Building Blocks: Structuring & Organizing Your Company
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Transcript of Building Blocks: Structuring & Organizing Your Company
Building Blocks Structuring and Organizing Your Company JANUARY 21, 2016 A N D R E W H E N N I G A R & E M M A N U E L L E F R E D E R I C - P O PA – M E P B U S I N E S S C O U N S E L
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Agenda
q BasicBusinessForms
q CapitalStructure
q Shareholders–RightsandRisks
q BoardsofDirectors–Du;es
q Shareholders’Agreements
q Ques;ons
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Basic Business Forms – Limited Partnership
GeneralPartner
Managementauthority
Unlimitedliability
FiduciarydutytoLPs
LimitedPartnersNo-managementauthority
Limitedliability
Taxpassthrough
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Basic Business Forms – CorporaRons Nolimitsonmanagementauthority/exercisedthroughdirectorelec7on
Managedbyboardofdirectors
Limitedliability
Nofiduciarydutyasshareholder
D&Ofiduciarydu7estothecompanySeparatetaxpayer
YourCoInc.
Shareholder1 Shareholder2 Shareholder3
• Corporatelaw• Bylaws/ar7cles• Shareholders’
agreement?
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CorporaRons – Federal or Provincial? FederalJurisdic7on
CanadaBusinessCorpora7onsAct25%ofdirectorsmustbeCanadianresidentsAutoma7cna7on-widenameprotec7onAbilitytocarryonbusinessanywhereinCanada(separateregistra7onmayberequired)
BCJurisdic7onBCBusinessCorpora7onsActNodirectorresidencerequirementWaiverofAGMandproduc7onoffinancialstatementspermi^edIncreasedflexibilityspecialresolu7onapprovalthreshold(662/3%to75%)Slightlycheapertoincorporate
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Capital Structure
SeniorSecuredDebt
SeniorUnsecuredDebt
SubordinatedDebt
HybridSecuri7es/PreferredShares
CommonEquity
Priorityon
liqu
ida7
on
Stockop7ons
Mezzanine
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Capital Structure: Share Classes Moreshareclasses=morecomplexity–carefullyconsiderwhatisnecessary
Shareswithnovo7ngrightsmayhaveclassvo7ngrightsunderlawforcertaintransac7ons
Sharestructurecanbemodifiedover7me
Commercial/regulatoryconsidera7onsmaydictateclassrequirements
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Capital Structure: Share Classes Start-Up
Class Vo7ng Dividends Liq.Pref. Ves7ng Purpose
ACommon Yes Yes None Yes Foundershares/commonequity
BCommon No Yes None No Employeeop7onplan
Angel/VentureStage
Class Vo7ng Dividends Liq.Pref. Ves7ng Purpose
ACommon Yes Yes None Yes Foundershares/commonequity
BCommon No Yes None No Employeeop7onplan
CCommon Yes Yes 2x No Angelinvestorround
APreferred Yes Yes–fixed% 2x No VentureCapitalround
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Shareholders – Rights
ShareholderRightsVo7ng
Dividends
RighttoBringSuit
Administra7veRights
Ownership/Liquida7on
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Shareholders –Risks
ShareholderRisksDilu7on
LimitedLiquidity
InvestedCapital
MinorityPosi7on
Posi7oninCapitalStructure
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Board of Directors Responsibleformanagingorsupervisingthemanagementofthebusinessandaffairsofthecompany
Shareholders
Directors
Officers
Elect
Appoint
Daytodayopera7ons
Strategicoversight/non-ordinarycourseac7ons
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Board of Directors – Roles and ObligaRons Maximizeshareholdervalue
Appointandmonitorperformanceofofficers
Determinestrategicdirec7onandgoalsforthecompany(withinputfrommanagement)
Developandimplementcontrolsoverfinancialrepor7ng
Developandimplementpoliciesforcompensa7on,corporategovernance,externalcommunica7ons,andaudi7ng(ifarepor7ngissuer)
Approvefinancialstatements
Approvefundamentalcorpora7onac7ons
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Officers – Roles and ObligaRons Specificrolessetoutinjobdescrip7onsapprovedbyboardand/oremploymentagreements.
CEO:daytodayopera7onalcontrol;goalsepng;fundraising;oversightofallotherofficers.
CFO:financialrepor7ng;financialcontrols;budge7ng;A/R,A/P. VPs:principalresponsibilityforgivenfunc7onalarea.
Secretary:corporategovernancecompliance;assisttheboardofdirectors.
