Every province and territory has its own securities laws and regulatory agency. These agencies exercise a variety of responsibilities. They include: prospectus review and clearance; oversight of disclosure requirements; takeover bids and insider trading; registration and regulation of market intermediaries; enforcement of compliance with the regime; recognition and supervision of exchanges and other self-regulated organizations; and public education.

As the Supreme Court of Canada recently confirmed in its much-anticipated decision in Reference re Securities Act (December 22, 2011), Canadian securities law remains largely the responsibility of the provincial and territorial governments. Canada has no national securities law and no national securities regulator. Rather, many substantive aspects of securities regulation, such as registration and prospectus requirements and exemptions and continuous disclosure requirements are harmonized using “national instruments” or “national policies”. They are adopted by each of the provincial and territorial regulators. Moreover, initiatives such as the national electronic filing system (SEDAR) and the Passport System encourage regulators to delegate responsibilities to one another. This creates a system of “one stop shopping” for issuers and registrants.

Ontario is the jurisdiction of the Toronto Stock Exchange (TSX) and the principal regulator for most of Canadian reporting issuers. The Ontario Securities Commission (OSC) has generally taken a more active role in developing Ontario securities law using various regulatory instruments, policies and rules. The OSC exercises a very broad regulatory and disciplinary jurisdiction, similar to the American SEC.

In the last decade, efforts to increase interprovincial cooperation and to harmonize provincial and territorial securities laws have intensified. The possibility of replacing the provincial and territorial securities regulators with a single national regulator has gained momentum. In fact, the federal government drafted legislation to establish a federal securities regulator to administer a national regulatory regime. The draft legislation and the federal government’s ability generally to nationalize securities regulation was referred to the Supreme Court of Canada for a ruling on its constitutionality. While the Province of Ontario supported the draft bill, the provinces of Alberta, Quebec, Manitoba and New Brunswick opposed it.

The Court resolved the reference question by concluding that proposed “Securities Act as presently drafted” was unconstitutional; specifically, it was “not valid under the general branch of the federal power to regulate trade and commerce under s. 91(2) of the Constitution Act, 1867”. One awaits the federal government’s next step in its initiative. Will it re-draft the proposed legislation to make it compatible with the division of powers under the Constitution Act, 1867? Or will it seek a non-legal route, such as negotiating deeper harmonious arrangements with the provinces and territories? Will it seek to follow the example in Australia? There, a national scheme involving cross-vesting of jurisdiction faced constitutional setbacks. As a result, since 2001, the national scheme of securities regulation in Australia is premised on powers referred by the states to the Commonwealth. Watch this space to see what happens in this country.

1. What is the Office of Foreign Assets Control?

The Office of Foreign Assets Control (OFAC) operates within the U.S. Department of the Treasury. OFAC administers and enforces economic and trade sanctions based on U.S. foreign policy and national security goals against targeted foreign countries and regimes, terrorists, international narcotics traffickers, those engaged in activities related to the proliferation of weapons of mass destruction, and other threats to the national security, foreign policy or economy of the U.S.

OFAC acts under Presidential national emergency powers, as well as authority granted by specific legislation, to impose controls on transactions and freeze assets under U.S. jurisdiction. Many of the sanctions are based on United Nations and other international mandates, are multilateral in scope, and involve close cooperation with allied governments.

2. Who must comply with OFAC regulations?

All U.S. persons must comply with OFAC regulations, including all U.S. citizens and permanent resident aliens regardless of where they are located, all persons and entities within the U.S., and all U.S. incorporated entities and their foreign branches.

3. What are “prohibited transactions”?

By enforcing the necessary economic and trade sanctions, OFAC restricts prohibited transactions. OFAC defines a “prohibited transaction” as a “trade or financial transaction and other dealing in which U.S. persons may not engage unless authorized by OFAC or expressly exempted by statute.” OFAC is largely responsible for investigating the “prohibited transactions” of individuals, organizations, and companies who operate in foreign nations. OFAC also has the ability to grant exemptions for prohibited transactions on a case-by-case basis.

