An executor takes care of your estate when you die, but who takes care of things if you are unable to make decisions for yourself while alive?

Signing a power of attorney gives someone you trust implicitly — like your spouse, sibling or child — signing authority over your financial and legal affairs. The person appointed, known as your attorney, can conduct banking on your behalf, buy and sell property, and even renew your mortgage.

It isn’t fun to think of situations where you might need someone to take control over your financial affairs — but it can help tremendously in a number of situations, from a debilitating accident, to a brain injury, to a diagnosis of dementia.

The most common form used by individuals is an enduring power of attorney, effective upon signing, which can be used whether or not you are incapacitated. Some people prefer to grant a springing power of attorney, which can only be used once you become incapable, although this requires proof of your incapacity, which may delay use of the power of attorney.

Both types of enduring power of attorney will allow your trusted appointee to protect your financial and legal interests when you can’t protect yourself. The alternative to an enduring power of attorney, getting a court-appointed guardian, can be both time consuming and expensive.

Granting someone power of attorney does not have to be a permanent decision. You can choose to revoke or change your power of attorney at any time.

Much like writing a will and appointing an executor, a power of attorney will ensure your interests are represented. Choosing your power of attorney is an important planning decision and requires careful thought and consideration. Talk to Cohen Buchan Edwards today and see how we can help you plan for the unexpected and protect your interests and assets.

When setting up a business, there are a variety of business structures that are available. So which is best for your needs? Below is a general overview of three basic business structures.

Sole-Proprietorship

In a Sole-Proprietorship a business has a single owner who is solely responsible for all the liabilities a company owes to third-parties (eg. financial institutions). This business structure is the simplest way of organizing your business as it only requires a business owner to

1. Obtain a tax number; and
2. Open a bank account.

From a legal and tax standpoint, there is no distinction between the business and the individual who owns the business. As a result, there is single ownership of the assets and liabilities of the business and there are low administrative costs and few formalities associated with operating the business. The lower level of complexity of a sole-proprietorship allows business owners to use simple accounting software to track their revenue and expenses. Further, if a business owner chooses to retain an accountant for their accounting requirements, then there are likely to be lower fees associated with the work. The legal structure of a sole-proprietorship is such that no public reporting is necessary, and the sole proprietor only needs basic financial knowledge to run the company and satisfy banks, vendors, CRA etc.

From a tax standpoint, the sole proprietorship’s earnings before tax (EBT) form the taxable income of the sole proprietor. The sole proprietor’s income is taxed at the personal tax rates of the individual, hence this type of business structure is limited when it comes to deducting expenses and sheltering its income.

Finally, as mentioned, the liabilities of the sole proprietorship are also considered to be the liabilities of the individual owning the business. As a result, the business owner is fully responsible for all of the company’s dealings. This can lead to a situation where, if the business were to be sued, then the business and personal assets of the sole proprietor can be seized to settle claims.

Corporation

A Corporation is a separate legal entity that can own assets, incur debt, sue, be sued, enter into contracts, and hold property in its own name. A Corporation is formed when one or more individuals incorporate a business.  It can be incorporated provincially or federally.

A Corporation is considered to have potential “immortality” in that it is an impersonal entity that can in theory exist forever. This means that despite certain changes in the Corporation’s composition (eg. An owner dying, shareholders changing etc.), the Corporation would not dissolve.

A defining feature of a Corporation is the limited liability associated with it. Under all Canadian statutes providing for the incorporation of companies, the members who form the corporation and become its shareholders are only required to contribute towards the debts of the Corporation the amount that they have agreed to pay for their shares in the Corporation. Limited liability is a substantial advantage in that if the Corporation is sued, the owners’ personal assets cannot be seized to settle the claims. Further, the ownership percentage of the owners of a Corporation is dependent on how many shares the shareholders hold.

A strong advantage for Corporations within our current taxation scheme is that they have few limits on the expenses they can deduct for taxation purposes. Corporations pay tax on earnings before tax at established rates. Net income that is distributed to owners is then taxed again at their personal rates. Further, some Corporations receive preferential income tax treatment and Corporations often provide more flexibility in deferring taxes and in allowing the division of business income.

However, incorporating and maintaining a corporation can be a relatively costly endeavour. For example, a corporation is required to file its own income taxes as well as abide by its annual filing requirements. The initial cost of incorporation and organization required to maintain related documents can also be a hurdle to consider. Further, in the multiple owner structure of a Corporation the shared decision making can increase accountability, but can also lead to slower decision making.