Note:Corporatelawdoesnotspecifypar7cularofficerrequirements.
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Board of Directors and Officers - DuRes Directorsarefiduciaries:theyhavethelegaldutytoactprimarilyforanotherperson’sbenefitinmanagingtheassetsandopera7onsofthecompany.
DutyofCare
DutyofLoyalty
FiduciaryDu7es DutyofConfiden7alityDutyofCandour
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Board of Directors and Officers – Duty of Care
DutyofC
are
Exercisethecare,diligenceandskillthatareasonablyprudentindividualwouldexerciseincomparablecircumstances.Actonaninformedbasisaqerdueconsidera7onoftherelevantmaterials,appropriatedelibera7onandinput,asrequired,fromexpertadvisors.
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Board of Directors and Officers – Duty of Loyalty
DutyofLoyalty
Acthonestlyandingoodfaith.Actwithaviewtothebestinterestsofthecompany.
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Board of Directors – Personal Liability Unpaidwages.Improperdividendpayments.Issuanceofsharesforinadequateconsidera7on.Repurchaseofsharesresul7ngwheninsolvent.Improperpaymentofindemnitytoadirectororofficer.Paymentofanunreasonablecommissiontopurchaserofshares.WithholdingundertheIncomeTaxActandExciseTaxAct(GST). 18www.meplaw.ca
Board of Directors – PracRcal ConsideraRons Ar7cles/bylawssetoutminimumrequirements(number,mee7ngfrequency,recordkeeping).Businessjudgmentrule.Duediligencedefense/relianceonexperts.Indemnifica7on.
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Shareholders’ Agreements Setshareholderrightsbeyondminimumsprovidedbycorporatelaw.Usually,notalways,allshareholdersarepar7es.Minorityshareholderprotec7ons.Majorityshareholderrightsandlimita7ons.
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Shareholders Agreements - Terms
Restric7onsonTransfer
RightofFirstRefusal/Offer
DragAlong
TagAlong
Governance
BoardComposi7on
SpecialApprovalThresholds
TieBreakProcedure
Financing
Ini7al/followoncontribu7ons
Pre-emp7veRights
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Exits
ApprovalRights
Puts/Calls
TriggeringEvents
IPOConsequences
Non-Compe77on
Administra7ve
Informa7onRights
Confiden7ality
Amendments
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MEP Business Counsel AtMichael,Evrensel&PawarLLP(MEPBusinessCounsel),weapproachtheprac7ceofbusinesslawdifferently.Weareonamissiontochallengetheinherentinefficienciestypicallyfoundinconven7onal“BigLaw”firms,pushingtorejecttheinflexibleandexpensiveservicemodelsfoundatthosefirms.
Asaguidingprinciple,wearecommi^edtoprovidethesamehigh-qualityexper7seofatop-7erna7onallawfirm,butdeliveritwiththeinnova7on,cost-efficienciesandpersonala^en7venessyou’dexpectfromdedicatedin-housecounsel.
AsaCanadiancorporateandentertainmentlawfirmwithextensiveinterna7onalexperience,ourcontemporarymodelissimplebutfarfromcommon:
World-ClassExperience–Ourteamofhighlyexperiencedandaward-winninglawyers–withtrainingandexperiencefrominterna7onallyrecognizedfirmsinLondon,NewYork,Toronto,Montreal,BeijingandVancouver–provideworld-classbusinessandentertainmentlegalservicestosomeofNorthAmerica’smostnotablecompanies.
Client-CentredApproach–Clientsnowdemandmoreoftheirlegaladvisors,whichisdrivingachangeinthelegalserviceslandscapeinCanada,andrightlyso.Businessesexpectgreatervalueatsensibleprices,whichisachievedbyreceivingprac7callegaladvicetailoredtoadvancetheirgoals.AtMEPBusinessCounsel,wehaveanunwaveringcommitmenttoyourbusiness,withagoaltoprovideyouwithbespokelegalservicesthatputyourrealneedsfirst.
Business-FirstThinking–Wehaveauniquecombina7onofestablishedlegalexper7seandcommercialunderstanding.Effec7vebusinesscounselshouldhelpdriveyourcommercialsuccessbycraqingsolu7ons,notbysimplyiden7fyingconstraints.AtMEPBusinessCounsel,weprideourselvesonaligningouradvicewithyourcorebusinessobjec7ves,offeringsolu7onstoovercomeobstacles.Aqerall,weareentrepreneursinourownright.
