Written by Ali Abdulla
JD Candidate 2024 | UCalgary Law Background - What are “Articles of Incorporation”? To incorporate a corporation under Alberta’s Business Corporations Act (the “ABCA”), the incorporator must send an application package to the Registrar of Corporations.[1] The most significant document in this application package is the “articles of incorporation”, which is a so-called “constating document” that establishes the corporation. Certain information must be set out in the articles of incorporation, including:
With this background in mind, we shall now discuss some of the more advanced considerations for articles of incorporation in Alberta. 1. Ensuring that the Corporation Meets the Private Issuer Exemption Essentially, in order to comply with securities laws in the province, a corporation must either file a prospectus, or fall under a “prospectus exemption”, before it issues shares.[4] One common prospectus exemption is the Private Issuer Exemption, which requires, among other things, that:
Note that the above discussion glosses over several nuances of the relevant securities laws, and is meant purely to flag issues related to the articles of incorporation. 2. Allowing Directors to Appoint Additional Directors between Annual General Meetings The articles of incorporation can grant the board of directors the power to appoint additional directors between annual general meetings, up to 1/3 of the current board.[6] This may help avoid a prolonged vacancy on the board of directors, or mitigate the stress of trying to quickly communicate with a large number of shareholders, if a director unexpectedly resigns or dies. 3. Miscellaneous Considerations The articles of incorporation can also include provisions allowing:
Conclusion Articles of incorporation can include much more than just the basic information required under section 6 of the ABCA. In order to set up the corporation for success, and avoid the headache of needing to amend the articles of incorporation, great care should be taken when drafting the constating documents. [1] Business Corporations Act, RSA 2000, c B-9 [“ABCA”], s 5 and 7(1); see also Government of Alberta, "Incorporate an Alberta corporation" (2023), online: <https://www.alberta.ca/incorporate-alberta-corporation>. [2] ABCA, s 6. [3] Ibid. [4] Securities Act, RSA 2000, c S-4, s 110(1). [5] This is an over-simplification, see National Instrument 45-106: Prospectus Exemptions, 2.4. [6] ABCA, s 106(4). [7] ABCA, s 30(1). [8] ABCA, s 107. [9] ABCA, s 48(14).
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Written by Alec Colwell
JD Candidate 2025 | UCalgary Law Termination is a common occurrence in start-up businesses. Employees don’t always work out as anticipated at the time of hire – this is even more true in a start-up where roles are typically less defined, highly dynamic, and lacking in established procedures.[1] The government and the courts have recognized that it would significantly disrupt employees' lives if they could be suddenly terminated with no time to seek replacement employment. To mitigate this problem, the mandatory minimums for reasonable notice were established. The Employment Standards Code[2] [the “Code”] outlines the mandatory minimum notice periods. The Code provides for a range of minimum notice periods depending on the employee’s length of service. In Alberta, this range begins at one week of notice for an employee who has been employed between three months to two years and increases to eight weeks of notice for an employee who has been employed for ten years or more.[3] Alternatively, an employer may opt to pay the employee a lump sum equal to their regular salary during the termination notice period without allowing them to continue working during that period.[4] This is known as severance pay. Common law factors, outlined in Bardal v Globe & Mail Ltd., [5] can entitle employees to more substantial severance compensation that is known as reasonable notice. The Bardal factors account for the likelihood that an employee can acquire similar work and include 1) the character of the employment, 2) the length of service, 3) the age of the employee, and 4) the availability of similar employment.[6] This common law determination of reasonable notice is the default position unless the employee is terminated with cause or the employment agreement contains a termination clause to limit the notice period.[7] If you can contract for the mandatory minimum notice period in a termination clause of an employment contract, then why concern yourself with the common law factors for determining reasonable notice? One reason is that a termination clause will not always stand up in court. In Machtinger v HOJ,[8] the employer’s contracted below the statutory minimum. As a result, the court held that the entire termination provision was void and the common law factors for determining reasonable notice would apply.[9] In McKercher v Stantec,[10] the court severed the termination provision of the employment contract when they found that the terms of the contract no longer reflected the objective reality of the plaintiff’s employment. The plaintiff had worked his way up in seniority over several years with no alterations made to his original contract.[11] The court again defaulted to the common law to determine reasonable notice.