Building Blocks: Structuring & Organizing Your Company

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<ul><li><p>Building Blocks Structuring and Organizing Your Company JANUARY 21, 2016 A N D R E W H E N N I G A R &amp; 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 </p><p>1</p></li><li><p>Agenda</p><p>q BasicBusinessForms</p><p>q CapitalStructure</p><p>q ShareholdersRightsandRisks</p><p>q BoardsofDirectorsDu;es</p><p>q ShareholdersAgreements</p><p>q Ques;ons</p><p>2www.meplaw.ca</p></li><li><p> You</p><p>Basic Business Forms Sole Proprietorship</p><p>IncomeExpensesLiabili7esRiskTaxRate</p><p>3www.meplaw.ca</p></li><li><p>Basic Business Forms Limited Partnership</p><p>GeneralPartner</p><p>Managementauthority</p><p>Unlimitedliability</p><p>FiduciarydutytoLPs</p><p>LimitedPartnersNo-managementauthority</p><p>Limitedliability</p><p>Taxpassthrough</p><p>4www.meplaw.ca</p></li><li><p>Basic Business Forms CorporaRonsNolimitsonmanagementauthority/exercisedthroughdirectorelec7on</p><p>Managedbyboardofdirectors</p><p>Limitedliability</p><p>Nofiduciarydutyasshareholder</p><p>D&amp;Ofiduciarydu7estothecompanySeparatetaxpayer</p><p>YourCoInc.</p><p>Shareholder1 Shareholder2 Shareholder3</p><p> Corporatelaw Bylaws/ar7cles Shareholders</p><p>agreement?</p><p>5www.meplaw.ca</p></li><li><p>CorporaRons Federal or Provincial?FederalJurisdic7on</p><p>CanadaBusinessCorpora7onsAct25%ofdirectorsmustbeCanadianresidentsAutoma7cna7on-widenameprotec7onAbilitytocarryonbusinessanywhereinCanada(separateregistra7onmayberequired)</p><p>BCJurisdic7onBCBusinessCorpora7onsActNodirectorresidencerequirementWaiverofAGMandproduc7onoffinancialstatementspermi^edIncreasedflexibilityspecialresolu7onapprovalthreshold(662/3%to75%)Slightlycheapertoincorporate</p><p>6www.meplaw.ca</p></li><li><p>Capital Structure</p><p>SeniorSecuredDebt</p><p>SeniorUnsecuredDebt</p><p>SubordinatedDebt</p><p>HybridSecuri7es/PreferredShares</p><p>CommonEquity</p><p>Priorityon</p><p>liqu</p><p>ida7</p><p>on</p><p>Stockop7ons</p><p>Mezzanine</p><p>7www.meplaw.ca</p></li><li><p>Capital Structure: Share ClassesMoreshareclasses=morecomplexitycarefullyconsiderwhatisnecessary</p><p>Shareswithnovo7ngrightsmayhaveclassvo7ngrightsunderlawforcertaintransac7ons</p><p>Sharestructurecanbemodifiedover7me</p><p>Commercial/regulatoryconsidera7onsmaydictateclassrequirements</p><p>8www.meplaw.ca</p></li><li><p>Capital Structure: Share ClassesStart-Up</p><p>Class Vo7ng Dividends Liq.Pref. Ves7ng Purpose</p><p>ACommon Yes Yes None Yes Foundershares/commonequity</p><p>BCommon No Yes None No Employeeop7onplan</p><p>Angel/VentureStage</p><p>Class Vo7ng Dividends Liq.Pref. Ves7ng Purpose</p><p>ACommon Yes Yes None Yes Foundershares/commonequity</p><p>BCommon No Yes None No Employeeop7onplan</p><p>CCommon Yes Yes 2x No Angelinvestorround</p><p>APreferred Yes Yesfixed% 2x No VentureCapitalround</p><p>9www.meplaw.ca</p></li><li><p>Shareholders Rights</p><p>ShareholderRightsVo7ng</p><p>Dividends</p><p>RighttoBringSuit</p><p>Administra7veRights</p><p>Ownership/Liquida7on</p><p>10www.meplaw.ca</p></li><li><p>Shareholders Risks</p><p>ShareholderRisksDilu7on</p><p>LimitedLiquidity</p><p>InvestedCapital</p><p>MinorityPosi7on</p><p>Posi7oninCapitalStructure</p><p>11www.meplaw.ca</p></li><li><p>Board