General Partnership

A General Partnership is a business established by two or more owners. General Partnerships are fairly simple and inexpensive to form as there are few formal legal requirements. All the General Partnership needs is a:

1. Registered tax number for applicable taxes; and
2. Bank account.

Typically the owners (the “Partners”) work out a partnership agreement that outlines their respective powers, ownership share and capital contribution, profit distribution, and operating procedures for the business. By default, all Partners are able to share in the management of the company, in the absence of a partnership agreement that states otherwise.

A General Partnership includes joint ownership with some formalities and moderate administration expenses. The Partners of the Company essentially pool their funds to raise capital. A disadvantage of a General Partnership is that decision making can become cumbersome, as important decisions require voting among partners. However, the partnership agreement may provide that smaller, less important decisions may be made individually as long as the other Partners are informed.

Revenues, expenses and cash flow management are typically tracked internally with additional support from outside accountants. There are no public reporting requirements for General Partnerships, but general financial information would be required to run the company and satisfy banks, vendors, CRA etc.

From a taxation perspective, each Partner is taxed individually on his or her share of the partnership income. Hence, there is no need for a tax return from the General Partnership itself. In terms of disadvantages, there are greater limits to what expenses can be deducted and the taxable income of the individual Partners is subject to their personal tax rates.

Legally, each Partner is liable for all assets and liabilities of the General Partnership. As a result, if the company is sued, then each Partner’s personal assets can be seized to settle the claims.

* Much of this general information can be found on the Business Development Bank of Canada website

https://www.bdc.ca/en/articles-tools/entrepreneur-toolkit/templates-business-guides/glossary/pages/sole-proprietorship.aspx

https://www.bdc.ca/en/articles-tools/entrepreneur-toolkit/templates-business-guides/glossary/pages/corporation.aspx

https://www.bdc.ca/en/articles-tools/entrepreneur-toolkit/templates-business-guides/glossary/pages/general-partnership.aspx

If you have questions about how to best structure your business, contact Cohen Buchan Edwards LLP at 604.273.6411 to speak to one of our lawyers.

Being the director of a corporation sounds like a cushy job, but not so fast. A director has a stringent set of rules to abide by.

The BC Business Corporations Act sets out all the duties that a director has. Particularly, a director must act honestly and in good faith with a view to the best interests of the corporation and exercise the care, diligence, and skill that a reasonably prudent individual would exercise in comparable circumstances.

Honesty

Directors must respect the trust and confidence they have been given in managing the assets of the corporation. Further, they must be truthful and open and are prohibited from realizing any secret profits or non-approved conflict of interest.

Good Faith and In the Best Interests of the Corporation

The duty of good faith can be generally referred to as the duty of loyalty or fiduciary duty. Whether a director has exercised this duty of good faith is determined on a case by case basis.

Diligence

The duty of diligence puts the onus on a director to make those inquiries that a person of ordinary care in that position or in managing his or her own affairs would make. Some examples of situations where these duties of directors come into play are as follows:

1. Attending meetings à A director does not have to attend all directors’ meetings but should try to do so, because they may be held liable for any prohibited matters that occur while they were absent.
2. Relying on other directors à Generally, directors are not responsible for the misdeeds or decisions of any of their co-directors if they have not participated in the acts resulting in the damage and is not negligent.
3. Relying on officers and professionals à Directors are allowed to rely on the expertise and knowledge of officers of the corporation or skilled professionals (eg. lawyers, accountants etc.) to assist them in making decisions, but should still be cautious of the information prior to accepting it.

Skill

Directors must respect the trust and confidence they have been given in managing the assets of the corporation and must exercise the care, diligence, and skill that a reasonably prudent individual would exercise in comparable circumstances. Further, they must avoid using their position for their personal benefit and must avoid any conflicts of interest with the corporation. Finally, directors must maintain the confidentiality of any information they obtain by virtue of their position and they must serve the corporation selflessly, honestly and loyally.

Duties Are Owed to Corporation

The long standing principle has been that directors owe a fiduciary duty only to the Corporation and not anyone else. However, recent case law has carved out exceptions where directors may be held liable to other groups such as shareholders, creditors, employees, the government and the public, among other groups.

Conflicts of Interest

As mentioned previously, directors are to avoid conflicts of interest wherever possible. However, courts consider what a reasonable person, in considering a particular situation, would think gives rise to a real sensible possibility of conflict, not what one could imagine could arise out of a situation. Essentially, the courts are not willing to look at every possible situation which could arise out of a situation as a potential conflict.