4. What are OFAC’s investigation powers?

OFAC investigation tools include administrative subpoenas. They allow OFAC to order individuals or entities to keep full and complete records regarding any transaction engaged in, and to provide these records if requested. OFAC’s director may hold hearings, administer oaths, examine witnesses, take depositions, require testimony, and demand the production of any books, documents, or relevant papers relating to the matter of investigation. Once OFAC has issued an administrative subpoena, the addressee must respond in writing within thirty days.

5. How much are the fines for violating these regulations?

The fines for violations can be large. Depending on the program, criminal penalties can include fines from $50,000 to $10,000,000 and imprisonment from 10 to 30 years for willful violations. Depending on the program, civil penalties range from $250,000 or twice the amount of each underlying transaction to $1,075,000 for each violation.

6. Are there exceptions to the prohibitions?

Yes. OFAC regulations provide for the granting of licenses. A license is an authorization from OFAC to engage in a transaction that otherwise would be prohibited. There are two types of licenses: general licenses and specific licenses. A general license authorizes a particular type of transaction for a class of persons without the need to apply for a license. A specific license is a written document issued by OFAC to a particular person or entity, authorizing a particular transaction in response to a written license application. Persons engaging in transactions pursuant to general or specific licenses must make sure that all conditions of the licenses are strictly observed. OFAC’s regulations may contain statements of OFAC’s specific licensing policy about particular types of transactions.

This post gives information only, not legal advice. If you have a legal problem or need legal advice, you should speak to a lawyer. For more information about OFAC regulations and guidance on how to apply for a specific license, please feel free to contact us.

Should you consult a lawyer before discussing debt and credit issues with a bankruptcy trustee?

A common misconception is that a bankruptcy trustee works for the creditors. A bankruptcy trustee does not work for the creditors, but he also does not “work” for the debtor or bankrupt person.

A bankruptcy trustee in Ontario is appointed by the court to administer the bankruptcy. The trustee’s job is to ensure that both the creditors and the bankrupt person follow the rules. A couple of examples follow.

The bankrupt must report his or her income each month, and to provide the trustee with information to file their taxes. Here, the trustee makes sure all required information is provided.

Suppose a creditor tries to garnish the bankrupt’s wages after the bankruptcy starts. Garnishment is a drastic measure for collecting a debt . It allows a creditor to take the property or wages of a debtor before the debtor gets possession of that property or income. Garnishment is always made by court order. A garnishing order always requires that money is paid to the court. It’s never paid directly to the creditor. Hence, the creditor’s actions are against the rules. So the trustee would seek a court order to stop that.

As the above situations exemplify, the bankruptcy trustee is the “middle man”, like a referee in a hockey game, making sure both sides follow the rules. Link: Lawyer Aurora

So the main question is: should you talk to a lawyer before you talk to a bankruptcy trustee? The answer is: “Yes, of course”. A lawyer works entirely for you, He or she can review your debt situation and advise you.  Also, bankruptcy lawyers usually have good working relations with several trustees and debt counselors. This relationship can work to your advantage.

We suggest that you first do your homework before dealing with a trustee.  Retaining a lawyer to assist you with your bankruptcy or debt reduction procedure is always highly recommended.

Article provided by Richmond Hill Lawyer

This post gives information only, not legal advice. If you have a legal problem or need legal advice, you should speak to a lawyer. For more information about debtor-creditor and bankruptcy law issues, please feel free to contact us.

1. Limited liability

A corporation is a separate and distinct legal entity from its owners. A corporation is therefore unlike a limited partnership, partnership, trust, co-ownership or joint venture. Shareholders are not personally liable for the acts of the directors, officers or other shareholders. There are some exceptions. The standards of reasonableness, prudence and due diligence apply to all such circumstances. The shareholders do not own the property of the corporation, and the rights and liabilities of the corporation are not those of the shareholders.

