“Entrepreneurs are willing to work 80 hour weeks to avoid working 40 hours for someone else” - Lori Greiner.
If you are like the entrepreneurs Lori Greiner is talking about, your day probably consists of managing competing demands to keep your business running. You focus on growing your business, marketing, innovating new products or services, and spending time managing your employees. This leaves little room for you to pause and check up on your business, including assessing whether the legal foundation is strong enough to support your endeavours.
Use this list to get started on your legal check-up. We'll cover:
Having the Right Business Structure
Lori Greiner's quote captures the essence of entrepreneurial dedication, but as your business evolves, so should its structure. Do you have the right business structure given the current size of your business? When you were starting, a sole proprietorship might have been the best option for you. Now that your business is growing, is it still the right vehicle for your business?
During a legal check-up, we review your business structure and provide guidance regarding the type of structure that is best suited to your needs. Learn more about choosing the right business structure.
The Internal Structure and Governing Documents
Your business’s internal processes are the backbone of its success. If in a partnership, is there a comprehensive agreement in place? Are the roles and responsibilities of each partner clearly outlined? The same goes for corporations. Do the officers and directors have clearly outlined roles and responsibilities?
At this stage, we go through governing documents, ensuring they align with your current business reality. We review the partnership agreement to see whether it holds up against the business you are running today. For corporations, we review the corporate by-laws and assess whether it’s time to implement a shareholders’ agreement. We also check to see if the directors and officers were legally appointed. We’ll suggest any necessary changes or corrections so that your internal structure and governing documents accurately reflect the reality of your business.
Ownership Interest
For corporations, review the securities register to ensure the information contained in the corporate ledgers is up to date with the current shareholders. This includes ensuring the shareholder ledger, the share registry, and the transfer registry have the right information. We also check to make sure the share certificates are issued to the right shareholders. The information should accurately reflect the class and number of shares issued and to whom they were issued.
Furthermore, we review the circumstances under which shares were issued and compare them to the governing legislation. For example, under the Canadian Business Corporations Act shares can only be issued if they are paid in full. Meanwhile, under the Quebec Business Corporations Act shares may be issued whether or not they are fully paid. This makes a small but significant difference in the order in which shares are issued based on the governing legislation.
Buy-sell & Exit Provisions
As the business grows and evolves, it’s important to implement an exit strategy. What happens if a partner or a shareholder wishes to exit? Who will take over the responsibilities of the partner? Who will buy-out the shareholder? We review your documents to assess whether buy-sell and exit clauses are in place that allows a partner or shareholder to leave without dispute. For corporations, this also means having a share valuation process in place.
Business Contracts
Your business, a synchronized mechanism, relies on contracts.
If you are renting, review your lease and whether it has been published. A published lease helps protect you in case the building is sold. Read our blog on commercial leases in Quebec to learn more.
Review your licensing agreements, intellectual property protection, service agreements with third parties, and any other contracts used in your business. Examine the contracts your clients' sign to ensure compliance with any legislation that may apply to your business, such as the Civil Code of Quebec and the Consumer Protection Act. We will draw up a list of these important agreements and store them in a virtual data room to have them easily accessible.
Life Insurance
Buy-sell provisions go hand in hand with life insurance policies. Having a life insurance policy for your partners in a partnership agreement, and for shareholders in a corporation helps protect the individual, the business, your business associates, and employees. For corporations, the life insurance policy provides funds for the capital gain that will arise from the value of the shares in the corporation upon a shareholders' death. The legal check-up allows us to review if the proper plans are in place.
Employment Matters
Employment agreements should contain non-disclosure, non-compete, and non-solicitation clauses. This will protect your business as, without these protections in place, your employees (and independent contractors) will be able to solicit your vendors and clients and compete with you.
Further, what are the employee policies in place, and are they accessible through an employee handbook? The employee handbook will provide clear guidelines for the employer and employee expectations and helps provide a defense mechanism in litigation matters.
Privacy policy & Terms and Conditions
In the digital age, client information is vital. Ensure your website’s terms and conditions and privacy policy are up to date with the current rules. In the absence of these, we will recommend a structure tailored to your type of business. This provides a framework for the type of information retained, how it’s used, and how clients can opt-out.
These are some of the key areas that you should use to conduct a legal check-up for your business. For more information or to get started with an assessment of your legal needs, get in touch with us today.
This blog post is not legal advice and is for general informational purposes only. Always speak with a lawyer before acting on any of the information contained herein.
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