any interests and rights they have in shares of the corporation
• description of the steps taken by the corporation in each financial year to ensure the register is complete and accurate; and
• any other prescribed information required by regulation.

Who Can Access the Register?

Information contained on the register will not be publicly available but will be available to directors, shareholders and creditors of a corporation. CRA and other regulatory bodies, may also be able to access the information. In the future, registers of beneficial owners may become more widely accessible.  Bill C-97, which is currently before Parliament, proposes giving certain investigative bodies involved in investigating crimes related to those listed in a schedule to the CBCA, the authority to request information from registers without a warrant. It is uncertain if, or when, this will become law.

In the interest of protecting privacy, corporations will be required by law to dispose of personal information collected in the process of maintaining a register of beneficial ownership six (6) years after an individual ceases to be an individual with significant control.

Compliance & Penalties

Once the amendments are in effect, corporations will be required to take “reasonable steps” to discern who the individuals with significant control in the corporation are, and to ensure registers are complete and accurate. Timeliness is an important requirement of the amendments.  A corporation that becomes aware of information that should be included in the register will have fifteen (15) days to update it.  Shareholders will also have a duty to respond to inquiries from a corporation pertaining to information required for the register “accurately and completely as soon as feasible”.

Non-compliance with the new requirements could result in significant monetary penalties, imprisonment, or both, for not only corporations themselves, but their directors, officers and shareholders.  Corporations may be fined up to $5,000.00 for failure to meet the requirements to maintain a register of individuals with significant control, or for failure to meet a request for information from an investigative body.  Directors and officers can be fined up to $200,000.00 or imprisoned for up to six (6) months for failure to meet the requirements to maintain the register, respond to a request from an investigative body or for allowing false or misleading information to be recorded in the register. Shareholders will face the same penalties for failure to meet their obligations to provide information for the register.

As the amendments are part of a larger plan towards national and international corporate transparency, provincial finance ministers have also pledged to strengthen transparency with respect to beneficial ownership. As such, it is likely that these CBCA amendments will be used as a model for provincial legislation.  The next several months will determine how and when the Provinces go about amending their own provincial legislation (in my base of Nova Scotia, found within the Nova Scotia Companies Act).

The post Canada – Federal Corporate Law: New Record Keeping Requirements – June 2019 appeared first on Halifax Law.

Well, although I always cringe when a news article identifies me as an “expert” (lawyers are to refrain from any such classifications, except under unique circumstances), I suppose that I have been contacted in the past to issue expert opinions on matters involving Constitutional Law (also, I spent a decade teaching the subject).

In the current matter, I was contacted by a reporter with Halifax’s Chronicle-Herald newspaper, to comment on the legitimacy of fees by the Province’s liquor corporation, NSLC.  My brief comment is included at the following link:  http://thechronicleherald.ca/metro/1389054-halifax-microbrewery-unfiltered-brewing-battles-nslc-in-court.

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In mid-June, Canada’s Minister of Public Safety and Emergency Preparedness introduced Bill C-21 “an Act to amend the Customs Act.”

Although the bill is a short one — in legislative terms, it carries dramatic impact on provisions to the Customs Act.  Where it is customary in my practice to focus on the importation of goods under the Customs Act, these amendments have absolutely nothing to do with customs duty collections.  Rather, Bill C-21’s amendments potentially impacts any Canadian business operating in international commerce, notwithstanding whether or not it implicates importation of goods.

The Bill is so broad as to affect business people traveling outside Canada, as well as businesses exporting goods.

So, what are the highlights to take away from these amendments?  First, I should mention that this Note is not intended to discuss privacy law issues — issues that frequently arise in my role as incoming Chair of the Canadian Bar Association – NS’s Privacy & Access Law Committee.

This post sets out ten things that Canadian businesses should know about Bill C-21. We are not going to address the privacy law issues that will be covered extensively by other.  I will be reserving such a discussion to an upcoming CBA Seminar hosted by my Committee.  So, with that in mind, here is what you should otherwise take away from C-21:

1.   Consistent with the agreement between Canada and the United States, announced in March, it is intended “to fully implement a system to exchange basic biographic entry/exit information at the land border and build off the process already in place.”