of DirectorsResponsibleformanagingorsupervisingthemanagementofthebusinessandaffairsofthecompany</p><p>Shareholders</p><p>Directors</p><p>Officers</p><p>Elect</p><p>Appoint</p><p>Daytodayopera7ons</p><p>Strategicoversight/non-ordinarycourseac7ons</p><p>12www.meplaw.ca</p></li><li><p>Board of Directors Roles and ObligaRonsMaximizeshareholdervalueAppointandmonitorperformanceofofficers</p><p>Determinestrategicdirec7onandgoalsforthecompany(withinputfrommanagement)Developandimplementcontrolsoverfinancialrepor7ng</p><p>Developandimplementpoliciesforcompensa7on,corporategovernance,externalcommunica7ons,andaudi7ng(ifarepor7ngissuer)</p><p>Approvefinancialstatements</p><p>Approvefundamentalcorpora7onac7ons</p><p>13www.meplaw.ca</p></li><li><p>Officers Roles and ObligaRonsSpecificrolessetoutinjobdescrip7onsapprovedbyboardand/oremploymentagreements.CEO:daytodayopera7onalcontrol;goalsepng;fundraising;oversightofallotherofficers.</p><p>CFO:financialrepor7ng;financialcontrols;budge7ng;A/R,A/P.VPs:principalresponsibilityforgivenfunc7onalarea.</p><p>Secretary:corporategovernancecompliance;assisttheboardofdirectors.</p><p>Note:Corporatelawdoesnotspecifypar7cularofficerrequirements.</p><p>14www.meplaw.ca</p></li><li><p>Board of Directors and Officers - DuResDirectorsarefiduciaries:theyhavethelegaldutytoactprimarilyforanotherpersonsbenefitinmanagingtheassetsandopera7onsofthecompany.</p><p>DutyofCare</p><p>DutyofLoyalty</p><p>FiduciaryDu7es DutyofConfiden7alityDutyofCandour</p><p>15www.meplaw.ca</p></li><li><p>Board of Directors and Officers Duty of Care</p><p>DutyofC</p><p>are</p><p>Exercisethecare,diligenceandskillthatareasonablyprudentindividualwouldexerciseincomparablecircumstances.Actonaninformedbasisaqerdueconsidera7onoftherelevantmaterials,appropriatedelibera7onandinput,asrequired,fromexpertadvisors.</p><p>16www.meplaw.ca</p></li><li><p>Board of Directors and Officers Duty of Loyalty</p><p>DutyofLoyalty</p><p>Acthonestlyandingoodfaith.Actwithaviewtothebestinterestsofthecompany.</p><p>17www.meplaw.ca</p></li><li><p>Board of Directors Personal LiabilityUnpaidwages.Improperdividendpayments.Issuanceofsharesforinadequateconsidera7on.Repurchaseofsharesresul7ngwheninsolvent.Improperpaymentofindemnitytoadirectororofficer.Paymentofanunreasonablecommissiontopurchaserofshares.WithholdingundertheIncomeTaxActandExciseTaxAct(GST). 18www.meplaw.ca</p></li><li><p>Board of Directors PracRcal ConsideraRonsAr7cles/bylawssetoutminimumrequirements(number,mee7ngfrequency,recordkeeping).Businessjudgmentrule.Duediligencedefense/relianceonexperts.Indemnifica7on.</p><p>19www.meplaw.ca</p></li><li><p>Shareholders AgreementsSetshareholderrightsbeyondminimumsprovidedbycorporatelaw.Usually,notalways,allshareholdersarepar7es.Minorityshareholderprotec7ons.Majorityshareholderrightsandlimita7ons.</p><p>20www.meplaw.ca</p></li><li><p>Shareholders Agreements - Terms</p><p>Restric7onsonTransfer</p><p>RightofFirstRefusal/Offer</p><p>DragAlong</p><p>TagAlong</p><p>Governance</p><p>BoardComposi7on</p><p>SpecialApprovalThresholds</p><p>TieBreakProcedure</p><p>Financing</p><p>Ini7al/followoncontribu7ons</p><p>Pre-emp7veRights</p><p>21</p><p>Exits</p><p>ApprovalRights</p><p>Puts/Calls</p><p>TriggeringEvents</p><p>IPOConsequences</p><p>Non-Compe77on</p><p>Administra7ve</p><p>Informa7onRights</p><p>Confiden7ality</p><p>Amendments</p><p>www.meplaw.ca</p></li><li><p>MEP Business Counsel AtMichael,Evrensel&amp;PawarLLP(MEPBusinessCounsel),weapproachtheprac7ceofbusinesslawdifferently.Weareonamissiontochallengetheinherentinefficienciestypicallyfoundinconven7onalBigLawfirms,pushingtorejecttheinflexibleandexpensiveservicemodelsfoundatthosefirms.