FlexibleValue-BasedPricingandAlterna;veFeeArrangements–Yourbusinessneedsareunique.That’swhyMEPBusinessCounselisflexiblewhenitcomestopricingandfeearrangements.Unhinderedbytherigidityoftheconven7onal“biglaw”firmmodel,MEPBusinessCounselisabletoworkwithyoutorespondtothoseuniquedemands.Regardlessofthefeearrangement,atthecoreofeachofourmandatesisacommitmenttoprovideexcep7onalvalueandbuildlas7ngbusinessrela7onships.
www.meplaw.cawww.facebook.com/mepbusinesscounsel@meplawMEPBusinessCounsel(604)669-1110
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OUTLINE
I. Overview of the SR&ED Program II. Benefits of Claiming SR&ED III. CRA’s Requirements IV. Do’s and Don’ts V. Q&A
QUALIFYING CRITERIA
Must meet three criteria to qualify for SR&ED:
1. Technological Challenges 2. Technological Uncertainty 3. Technical Content or Iterations
ELIGIBILITY The CRA’s 5 questions: 1. Was there a scientific or a technological uncertainty that could not
be removed by standard practice/engineering? 2. Did the effort involve formulating a hypothesis specifically aimed at
reducing or eliminating the uncertainty? Continued…
ELIGIBILITY 3. Was the adopted procedure consistent with the total discipline of
the scientific method, including formulating, testing, and modifying the hypothesis?
4. Did the process result in a scientific or technological
advancement? 5. Was a record of the hypothesis tested and results kept as the
work progressed?
WHO CAN CLAIM?
SMEs = defined as generating less than $500K taxable net income in the prior fiscal year.
TECHNICAL DOCUMENTATION CRA requires that SR&ED documentation must: § Have been documented at the time the work was completed § Highlight technical obstacles or challenges § Be dated
WHEN TO CLAIM?
18 Months Past Fiscal Year End § Current Claim = Within 6 mo § Amended Claim = Within 7 to 18 mo
TURNAROUND TIMES
From receipt of a complete claim:
§ CCPC Current Claim – 4 months § CCPC Amended Claim – 8 months § Non-CCPC Claim – 12 months
CRA REVIEWS
CRA Review ≠ Tax Audit Multiple types of Reviews:
§ Desktop § Financial § Technical & Financial § First Time Claimant Advisory Service (FTCAS)
THE DO’s
Do: § Pay yourself and staff § Start time tracking and proper documentation
now § Incorporate your company
THE DON’T’S
Don’t: § Underestimate the importance of
documentation § Focus on the business opportunity § Leave SR&ED claims until the last minute
JEFF CHRISTIE PARTNER 403 589 2809 | [email protected] BoastCapital.com | @BoastCapital | @ChristieLuge
Presenter Bios
47
CalltotheBarNewYork,2007Bri7shColumbia,2012AreasofExper;seMergersandAcquisi7onsCorporateFinanceCorporateandCommercialTechnologyStart-upCompaniesVentureCapital/PrivateEquityEduca;onB.Comm,McGillUniversity,2003J.D.,UniversityofToronto,2006
@meplaw
AndrewHennigar
Andrew Hennigar ([email protected]; (604) 891-1184) Senior Associate Andrew’sprac7cefocusesonmergers&acquisi7ons,privateequityandventurecapitaltransac7ons,corporatefinance(bothpublicandprivate)andgeneralcorporateandcommercialma^ers.Andrewrepresentsabroadrangeofclients,includingstart-ups,growthstagecompaniesandmatureprivateand public companies. Andrew has experience in share and asset purchases, dives7tures, equity offerings, spin-outs, restructuring transac7ons,shareholderma^ers,securi7es lawandTSX/TSX-Vcomplianceandcorporategovernance.Andrewhasalsorepresentedpurchasersofassets throughbothCanadianandUSbankruptcyproceedings.
Prior to joiningMEPBusinessCounsel,Andrewprac7ced in the securi7es groupof theVancouverofficeofBlake,Cassels&Graydon LLPand in themergers&acquisi7onsgroupoftheNewYorkofficeofPaul,Weiss,Rivind,Wharton&GarrisonLLP.