2.   Bill C-21’s primary purpose is to introduce the legislative requirements to collect biometric data for all persons exiting Canada.  Yes, people, Canada will now be doing to everyone what the United States does to all of its non-citizens (and what Disney attempts to collect whenever you enter one of its theme parks).  This process is designed to permit for matching entry and exit information.  Of course, this will also carry implications for non-citizens/legal residents of Canada attempting to establish minimum residency periods.

The specific language of the subsection 92(1) to the Customs Act, as provided by the Bill, provides that

[i]n relation to any person who is leaving Canada or who has left Canada, the Canadian Border Services Agency [“CBSA”] may collect, from a prescribed source, in the prescribed circumstances, within the prescribed time and in the prescribed manner, the following information:

(a)  the surname, first name and middle names, the date of birth, the citizenship or                                       nationality and the sex of the person;

(b)  the type of travel document that identifies the person, the name of the country or                                    organization that issued the travel document and the travel document number; and

(c)  the date, time and place of the person’s departure from Canada and, if the person                                   arrives in the United States, the date, time and place of their arrival.

Further, the Canadian Government is permitted under subsection 92(2) to pass regulations that would

(a)  prescribe the sources from which the information may be collected;

(b)  respect the circumstances in which the information may be collected; and

(c)  respect the time within which and the manner in which the information may be                                     collected.

Expect these regulations to be pivotal, containing details left out of the brief text of C-21.

3.  Business people traveling regularly for business, and spending a reasonable period outside of Canada could potentially be snagged in various legal issues limiting benefits to them.  For example, access to the Canadian health care system and other benefits could negatively impacted.  The “number of days in Canada,” limitation — which is carried in a slew of laws/regulations at both the federal and provincial levels — could come into play, limiting a Canadian citizen/resident’s ability to continuous — without impairment — access such benefits.  Consequently, individuals and businesses will be required to act conscientiously to learn and understand such limitations brought on by the number of travel days.

4.  The same rules will exist for business people traveling to Canada, as it may ultimately implicate the payment by those individuals of Canadian income tax.  Simply, the tracking by CBSA of both entry and exit data will permit the Canadian Government to calculate number of days in Canada, and to send tax assessment notices if the annual number of days is exceeded.

5.  Impact on Conveyances.  New reporting obligations are being imposed if business activity involves conveyances.  Subsection 93(1) of the Customs Act imposes obligations on a “prescribed conveyance” that departs from a place in Canada and has a final destination outside Canada.  Such a conveyance must to provide information regarding both passengers and place of departure.   Moreover subsection 93(2) authorizes the Minister of Public Safety & Emergency Preparedness to issue notification to any person required to give information under subsection (1) to require the person to take any specified measure with respect to the information.  Subsection 93(1) will impose an obligation to comply with ministerial requests to give information.

6.  Section 94 of Customs Act creates an obligation on persons leaving Canada to answer questions of a CBSA officer, specifically providing that

Every person who is leaving Canada shall, if requested to do so by an officer, present                             themselves to an officer and answer truthfully any questions asked by an officer in the                         performance of their duties under this or any other Act of Parliament.

This new requirement can be fraught with legal peril, as it seemingly provides CBSA with the ability to make a determination as to whether or not an individual is tell the truth.  A determination of something other than the truth could ensnare the traveler with potential offences under the Customs Act.  FYI:  CBSA officers commonly assume that individuals have provided false answers, even when responses are the result of simple mistakes.

7.  Section 95 currently imposes obligations to report exporting of certain goods.  The new Section 95 clarifies this obligation, requiring all goods being exported to be reported — consistent with written export reporting obligations.  Also, under Section 159, there will be a newly-created export smuggling offense.

8.  Expanded Detention Powers for CBSA.    Subsection 97.25(1) is being amended to permit CBSA to detain any goods that are to be exported, and that have been reported under section 95.   This power permits  CBSA to stop goods that are being exported and keep the goods from being exported.  Fortunately, the law contains various legal mechanisms to provide evidence to CBSA, in order to challenge the potential, indefinite detention of such goods..

There is certainly a lot to digest with these changes.  As you can see, the changes could have — in many circumstances — significant consequences (tax, immigration, criminal, customs duty-related, etc.), to travelers coming and leaving Canada.

The post International: Note on Bill C-21 Amendments to Customs Act appeared first on Halifax Law.