</p><p> Asaguidingprinciple,wearecommi^edtoprovidethesamehigh-qualityexper7seofatop-7erna7onallawfirm,butdeliveritwiththeinnova7on,cost-efficienciesandpersonala^en7venessyoudexpectfromdedicatedin-housecounsel.</p><p> AsaCanadiancorporateandentertainmentlawfirmwithextensiveinterna7onalexperience,ourcontemporarymodelissimplebutfarfromcommon:</p><p> World-ClassExperienceOurteamofhighlyexperiencedandaward-winninglawyerswithtrainingandexperiencefrominterna7onallyrecognizedfirmsinLondon,NewYork,Toronto,Montreal,BeijingandVancouverprovideworld-classbusinessandentertainmentlegalservicestosomeofNorthAmericasmostnotablecompanies.</p><p> Client-CentredApproachClientsnowdemandmoreoftheirlegaladvisors,whichisdrivingachangeinthelegalserviceslandscapeinCanada,andrightlyso.Businessesexpectgreatervalueatsensibleprices,whichisachievedbyreceivingprac7callegaladvicetailoredtoadvancetheirgoals.AtMEPBusinessCounsel,wehaveanunwaveringcommitmenttoyourbusiness,withagoaltoprovideyouwithbespokelegalservicesthatputyourrealneedsfirst.</p><p> Business-FirstThinkingWehaveauniquecombina7onofestablishedlegalexper7seandcommercialunderstanding.Effec7vebusinesscounselshouldhelpdriveyourcommercialsuccessbycraqingsolu7ons,notbysimplyiden7fyingconstraints.AtMEPBusinessCounsel,weprideourselvesonaligningouradvicewithyourcorebusinessobjec7ves,offeringsolu7onstoovercomeobstacles.Aqerall,weareentrepreneursinourownright.</p><p> FlexibleValue-BasedPricingandAlterna;veFeeArrangementsYourbusinessneedsareunique.ThatswhyMEPBusinessCounselisflexiblewhenitcomestopricingandfeearrangements.Unhinderedbytherigidityoftheconven7onalbiglawfirmmodel,MEPBusinessCounselisabletoworkwithyoutorespondtothoseuniquedemands.Regardlessofthefeearrangement,atthecoreofeachofourmandatesisacommitmenttoprovideexcep7onalvalueandbuildlas7ngbusinessrela7onships.</p><p> www.meplaw.cawww.facebook.com/mepbusinesscounsel@meplawMEPBusinessCounsel(604)669-1110</p><p>22</p><p>www.meplaw.ca</p></li><li><p>SR&amp;ED </p><p>Presented by Jeff Christie, Partner, Boast Capital </p></li><li><p>OUTLINE </p><p>I. Overview of the SR&amp;ED Program II. Benefits of Claiming SR&amp;ED III. CRAs Requirements IV. Dos and Donts V. Q&amp;A </p></li><li><p>I. OVERVIEW OF THE SR&amp;ED PROGRAM </p></li><li><p>WHAT IS SR&amp;ED? </p></li><li><p>APPLICABLE INDUSTRIES </p></li><li><p>QUALIFYING CRITERIA </p><p>Must meet three criteria to qualify for SR&amp;ED: </p><p>1. Technological Challenges 2. Technological Uncertainty 3. Technical Content or Iterations </p></li><li><p>ELIGIBILITY The CRAs 5 questions: 1. Was there a scientific or a technological uncertainty that could not </p><p>be removed by standard practice/engineering? 