Further, directors have an obligation to disclose to shareholders any profits or gains realized from a contract or transaction with the corporation if it is material to the corporation. The Business Corporations Act has codified this requirement, by setting out a general test which requires assessing whether

1. A contract or transaction which creates a conflict is “material” to the corporation; and
2. The director has a “material interest” in the contract or transaction.

If answers to both parts of the test, are a “yes” then a director should disclose the interest to the shareholders of the corporation.

From a practical perspective, an assessment of whether a director is in a conflict of interest, whether they have addressed the conflict of interest, and whether they have made sufficient disclosure to interested parties is a fact based exercise. Directors would be prudent to remain as transparent as possible when dealing with any potential conflicts of interest.

For inquiries on this topic, please contact one of the lawyers from our Business Law Group at 604.273.6411.

Cohen Buchan Edwards LLP has moved, our new location at 290 – 13777 Commerce Parkway, Richmond, BC V6V 2X3.  All telephone numbers and email addresses remain the same.

We are located just west of No 6 Road, the third driveway in. Visitor parking is available near the front of the building. CBE also has three reserved spaces at the rear of the building nearest the round about, marked Reserved 24 hours Cohen Buchan Edwards.

As of March 18, 2013, the Family Relations Act (“FRA”) was replaced with the Family Law Act (“FLA”). Sweeping changes came into effect under the new legislation affecting all aspects of family law. Amongst the many changes is the process by which parents can now move away and change the primary residence of the child.

The FRA did not specifically address child relocation and the case law in this area was often unclear.

The introduction of the FLA containing provisions dealing specifically with child relocation is intended to provide some clarity and certainty in this area. It offers this step-by-step process to resolve child relocation issues:

1. Firstly, the legislation treats parents who have a court order or written agreement respecting parenting arrangements or contact time with a child different than those who do not have such. If there is an order or written agreement, whether interim or final, the guardian who desires to relocate with the child must give to all other guardians and persons having contact with the child a minimum of 60 days’ written notice of the date of relocation and the proposed location.
2. The guardian who gave the notice of relocation must use his/her best efforts to cooperate with one another for the purpose of resolving any issues relating to the proposed relocation.
3. If within 30 days of receiving the notice to relocate, the non-relocating guardian does not file a court application for an order prohibiting the relocation, the guardian who gave the notice may relocate with the child to the proposed destination on or after the date set out in the notice.
4. If the non-relocating guardian makes an application to court for an order prohibiting the relocation of a child, the court will need to assess:
   1. the best interests of the child;
   2. whether the proposed relocation is made in good faith; and
   3. whether the relocating guardian proposed a reasonable and workable arrangement to preserve the relationship between the child and the non-relocating guardian, as well as other persons who are entitled to contact with the child or have a significant role in the child’s life.
5. If the court is satisfied that the aforementioned factors are met, then it may dismiss the application prohibiting the move and allow the guardian to relocate with the child.
6. If there is no written agreement and court order respecting parenting arrangements or contact with the child, the child’s guardian who desires to relocate with the child must apply to Court for a relocation order.
7. In these applications the court applies the same test and considers the same factors as those set out for applications made by a guardian to prohibit a proposed relocation with the child set out in point 4 above.
8. If relocation is permitted, the court may make orders necessary to ensure that the relocating guardian complies with the terms of the order permitting the relocation, which is intended to ensure the relocation is facilitated and the relationship between the child and the non-relocating guardian is preserved.

This more organized and systemized approach is intended to reduce the amount of cases that go to litigation on parent mobility and child relocation issues. The process is set out in the legislation for parents to follow. Parents who do not object to the relocating parent moving away with the child can simply acquiesce to the proposed relocation by not doing anything after receiving the written notice. Parents who do not object to the relocation but require certain measures to be in place to ensure that his/her relationship is preserved with the child will have an opportunity to resolve such matters with the other parent outside of court as the parents are required to use best efforts to resolve such disputes.   It is only if such efforts cannot resolve the matters in dispute that either parent may bring an application to court.

Whether this new scheme will actually reduce the amount of cases that go to litigation on parent mobility issues is yet to be seen.   It nonetheless can be said that these changes are significant improvements to our legal system in dealing with the new challenges that arise from the surge of globalization and the increasing demand for freedom of mobility.

For more information regarding Family Law, please contact one of our Family Lawyers or complete this form and one would be happy to contact you.