I am pleased to acknowledge my election as the Chair of the Greater Burnside Business Association.  It is a great honor.  I look forward to working alongside the Board of Directors, and to helping the GBBA continue to grow in prominence.  I also look forward to working alongside other regional and business improvement districts and Chambers; the continued building of coalitions with these groups will only help to drive positive change for the region.

The post Election as Chair of Greater Burnside Business Association appeared first on Halifax Law.

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The post Constitutional Law/Land Use Law: U.S. Supreme Court Case Update appeared first on Halifax Law.

(1)  Yesterday, I shipped off a petition for a writ of certiorari to the United States Supreme Court.  It was an experience to prepare such a document, and I am crossing my fingers that the Court accepts my petition, thus reviewing a couple of earlier, poor decisions from the lower courts that would allow for a public entity to destroy public records to avoid disclosure; actively conceal such destruction, including through court filings; and then point the finger at the plaintiff/my client for not having discovered the destruction prior to the city securing a dismissal of my client’s case.

(2)  Next, over the past several weeks, I have lectured three (3) times on issues of privacy law in Canada, and also involving cross-border involvement with the United States.  As I practice in both jurisdictions, it proved an interesting pursuit.  I thoroughly enjoyed the opportunity presented to me as Vice Chair of the Canadian Bar Association’s Privacy & Access Law Committee, and I thank my colleagues, Alayna Kolodziechuk and David Fraser for their co-hosting of these events, delivered to a number of regional lawyers.

(3)  I am pleased to have been placed into a position to assist the American Chamber of Commerce in Canada, working on one of its committees, and becoming active as a legal consultant for the organization.  The organization is geared to enhancing the commercial relationship between the United States and Canada.

(4)  I continue to represent the interests of the citizens of Lake Loon-Cherry Brook, aimed at preventing the unlawful seizure of their heritage property and land by the City of Halifax.  Over the past month, a rally was held in front of Halifax City Hall.  I was honoured to participate in this event, alongside the leadership of the Lake Loon-Cherry Brook Community Association, and to have been able to directly address the Mayor regarding the City’s departure from a previous oral commitment to relinquish the lands unlawfully taken by the City for the price of one-dollar.  Legal action in the coming month is a definite possibility.

(5)  There is much more, as I also continue to ramp up my domestic and cross-border commercial clientele.  However, these are the highlights of what has been an exhaustive period in my career.

Best,

Derek

The post Update on Practice Events — Including Filing in U.S. Supreme Court appeared first on Halifax Law.

http://www.huffingtonpost.ca/2015/09/21/watch-out-for-dirty-voter-suppression-tricks-elections-canada-warns-staff_n_8168806.html

In the above, linked article, Elections Canada is warning of voter suppression tactics being used against Canadians on the upcoming federal election day, October 19.  This brings back lessons learned in Florida, from 2004-2012, while I served as co-lead regional elections  counsel for the Presidential nominees, as well as other Democratic Party candidates.

In Florida, especially during the Presidential election periods, we had a few thousand lawyers working on behalf of the Democratic candidates to ensure that no one was deterred from voting, regardless of their possible political affiliation. There was a reasonable concern that such would occur, especially based upon voter suppression tactics being implemented through GOP-controlled legislatures, as well as past efforts on or before Election Day. Sadly, I am now witnessing such methods being deployed in Canada. C-23, passed by the current Federal Government, despite a public outcry, yet another example of methods that have become all-too-common in the U.S. following Bush v. Gore and the 2000 Presidential Election. Again, this is another reason why election protection legal teams are an absolute necessity. In Central Florida, Richard Siwica and I saw great, long-term success in assembling, training, and deploying these — to great degree — volunteer legal teams to stem voter suppression efforts.  (Continued below illustration ….)

So, what have we learned about efforts to suppress voter turnout in the United States.   It is unilaterally used by one particular political party to suppress core voter constituencies of the other major political party.  It is also multi-faceted; it is not limited to one single approach — rather, there are layers of methods utilized to suppress voter turnout on Election Day, to deter voters from being able to cast ballots, and there are serious questions regarding the security of voting technology to accurately count ballots.