2. Did the effort involve formulating a hypothesis specifically aimed at </p><p>reducing or eliminating the uncertainty? Continued </p></li><li><p>ELIGIBILITY 3. Was the adopted procedure consistent with the total discipline of </p><p>the scientific method, including formulating, testing, and modifying the hypothesis? </p><p> 4. Did the process result in a scientific or technological </p><p>advancement? 5. Was a record of the hypothesis tested and results kept as the </p><p>work progressed? </p></li><li><p>II. SR&amp;ED BENEFITS </p></li><li><p>WHO CAN CLAIM? </p><p>SMEs = defined as generating less than $500K taxable net income in the prior fiscal year. </p></li><li><p>SR&amp;ED BENEFITS Return rates for SME CCPCs: </p></li><li><p>SR&amp;ED BENEFITS Return rates for non-CCPCs: </p></li><li><p>IV. CRA REQUIREMENTS </p></li><li><p>TECHNICAL DOCUMENTATION CRA requires that SR&amp;ED documentation must: Have been documented at the time the work was completed Highlight technical obstacles or challenges Be dated </p></li><li><p>TIME TRACKING </p></li><li><p>FINANCIAL STATEMENTS </p></li><li><p>WHEN TO CLAIM? </p><p>18 Months Past Fiscal Year End Current Claim = Within 6 mo Amended Claim = Within 7 to 18 mo </p></li><li><p>TURNAROUND TIMES </p><p>From receipt of a complete claim: CCPC Current Claim 4 months CCPC Amended Claim 8 months Non-CCPC Claim 12 months </p></li><li><p>CRA REVIEWS </p><p>CRA Review Tax Audit Multiple types of Reviews: Desktop Financial Technical &amp; Financial First Time Claimant Advisory Service (FTCAS) </p></li><li><p>IV. THE DOS AND DONTS </p></li><li><p>THE DOs </p><p>Do: Pay yourself and staff Start time tracking and proper documentation </p><p>now Incorporate your company </p></li><li><p>THE DONTS </p><p>Dont: Underestimate the importance of </p><p>documentation Focus on the business opportunity Leave SR&amp;ED claims until the last minute </p></li><li><p>JEFF CHRISTIE PARTNER 403 589 2809 | jchristie@boastcapital.com BoastCapital.com | @BoastCapital | @ChristieLuge </p></li><li><p>Presenter Bios</p><p>47</p><p> CalltotheBarNewYork,2007Bri7shColumbia,2012AreasofExper;seMergersandAcquisi7onsCorporateFinanceCorporateandCommercialTechnologyStart-upCompaniesVentureCapital/PrivateEquityEduca;onB.Comm,McGillUniversity,2003J.D.,UniversityofToronto,2006</p><p>@meplaw</p><p>AndrewHennigar</p><p>Andrew Hennigar (ahennigar@meplaw.ca; (604) 891-1184) Senior Associate Andrewsprac7cefocusesonmergers&amp;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.</p><p>Prior to joiningMEPBusinessCounsel,Andrewprac7ced in the securi7es groupof theVancouverofficeofBlake,Cassels&amp;Graydon LLPand in themergers&amp;acquisi7onsgroupoftheNewYorkofficeofPaul,Weiss,Rivind,Wharton&amp;GarrisonLLP.</p><p>SelectedRepresenta;veWork RepresentedShoes.comTechnologiesInc.initsacquisi7onsofalloftheoutstandingsharesofShoes.com,Inc.fromasubsidiaryofCalaresInc.,</p><p>andRicherPoorer,Inc.fromitsfounders. RepresentedanAlberta-basedconstruc7onmanagementcompanyinitsacquisi7onofalloftheoutstandingsharesofaVancouver-based,family</p><p>ownedconstruc7onmanagementcompany. RepresentedThunderbirdFilmsInc.initsacquisi7onofallofthesharesofAtomicCartoonsInc. RepresentedViableHealthworks(Canada)Corp.initsacquisi7onoftheAIMHealthGroup. RepresentedCardiomePharmaCorp.initscrossborderacquisi7onofCorrevioLLC. RepresentedWebtechWirelessInc.inthesaleofitsNextBusdivisiontoCubicTransporta7onServicesInc. RepresentedLMEricssonandtheRockstarConsor7uminitsacquisi7onofNortelNetworkspatentporwolio. RepresentedLMEricssoninitsacquisi7onoftheassetsofNortelsCDMAandGSMbusinesses. RepresentedWebloyaltyHoldings,Inc.inconnec7onwiththeshareforsharemergerwithandintoasubsidiaryofAffinionGroupHoldings,Inc. RepresentedShoes.comTechnologiesInc.initsnon-brokeredprivateplacementofcommonsharesforgrossproceedsof$45million. RepresentedGeneralAtlan7cLLCinconnec7onwithitspreferredequity