[12] To limit the amount of severance that an employer will have to pay, the best course of action is to seek legal help in drafting an unambiguous employment contract with a legal termination clause. Additionally, having employees sign updated employment contracts when significant terms of their contract change will alleviate issues regarding the enforceability of a termination clause. If an employment contract does not contain a termination provision, being aware of how the Bardal factors affect the determination of reasonable notice will assist an employer in negotiating fair severance. [1] Bryce Tingle, Start-Up and Growth Companies in Canada: A Guide to Legal and Business Practice, 3rd ed (LexisNexis Canada Inc, 2018) at pp 127-130. [2] Alberta Employment Standards Code, RSA 2000, c E-9 [Code]. [3] Ibid at s 56. [4] Ibid at s 57. [5] [1960] OJ No 149 (ONSC). [6] Ibid at para 21. [7] Ibid. [8] [1992] SCJ No. 41, [1992] 1 SCR 986, at 508 (SCC). [9] Ibid. [10][2019] SCJ No. 159, 2019 SKQB 100. [11] Ibid. [12] Ibid. Written by Krystian Sekowski
JD Candidate 2025 | UCalgary Law In the realm where risk intertwines with innovation, Tyler Cowen illuminates the American venture capital (VC) system in his book "Big Business: A Love Letter to an American Anti-Hero." In his chapter on VC, Cowen explains how the American VC system emerges as a global beacon, a lifeline for visionary minds whose ground-breaking ideas are not yet primed for the public market. Cowen emphasizes that VC, often synonymous with Silicon Valley's tech juggernauts, symbolizes America's exceptional ability to nurture fledgling firms with exponential growth potential. What distinguishes venture capital is its daring embrace of risky ventures—those that traditional banks, risk-averse and bound by convention, would typically shy away from. Cowen paints a vivid picture of an ingenious entrepreneur with a concept carrying a mere 2 percent chance of success but possessing the potential to revolutionize industries. While conventional bankers might dismiss such odds, venture capitalists, according to Cowen's insights, have the acumen to see beyond mere numbers. They comprehend the long odds, strategically funding numerous start-ups, understanding that, although many may falter, the select few that succeed could redefine entire industries. As Cowen delves into, venture capital transcends the mere infusion of capital; it is a meticulously crafted tapestry of systematic networks, honed expertise, and an innate ability to recognize and foster talent. In the corridors of Silicon Valley, it transcends monetary contributions, evolving into a fusion of financial backing intertwined with invaluable advice, guidance, and mentorship. Cowen argues that venture capital's influence extends far beyond the bounds of Silicon Valley and the tech-centric domains. His exploration reveals that approximately 20 percent of VC firms specialize in information technology, with the majority diversifying their investments across various industries. Whether in healthcare, medicine, or green energy, venture capital, guided by calculated risk-taking, emerges as a catalyst capable of reshaping entire societies. Cowen's exploration unveils the colossal impact of venture capital, asserting that companies backed by VC contribute a staggering 21 percent to the U.S. GDP and play a pivotal role in fostering 11 percent of private-sector jobs, as per the National Venture Capital Association. Beyond financial contributions, Cowen underscores VC's transformative effect on economies and job markets. The success stories of tech giants—Microsoft, Apple, Google, Uber—find common ground in venture capital. Cowen illustrates how these narratives underscore VC's pivotal role in nurturing businesses that ascend to market leadership, effectively shaping the tangible fabric of the American dream. As Cowen elucidates, venture capital is not confined to Silicon Valley's glamorous precincts; it is a transformative force shaping economic landscapes in diverse regions like Boston, Brooklyn, and Austin. Cowen's exploration underscores how VC becomes a driving force in economic evolution, gentrification, and fostering vibrant communities. On a global scale, Cowen acknowledges the formidable challenge of replicating the success of American venture capital. The American model, he contends, thrives on a distinctive blend of finance and trust, forming a delicate yet potent ecosystem that proves challenging to recreate elsewhere. Contrary to assertions of being "good finance," venture capital, Cowen asserts, operates as an integral component of the broader American financial symphony. VC becomes a harmonious force propelling innovation in the intricate interplay with bank backstops, letters of credit, and the orchestrated chaos of initial public offerings. Cowen's exploration also tackles the inevitability of failure in the venture capital landscape. He positions it as an integral part of the entrepreneurial journey, a driving force behind creative destruction that paves the way for replacing outdated economic sectors with new, vibrant ones. As Cowen underscores, the result is a dynamic American economy with the resilience to adjust, adapt, and thrive. In Tyler Cowen's exploration of venture capital, readers uncover the hidden magic propelling America's innovation landscape. It transcends mere monetary transactions; it's about transforming dreams into reality, fostering diverse ventures, and shaping the dynamic heartbeat of the American economy. In Cowen's narrative, venture capital becomes more than an investment—it becomes a journey, an experience, and a driving force behind the nation's entrepreneurial spirit. Citation: Cowen, Tyler. Big Business: A Love Letter to an American Anti-Hero. St. Martin's Press, 2019. Pg. 138-142. Written by Justin Chia
