Taxpayer Loses Amalgamation Appeal: SCC

In Envision Credit Union v. Canada, 2013 SCC 48, the Supreme Court rejected the taxpayer's bid to avoid the flow through requirements of s. 87 of the Income Tax Act by characterizing the merger of two credit unions as a non-qualifying amalgamation. The taxpayer structured the merger such that surplus properties of the merging credit unions were simultaneously transferred to a recently created subsidiary, but the court found that this arrangement contradicted the provisions of the B.C. statute governing amalgamations (the Credit Union Incorporation Act), under which an amalgamated credit union is the owner of all of the property of its predecessors. The court also went on to reject the look through approach used by the Federal Court of Appeal, finding at para. 58 that "(t)he tracing approach cannot be used to cause an amalgamation to meet the requirements of s. 87." The Tax Notes International article, Supreme Court Dismisses Appeal in Amalgamation Case, discusses the significance of the case.

Enforceability of Restrictive Employment Covenants in Commercial Agreements: SCC

The rules governing the enforceability of restrictive covenants relating to employment differ depending on whether the covenants are found in commercial agreements or in contracts of employment according to the Supreme Court in Payette v. Guay inc., 2013 SCC 45. The rules will be more generous in the commercial context ("where flexibility is required to protect freedom of trade and promote the stability of commercial agreements"), but much stricter in the context of contracts of employment or service, because "the legal framework applicable to contracts of employment takes account of the imbalance of power that generally characterizes an employer-employee relationship, and it is designed to protect employees." (para. 3) In this case, where the restrictions were negotiated in the context of the sale of a specialized crane rental business, the court found they must be interpreted in a manner consistent with the intention of the parties, unless proven to be contrary to public order. The court found no evidence that either the 5-year restriction or the failure to include a territorial limitation was unreasonable. The Davis publication,  Restrictive covenants: in sale transactions vs. employment agreements, discusses the ramifications of the decision for those drafting agreements of sale and concludes with the caution that it would be prudent to ensure that restrictive covenants are placed in the commercial agreement and not left to an employment or consulting agreement with the seller or its principal.

Court Underscores Importance of Carefully Drafting Option to Renew Clauses and Notices: MBCA

In 441 Main Inc. v. Silver Pawn Pictures Inc., 2013 MBCA 70, the landlord successfully appealed the lower court finding that the tenant had validly exercised its option to renew their commercial lease. "Simply put, the tenant's attempt to "engage in a dance" with the landlord with respect to the purchase of the building defeated its right to renew the lease," said the court at para. 49. By alleging in the option to renew that an undertaking to sell was given as an inducement to lease, the tenant was attempting to impose a new term or condition into the landlord and tenant relationship that did not exist under the lease. The effect of doing so, said the court, was to make the notice a counter offer, which the landlord expressly rejected. Since the notice was never retracted, it remained an impediment to the renewal of the lease, not the means by which it was exercised. This McMillan publication discusses the case.

Update on Legislation

Bill 211, The Personal Information Protection and Identity Theft Prevention Act, received royal assent on September 13, 2013 and will come into force on proclamation. This legislation governs the collection, use, disclosure and destruction of personal information by organizations in the private sector and requires those organizations to notify individuals who may be affected when that personal information is lost, stolen or compromised. This article discusses the "momentous" new legislation:

• Manitoba Joins The Ranks Of Other Provinces In Enacting Its Own Private Sector Privacy Legislation - McCarthy TÈtrault LLP

Bill 34, The Property Registry Statutes Amendment Act, and Bill 40, The Residential Tenancies Amendment Act, both received royal assent on September 13, 2013, and will come into effect on proclamation. The former amends The Real Property Act, The Personal Property Security Act and The Registry Act to allow services under those Acts to be provided by a designated service provider (see explanatory note for further details). The latter makes key changes to the rent regulation system, as described in the explanatory note.  

Companies Office Fee Changes

A number of fees payable under The Corporations Act and The Business Names Registration Act have changed effective October 1, 2013. A copy the new fee schedule is available from the Companies Office or on the web site.

Changes to the Provincial Nominee Program for Business

The Manitoba government announced upcoming changes to its provincial nominee program for business requiring potential applicants to submit an expression of interest and then be placed in a qualification group to be assessed against a points based system. Further details of the program,  an update, and the new application kit, are all available online.

Recommended Reading

Business lawyers may be interested in these recent publications:

Through the Looking Glass: Recent Developments in Piercing the Corporate Veil - this paper discusses the significance of the UK Supreme Court's recent watershed decisions on piercing the corporate veil (VTB Capital Plc v Nutritek International Corp, [2013] UKSC 5 and Prest v Petrodel Resources Ltd, [2013] UKSC 34).

Personal Information and Privacy Issues in Business Transactions: Part 1 and Part 2 - are part of a series of articles on the privacy issues arising in business transactions. Part 1 reviews the current privacy regimes in Canada and Part 2 looks at issues that arise during the due diligence phase of a transaction.

Uses and abuses of trademarks online - this Canadian Lawyer article on globalization and trademark enforcement examines the difficulty of advising clients on properly registering and maintaining trademarks in an online and globalized world.

Income Tax Act Changes To Taxation For Restrictive Covenants Are Now Confirmed: Beware As Consequences Could Be Taxing! - this McMillan tax bulletin summarizes the key features of the recently enacted s. 56.4 of the Income Tax Act, which impacts how payments for restrictive covenants are treated for taxation purposes.  

Better to agree now than fall out later - this Lawyers Weekly article canvasses the integral role valuation plays in shareholder agreements and what such clauses should cover.

Synergy in action - this Lawyers Weekly article discusses the importance of collaboration between the receiver and the forensic accountant in receiverships and what that entails.

Leadership Skills Series: Tools, Techniques and Strategies

Pitblado Lectures

The 2013 Isaac Pitblado Lectures, titled Human Rights Challenges and Achievements, will take place November 22-23, 2013, at the Fort Garry Hotel. Presenters will cover a variety of topical human rights issues including equality jurisprudence, the future of human rights tribunals and commissions, and how international human rights law impacts Manitoba practice.

CBA Skilled Lawyer Series

The CBA continues its series on practice competencies with four new transactions stream programs in 2014:

Negotiation Techniques for the Business Lawyer - online January 21, 2014;

Drafting Pitfalls: Most Litigated Business Clauses - online February 11, 2014;

Share Capital Basics - online April 10, 2014; and

Avoiding the 10 Biggest Mistakes Business Lawyers Make - online May 27, 2014.