Again, addressing C-23, it was passed under the auspices of attempting to stem vote fraud. Unfortunately, as both Canadian and U.S.-based elections experts recognize, that is a virtual, non-existent threat.  In the meantime, such legislation undermines the ability of visible minorities, seniors, students and those with physical handicaps from being able to cast their votes.  Here is an illustration created by the venerable Brennan Center, reflecting U.S.-based misrepresentations on the effect of voter fraud versus the reality:

So, the message I started with stands:  in the absence of effective public representation designed to prevent such tactics from being deployed, non-governmental organizations and legal advocacy groups need to be vigilant in standing together as a deterrent to such pernicious methods of suppressing the vote.

Now, such coordinated effort to fight back did not arise immediately in the United States.  The lessons of Election 2000 were only internalized by the Democratic Party — in part — starting in 2004.  Some of those lessons are still being learned, although dedicated non-governmental organizations are doing their best to continue organized resistance to voter suppression efforts, especially with coordinated voter registration drives.  Hopefully, in Canada, political parties will not abdicate their responsibility for organizing and publicizing such organizational efforts to stem the tide of voter suppression.  After all, October 19, is just around the corner ….

The post Elections Law: Comment on Revelations of Possible Voter Suppression on October 19 appeared first on Halifax Law.

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Labour lawyer predicts ugly negotiations between unions, province

Last evening, I was featured on Global TV News — fortunate to headline the top story of the day.  The subject was the Province of Nova Scotia’s relationships with its public sector unions.  The reporter did a competent job on the matter, although mislabeling me an “expert” in labour law.  Admittedly, I possess over a decade of labour law experience, representing predominantly public sector unions in the United States.  However, I have never been qualified as an “expert,” and the label came as a bit of a surprise.  The only area of law where I have been consulted as an “expert” is in the field of Constitutional Law, which I taught for over a decade in the United States.

Notwithstanding the above qualification, I thought that I would provide a bit more perspective on the sound bytes coming out the TV coverage.  Two days ago, the governing political party in Nova Scotia, the Liberal Party, invited its public sector labour union leaders for a ‘sit down’ discussion regarding upcoming, anticipated labour contract negotiations — also called “collective bargaining negotiations.”  The unions came to the meeting with trepidation — this particular provincial government has distinguished itself in the past year for engaging in questionable tactics including, most notably:  (1)  attempting to arbitrarily reorganize the health care union membership away from their present bargaining units — a likely violation of the right to association guaranteed under Canada’s Charter of Rights; (2) firing the arbitrator selected to rule upon the impasse that arose from the Province’s perceived inability to negotiate in good faith with its health care unions; and (3) expanding the scope of its governmental powers to prevent union reaction, i.e., striking.  Admittedly, removing oneself from the politics surrounding the matter, it seems like a good idea to reorganize the health care workers into fewer overall bargaining units.  However, it is never good public policy or politics to unconstitutionally and arbitrarily plot such reorganization; nor, is it effective policy making to attempt to undermine real collective bargaining negotiation.

This Province relies on its unions — it is in active competition versus other provinces for these trained professionals.  These trained professionals — like everyone else in society — deserve good living wages and benefits, alongside other workplace protections.  Indeed, what is notable about unions is that they deliver results for workers in a way that should be commonplace for all workers.  What I have observed from my experience in the United States is that government — especially when adopting austerity policies — often mistakenly target its workers, rather than making politically courageous decisions on taxation, other methods for collection of revenue or better spending policies (e.g., not dumping millions of dollars into a private company running a ferry; not privatizing utility services, etc.) to further bolster public funds and spending.

I am not attempting to be political.  I am a lawyer who has long-represented labour interests; I have always done so in a manner designed to, in good-faith, establish common ground between the parties.  Sadly, in many cases, it was the obstinacy and politics of public officials that undermined the ability to deliver fair bargains to both sides.  I will state, as an aside, that the Liberal Party in Nova Scotia has adopted several policies with which I can, as a citizen, agree.  Labour relations policy is simply not one of those items.

As I indicated during my interview, I anticipate that, based upon the recent history of failed negotiations, the sides will be unable to come to agreement during collective bargaining.  The distrust fueled by last year’s actions, described above, leave this Government with the insurmountable problem of attempting to regain the immediate trust of the unions during negotiations.  I simply do not see the Provincial Government making any real efforts to do so — hence, my prediction of impasse.  I certainly hope that the Government does not again attempt to bulldoze results.  The consequences from public backlash, when combined with other recent issues (including, but not limited to, the Film Tax Credit debacle), could make this Government’s tenure a short one.

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