2. Protect your capital

Because of the principle of limited liability, shareholders of corporations have limited liability for business risks. Thus, the maximum amount of your capital at risk will generally be the capital you have contributed and/pledged to the company to acquire your shareholdings.

3. Tax advantages

The tax advantages to incorporating your business in some situations include a lower corporate tax rates and the carrying forward of losses from previous years to offset profits in later years (“tax deferral”).

4. Capital acquisition

The securities of a corporation are generally more readily marketable. As a result, corporate shares (and debt instruments) are often seen as more attractive investments than say units in partnerships or joint ventures. Corporations can issue various classes of shares (in addition to other debt instruments such as bonds) in order to raise capital. This is an attractive feature to investors because it allows for partial ownership of the corporation.

5. Perpetual existence

The existence of the corporation is not affected by a change in the people that own and/or manage the corporation. The shareholders, directors and officers may retire or sell their shares, but the corporation continues in existence.

There is a ‘built in’ estate and succession planning for the incorporated entities. Therefore, the founder’s absence will not hinder the corporation’s existence.

6. Mergers and acquisitions

A corporation can merge or amalgamate with another corporation.

7. Better public image

Incorporated businesses have a better “image” than unincorporated businesses. Incorporated companies are more likely to attract investors than a sole proprietor or partnership.

This post gives information only, not legal advice. If you have a legal problem or need legal advice, you should speak to a lawyer. For more information about incorporation and other business entities, please feel free to contact us.

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Your right not to speak to the police when questioned is part of your fundamental right to be free from self-incrimination; that is, to not provide the police with evidence that may be used against you.

You have a duty to identify yourself by giving them your name, however, and in some circumstances, your birth date and address. If you refuse to identify yourself to the police, they can hold you in custody for the purposes of determining who you are.

The scenario is common. The police might think that you know about an incident. The police may or may not be seeking to charge you. Or suppose you have already been charged, or are at the police station and about to be charged. You might think that you can avoid being charged by telling your story, or “talking your way out of it”.

Remember: the role of the police in investigating crime is to charge people whom they have reasonable grounds to believe have committed a criminal offence. To lay a charge, a police officer must have grounds to believe they are justified in doing so. In most circumstances, if they have grounds, they will lay the charge. Thus, when a police officer asks for a statement from someone who has not been charged, it usually means they do not have grounds to lay the charge. Any statement may just provide those grounds.

The police must tell you of your right to remain silent. The reason for the right to silence is to give you the opportunity to speak to a lawyer and then make a free and meaningful choice about whether to speak.  After speaking with the lawyer, the police can continue to ask you anything they want without the presence of a lawyer.

The general rule of thumb is to refrain from speaking with the police.  The three situations below underscore your right to remain silent.

Walking down the street

Suppose you are walking down the street and a police officer says he wants to speak with you.  Most people who encounter this situation will stop and speak to the police officer until it becomes clear that the conversion is over.  Most people believe that when a police officer asks to speak with you that you have no choice but to comply.  In fact, the Canadian Charter of Rights and Freedoms (Charter) gives everyone many protections in these circumstances.

You might well not know if the police have reasonable grounds to force you to remain.  The situation might be ambiguous.  What should you do? Just tell the police officer that you do not wish to speak to him and ask “Am I free to leave?” If the police officer tells you that you are free to leave, you can simply walk away.  If the police officer tells you that you are not free to leave you are now detained and have to remain until they allow you to leave.  When you are detained, section 10(a) of the Charter requires the police to tell you why. Under section 10(b) of the Charter, they must let you speak to a lawyer in private as soon possible.  You should always take the opportunity to speak with a lawyer first before speaking with the police. When you are detained, you do not have to say anything to the police.  You do not have to answer any of their questions. The police may make you feel like you have to answer their questions. But the law allows you to remain silent.  While generally not recommended, you might choose to speak to the police. If you do, anything you say must be the truth to avoid being charged criminally.