JD Candidate 2025 | UCalgary Law Non-compete provisions are key mechanisms that start-ups and companies use to safeguard trade secrets and other sensitive information that employees may obtain during employment.[1] The primary concern with non-compete clauses is their potential to unfairly restrict an individual’s ability to find employment in their preferred trade or occupation.[2] Clauses with narrow geographic and temporal terms are more likely to be upheld by the courts in Canada. Additionally, courts are more likely to uphold restrictions on activities in which the employee is prohibited from engaging are not overly broad.[3] Non-compete clauses and various other restrictive covenants, including non-solicit provisions and Non-disclosure agreements (NDAs), can protect a start-up’s trade secrets from its competitors. The U.S. Federal Trade Commission recently proposed a nationwide ban on non-compete clauses.[4] The ban would prohibit employers from imposing non-competes on employees, regardless of how narrowly framed. The FTC’s main concern is that non-competes unfairly restrict an individual’s employment opportunities and undermine economic competition and innovation.[5] Any agreement that purports to limit an employee’s opportunities to seek future employment will fall under the ban, even if not explicitly labelled as a non-compete. Ontario is currently the only province in Canada that has imposed a ban on non-compete clauses.[6] The prohibition on non-competes reflects the common law presumption that they are contrary to public policy. Whether the rest of the provinces or the federal government will follow suit regarding outlawing non-competes remains to be seen. The implications of a ban on non-competes for start-ups are not precisely clear. Still, it would likely considerably impact how start-ups seek to protect trade secrets and intellectual property more broadly. Should a ban on non-competes be imposed, start-ups still have a variety of other restrictive covenants at their disposal to safeguard IP, including NDAs and non-solicits. Ontario, however, is discussing a potential ban on NDAs in the context of workplace misconduct, which, if implemented, could also be extended to IP.[7] Potential bans on non-competes and other restrictive covenants emphasize an increasingly clear reality. Corporate and employment legal regimes require start-ups to balance commercial interests with the rights of employees, which is by no means an easy task. [1] Bryce C Tingle, Start-up and Growth Companies in Canada: A guide to Legal and Business Practice, 3rd ed (Toronto: LexisNexis, 2018) at 131. [2] Shafron v KRG Insurance Brokers (Western) Inc, 2009 SCC 6 at para 16. [3] Payette v Guay Inc, 2013 SCC 45 at para 61. [4] “FTC. Proposes Rule to Ban Noncompete clauses, Which Hurt Workers and Harm Competition (5 January 2023), online: Federal Trade Commission <https://www.ftc.gov/news-events/news/press-releases/2023/01/ftc-proposes-rule-ban-noncompete-clauses-which-hurt-workers-harm-competition.> [5] Ibid. [6] “Ontario Bans Employee Non-Competition Agreements: What Does This Mean for Trade Secret Protection?” (9 December 2021), online: Fasken <https://www.fasken.com/en/knowledge/2021/12/ontario-bans-employee-non-competition-agreements-what-does-this-mean-for-trade-secret-protection.> [7] “Ontario to consult on banning NDAs in cases of workplace harassment, misconduct” (6 November 2023), online: CTV News <https://toronto.ctvnews.ca/ontario-to-consult-on-banning-ndas-in-cases-of-workplace-harassment-misconduct-1.6632398.> Written by Brody Gray
JD Candidate 2024 | UCalgary Law The OpenAI Story The recent news story of OpenAI brings the question of corporate governance and control into the spotlight. The story began on Friday, November 17th, when OpenAI announced they would be parting ways with CEO Sam Altman. The board ousted Altman after losing confidence in his ability due to an apparent lack of communication.[1] This news kicked off a weekend of high-tech corporate drama the likes of which Hollywood can only dream of. By Monday morning, Altman had secured employment at Microsoft. Quickly after this announcement, an OpenAI employee letter began circulating in which employees flipped the script.[2] Employees claimed they had lost faith in their board and demanded their resignation,[3] going as far as threatening their resignation if their demands were not met.[4] To further the drama, a board member of OpenAI publicly posted about their regret towards the board's actions and alluded to efforts to bring Altman back.[5] This dramatic plot seems to have concluded, with Altman returning to OpenAI as CEO, as announced in an OpenAI blog post by Altman.[6] Included in the blog post was a comment from the new Chair of the Board, Bret Taylor, stating how much he wants to express gratitude to OpenAI, and specifically OpenAI employees, "who came together to help find a path forward for the company over the past week."