SelectedRepresenta;veWork§ RepresentedShoes.comTechnologiesInc.initsacquisi7onsofalloftheoutstandingsharesofShoes.com,Inc.fromasubsidiaryofCalaresInc.,
andRicherPoorer,Inc.fromitsfounders.§ RepresentedanAlberta-basedconstruc7onmanagementcompanyinitsacquisi7onofalloftheoutstandingsharesofaVancouver-based,family
ownedconstruc7onmanagementcompany.§ RepresentedThunderbirdFilmsInc.initsacquisi7onofallofthesharesofAtomicCartoonsInc.§ RepresentedViableHealthworks(Canada)Corp.initsacquisi7onoftheAIMHealthGroup.§ RepresentedCardiomePharmaCorp.initscrossborderacquisi7onofCorrevioLLC.§ RepresentedWebtechWirelessInc.inthesaleofitsNextBusdivisiontoCubicTransporta7onServicesInc.§ RepresentedLMEricssonandthe“RockstarConsor7um”initsacquisi7onofNortelNetworks’patentporwolio.§ RepresentedLMEricssoninitsacquisi7onoftheassetsofNortel’sCDMAandGSMbusinesses.§ RepresentedWebloyaltyHoldings,Inc.inconnec7onwiththeshareforsharemergerwithandintoasubsidiaryofAffinionGroupHoldings,Inc.§ RepresentedShoes.comTechnologiesInc.initsnon-brokeredprivateplacementofcommonsharesforgrossproceedsof$45million.§ RepresentedGeneralAtlan7cLLCinconnec7onwithitspreferredequity investments inPeixeUrbano, Inc.,GiltGroupe, Inc.,RedVenturesLLC
andothers.
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Presenter Bios
48
CalltotheBarAlberta,2012Bri7shColumbia,2014AreasofExper;seMergersandAcquisi7onsCorporateFinanceCorporateandCommercialTechnologyStart-upCompaniesVentureCapital/PrivateEquityEduca;onB.Comm,ConcordiaUniversity,2003J.D.,UniversityofBri7shColumbia,2011
@meplaw
EmmanuelleFrederic-Popa
Emmanuelle Frederic-Popa ([email protected]; (778) 331-0286) Associate EmmanuelleFrederic-PopaisanAssociateatMEPBusinessCounsel.Emmanuelle’sprac7ceencompassesawidevarietyofcorporateandcommerciallaw transac7ons,witha focusonmergers&acquisi7ons, corporategovernanceandfinancings.Emmanuelleadvisespublicandprivatecompanies inCanadianandcross-bordermergers&acquisi7ons,financings,securi7esofferings,technology-relatedtransac7onsandregulatorycompliance.Shealsoregularlyassistsclientsongeneralcorporatema^ersandcorporategovernanceissues.
PriortojoiningMEPBusinessCounsel,EmmanuelleworkedintheCalgaryofficeofBlakeCassels&GraydonLLPrepresen7ngbothprivateandpubliclytradedissuersandac7ngonbehalfofunderwritersanddealersinawidevarietyofprivateandpublicofferingsofdebtandequitysecuri7esaswellasmergers&acquisi7ons.
Priortoprac7singlaw,EmmanuellewasanInforma7onTechnologyprojectmanageratJohnson&Johnsonandhasexperienceintheconsumer,medicaldevicesandpharmaceu7calindustries.
SelectedRepresenta;veWork
• RepresentedShoes.comTechnologiesInc.initsacquisi7onsofallofthesharesofSea^lebasedOnlineshoes.com,St.LouisbasedShoes.comandCaliforniabasedRicherPoorer,Inc.
• RepresentedaBri7shColumbiabasedonlineretailerinconnec7onwiththeissuanceof$10millionsecuredconver7bledebentures.• RepresentedThunderbirdFilmsInc.,aVancouverbasedfilmandtelevisionproduc7oncompany,inconnec7onwithitsacquisi7onofallofthesharesof
GreatPacificMediaInc.andSodaPicturesLimited.• RepresentedaBri7shColumbiabasedfoodandbeveragesdistribu7oncompanyinthesaleofitsassetstoaNewYorkbasedprivateequityfund.• Representedapubliclytradedcompanyonits$69-millionacquisi7on,throughaCanadiansubsidiary,ofaprivateAlberta-basedEngineering,Procurement
andConstruc7onManagementcompany.• Representedthetargetinconnec7onwithits$15.1-billionacquisi7onbyaforeigncompanyandsubsequentrestructuring.• Representedamajorpubliclytradedenergycompanyinconnec7onwithitsofferingsofseniornotesofanaggregateofUS$2.25-billionunderashelf
prospectus.• RepresentedapubliclytradedAlbertabasedcompanyonnumerouscross-borderprivateequitycommitmentsinprivatetechnologycompanies.• Representednumerousjunioroilandgascompaniesonapproximately$220millionofaggregateprivateequitycommitments.
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