Section 9 of the Charter protects individuals from arbitrary detentions.  A “detention” occurs when the police through words, or actions, force you to stop and remain with them.  “Detained” means that the police have taken control of your movements, either by physically restraining you or by commanding you to stay put. An obvious example of a detention is an arrest; the police by force ensure that you remain in their custody.  Or the police could simply say “stop” or “don’t move” or block your path and a detention would occur. Simply put, a detention occurs when the police’s actions cause you to reasonably believe that you are not free to walk away.  The police are only permitted to detain you when they have reasonable grounds to believe, or suspect, that you are engaged in criminal activity.  If the police do not have the required grounds, then the detention is illegal and any evidence they obtain can be excluded at trial if one occurs.

Driving your car

Suppose you are driving your car and a police officer pulls you over. Just like when you’re walking down the street, your Charter rights apply to you and also to anyone else in your car. But you should know a few things to ensure that you are can exercise your rights in the car if you need to.

First, the law recognizes that there are a few issues that the police should legally be able to investigate in almost all driving situations. These issues include: (1) whether the driver is licensed to drive; (2) whether the motor vehicle is properly insured and registered; and (3) whether the vehicle is in good working order.  Driving is considered a privilege, not a right. The power for a stop of this kind comes from the Highway Traffic Act. But this power does not allow the police to pretend to stop a car for a legitimate investigation of a Highway Traffic Act offence. If the real reason the police have stopped your car is because they don’t like the way you look or are just curious to stop you and see what you are doing, they will be breaching your right not to be detained, or arrested, arbitrarily, under s. 9 of the Charter.

Similarly, the police power to stop your car to investigate your licence, insurance, registration, or the safety of your car does not permit a comprehensive search of your car or an investigation into who your passengers are.  Since they are not driving the car, they do not have to identify themselves to the police, unless the police have some other reasonable suspicion or belief that they are involved in a criminal offence.  Searches that go beyond the purposes of a Highway Traffic Act investigation will breach your right not to be unreasonably searched, protected by s. 8 of the Charter, unless the police can show that they otherwise had reasonable grounds or authority to search you.

The police may request or order that you allow them to search your vehicle over the course of a vehicle stop. You do not have to allow the police to do this. You would be wise to insist on calling a lawyer immediately, before you make any decision or give any permission.

If the police have grounds to believe you have committed a criminal offence, or if they observe you committing a Highway Traffic Act offence, they may stop your vehicle and conduct further investigations of you, and in some cases, your passengers. If you are stopped by the police, insist on your right to speak to a lawyer immediately and to be told why you are being stopped. This is the best way to ensure that your rights are protected.

At the front door of your home

Suppose you are at home and a police officer knocks on your door. The police or other law enforcement authorities can only lawfully enter your home under certain circumstances, such as when they have an arrest warrant or a search warrant, or you’ve invited them in. Otherwise they are the same as any trespasser.

A police officer, like anyone, has your implied consent to walk onto your property to talk to you at your front door. If the police have a legitimate reason for communicating with you, such as responding to a call or seeking information for an investigation, then there is nothing wrong with this. But the police may not conduct a “sniff” test to see whether there is any sign of criminal activity. You do not have to answer the door when the police knock. You do not have to speak to the police at your door, and you can end any conversation with them whenever you want.

In summary, the best approach in the above situations is often to remain silent.

“Any lawyer worth his salt will tell the suspect in no uncertain terms to make no statement to the police under any circumstances.”

- United States Supreme Court Justice Robert H. Jackson in Watts v. State of Indiana (1949)

This post gives information only, not legal advice. If you have a legal problem or need legal advice, you should speak to a lawyer. For more information about your rights when dealing with the police, please feel free to contact us.

Offshore incorporation involves creating an offshore entity outside one’s primary jurisdiction of business. It is often one of the best methods of protecting one’s assets. Many different jurisdictions offer various levels of offshore legal protection. Generally, these offshore jurisdictions can be divided into three categories:

a. very expensive ones – these are often suitable for major financial institutions;

b. medium cost, high efficiency ones – these are highly suitable for small to medium sized entities that wish to benefit from offshore features to a great extent;

c. low cost, loosely regulated ones – these are very inexpensive to  establish and operate.