investments inPeixeUrbano, Inc.,GiltGroupe, Inc.,RedVenturesLLC</p><p>andothers.</p><p>www.meplaw.ca</p></li><li><p>Presenter Bios</p><p>48</p><p> CalltotheBarAlberta,2012Bri7shColumbia,2014AreasofExper;seMergersandAcquisi7onsCorporateFinanceCorporateandCommercialTechnologyStart-upCompaniesVentureCapital/PrivateEquityEduca;onB.Comm,ConcordiaUniversity,2003J.D.,UniversityofBri7shColumbia,2011</p><p>@meplaw</p><p>EmmanuelleFrederic-Popa</p><p>Emmanuelle Frederic-Popa (epopa@meplaw.ca; (778) 331-0286) Associate EmmanuelleFrederic-PopaisanAssociateatMEPBusinessCounsel.Emmanuellesprac7ceencompassesawidevarietyofcorporateandcommerciallaw transac7ons,witha focusonmergers&amp;acquisi7ons, corporategovernanceandfinancings.Emmanuelleadvisespublicandprivatecompanies inCanadianandcross-bordermergers&amp;acquisi7ons,financings,securi7esofferings,technology-relatedtransac7onsandregulatorycompliance.Shealsoregularlyassistsclientsongeneralcorporatema^ersandcorporategovernanceissues.</p><p>PriortojoiningMEPBusinessCounsel,EmmanuelleworkedintheCalgaryofficeofBlakeCassels&amp;GraydonLLPrepresen7ngbothprivateandpubliclytradedissuersandac7ngonbehalfofunderwritersanddealersinawidevarietyofprivateandpublicofferingsofdebtandequitysecuri7esaswellasmergers&amp;acquisi7ons.</p><p>Priortoprac7singlaw,EmmanuellewasanInforma7onTechnologyprojectmanageratJohnson&amp;Johnsonandhasexperienceintheconsumer,medicaldevicesandpharmaceu7calindustries.</p><p>SelectedRepresenta;veWork</p><p> RepresentedShoes.comTechnologiesInc.initsacquisi7onsofallofthesharesofSea^lebasedOnlineshoes.com,St.LouisbasedShoes.comandCaliforniabasedRicherPoorer,Inc.</p><p> RepresentedaBri7shColumbiabasedonlineretailerinconnec7onwiththeissuanceof$10millionsecuredconver7bledebentures. RepresentedThunderbirdFilmsInc.,aVancouverbasedfilmandtelevisionproduc7oncompany,inconnec7onwithitsacquisi7onofallofthesharesof</p><p>GreatPacificMediaInc.andSodaPicturesLimited. RepresentedaBri7shColumbiabasedfoodandbeveragesdistribu7oncompanyinthesaleofitsassetstoaNewYorkbasedprivateequityfund. Representedapubliclytradedcompanyonits$69-millionacquisi7on,throughaCanadiansubsidiary,ofaprivateAlberta-basedEngineering,Procurement</p><p>andConstruc7onManagementcompany. Representedthetargetinconnec7onwithits$15.1-billionacquisi7onbyaforeigncompanyandsubsequentrestructuring. Representedamajorpubliclytradedenergycompanyinconnec7onwithitsofferingsofseniornotesofanaggregateofUS$2.25-billionunderashelf</p><p>prospectus. RepresentedapubliclytradedAlbertabasedcompanyonnumerouscross-borderprivateequitycommitmentsinprivatetechnologycompanies. Representednumerousjunioroilandgascompaniesonapproximately$220millionofaggregateprivateequitycommitments.</p><p>www.meplaw.ca</p></li><li><p>QuesRons?</p><p>49www.meplaw.ca</p></li></ul>