I personally do not recommend using jurisdiction ‘c’ since the rule of law may be lax and your legal rights may not be protected.

I suggest ‘a’ for those who can afford it, and ‘b’ to almost any aspiring businessperson!

This post gives information only, not legal advice. If you have a legal problem or need legal advice, you should speak to a lawyer. For more information about offshore incorporation, please feel free to contact us.

For the first post, we would like to bring to our reader’s attention one of the most important factors in the success of a business — effective risk management. Risk management is the art and science of preventing risks, and minimizing and effectively dealing with risks if and when they arise. Rigorous risk management is an essential element of good governance.

The three pertinent categories of risk are briefly described below.

Regulatory risk, or “legislative and regulatory risk”, is the potential that a change in laws and regulations will materially impact a security, business, sector or market. A change in laws or regulations made by the government or a regulatory body can increase the costs of operating a business, reduce the attractiveness of investment and/or change the competitive landscape. Applied globally, regulatory risk means the risk of operating or investing in a country where regulatory changes may have an adverse impact on earnings or returns.

Regulatory risk occurs when an organization fails to comply with laws or regulatory requirements. These requirements exist in virtually every industry and are specific to it.

Legal risk is the potential for loss that is primarily caused by:

(1) the uncertainty of legal proceedings and potential legal proceedings;

(2) a defective transaction or an unenforceable agreement; or

(3) a failure to adequately protect the business’s assets.

Where legal risk results from litigation, significant losses are possible regardless of whether a claim is successfully defended. Even a successful defence will incur substantial legal costs. Worse, losing a court case could expose a company to a considerable judgment award.

If a claim, whether an ordinary lawsuit, a derivative action, or a class action, is brought against a company and/or its directors, then management’s time and attention is diverted from running the business and earning profits. In addition, the out-of-pocket costs associated with the defense of the claim (legal fees, experts, public relations firms and other consultants) can be huge. Share prices can even be affected.

Reputational risk is the potential for operational disruption or other damage to an organization resulting from a loss of its standing, reputation or trustworthiness. Some recent famous examples of companies whose reputations were damaged are BP, Toyota, Goldman Sachs, Enron, Arthur Andersen LLP, RIM and Maple Leaf Foods.

Regulatory and legal risk and reputational risk are clearly related. Defending and/or losing a court battle or not complying with laws and regulations may adversely impact an organization’s reputation. A variety of areas can be negatively affected if a business’s reputation is tainted. A loss of reputation may affect the organization’s customers, investors, market analysts, distribution intermediaries, alliance partners, regulators, the media, the general public or anyone who can have an impact on the organization.

For instance, an infamous business might struggle to attract new customers and keep existing ones. Consequently, revenue and profitability could decline.

A private company that is “de-valued” and that is part of a corporate group may find it harder to get capital infusion from its parent or to compete with other subsidiaries in the group for capital from the parent. It might even be sold off.

A public company might find it more difficult to raise funds in the equity markets if its reputation is tarnished.

These are just a few of many examples of the possible fallout from a loss of reputation.

To manage regulatory, legal and reputational risks, a successful organisation must first identify all potential risks, which comes from clearly understanding your business. The next step is to implement internal mechanisms and safeguards to minimise the occurrence of risk-inducing events.

From a legal perspective, the very first act of risk management in the life of a business is choosing an appropriate business structure. Whether a sole proprietorship, partnership (general or limited), corporation, unlimited company, or joint venture, the nature of the business structure could significantly impact the potential risks of the business’s stakeholders. Depending on your business’s nature, stage of development and industry, identifying and managing risk varies in complexity. Dealing with risk is easier if you adopt a methodical and analytical approach.

This post gives information only, not legal advice. If you have a legal problem or need legal advice, you should speak to a lawyer. For more information about risk management fundamentals in your industry and for assistance in systematically analyzing your business to identify risks, please feel free to contact us.

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