[7] What began as a board of directors ousting a CEO ends in the CEO's return and the board's dismissal. So, Who is Actually in Charge? This whole saga seems to run counter to our ideas of the corporate hierarchy and begs the question of who is actually in charge. To answer that question, I will begin by echoing the ever-applicable legal answer of 'It depends.' What the Law Says Corporate legislation is rather clear on who is in charge. All ultimate authority rests with shareholders, who are the company's owners. Yet shareholders are not expected to give their opinion on every single issue. For efficiency, expertise, and practical reasons, shareholders elect directors. Corporate legislation states that with more than 50% of the voting shares, directors can be elected to act in the interest of the shareholders.[8] Once directors are elected, they form a board of directors, which is given very broad authority to manage or supervise the business.[9] This authority to run the business includes the power to manage the corporation's affairs, yet directors typically will not concern themselves with the day-to-day management. Corporate legislation grants directors the authority to appoint officers and then delegate powers to these officers.[10] There are a few specific categories of authority that directors are forbidden from granting to officers. In the Alberta Business Corporations Act, those are laid out in section 115(3). Directors then have the power to appoint officers. They will appoint the CEO, CFO, CTO, COO, and various other positions depending on the context of the company and the business they operate. Officers are typically granted broad management powers, and the officers oversee the corporation's day-to-day management. The above structure is laid out in corporate legislation, but it is also subject to unanimous shareholder agreements, articles of incorporation, and bylaws. The exact share percentage required to elect a director or the powers directors can delegate to officers may change from corporation to corporation, but this describes a general structuring and chain of authority found in most corporations. It would, therefore, appear that the law paints a clear picture. Shareholders elect directors to manage on their behalf. Directors take this authority and oversee the company's strategy and long-term planning, elect officers, and further delegate the day-to-day management. Officers then manage the company on a day-to-day basis, reporting back to the board of directors. The chain places directors higher than officers, and it would seem clear that it is the directors in charge. So, What's the Catch? The reality is that corporate governance is not necessarily this clear-cut, as shown by the OpenAI story. For starters, CEOs often sit on the boards of corporations they manage to increase communication and efficiency. Some CEOs may be highly prominent figures or exceptionally well liked and respected within the company. The reality of social context and working relationships should always be considered when assessing the power dynamic. There is also the reality, as shown by OpenAI, that corporations require the efforts of multiple parties, including their employees, to function correctly. A board of directors may have the legal authority to fire a CEO, but if employees refuse to work for anyone else, this authority is of little use in practice. The board of directors should be wary that they cannot afford to alienate large portions of the corporation, even if they have the legal authority to act in such a way. This discussion is particularly relevant to entrepreneurs and those working in start-up companies. This nuanced power dynamic is even more prominent, as start-up companies are often close-knit groups with intricate social relationships. Founders who sit on the board of their companies may have the legal authority to dismiss officers, but they should not conflate legal authority with practical ability. Directors dismiss CEOs frequently and can exercise their authority to do so without complaint. Still, these decisions should be made with an understanding of the contextual dynamic within any specific corporation. [1] “OpenAI employees threaten to quit en masse after former CEO Sam Altman joins Microsoft”, NBC News, (20 November 2023), online: https://www.cbc.ca/news/business/microsoft-sam-altman-openai-chatgpt-1.7033588. [2] “Majority of OpenAI employees threaten to quit as backlash against ouster CEO continues”, CBC News, (20 November 2023), online: https://www.nbcnews.com/business/business-news/sam-altman-joins-microsoft-openai-ouster-rcna125940. [3] “Majority of OpenAI employees threaten to quit”, ibid. [4] “OpenAI employees threaten to quit en masse”, supra note 1. [5] “Majority of OpenAI employees threaten to quit”, supra note 2. [6] “Sam Altman returns as CEO, OpenAI has new initial board”, OpenAI Blog, (29 November 2023), online: https://openai.com/blog/sam-altman-returns-as-ceo-openai-has-a-new-initial-board. [7] “Sam Altman returns as CEO, OpenAI has new initial board”, ibid. [8] Alberta Business Corporations Act, RSA 2000, c B-9, 2(2)(a). [9] ABCA, ibid s. 101(1). [10] ABCA, ibid s. 121(a). Written by Zachary Kennedy
JD Candidate 2024 | UCalgary Law In the constantly changing world of software development, joint coding ventures have become the norm. As groups of independent developers converge to develop intricate programs and applications, the need to clarify and establish intellectual property rights for jointly authored programs has never been more critical. Innovation in this field thrives on the collaboration of distinct and diverse minds. Still, when done without a well-defined framework, the potential for authorship disputes, the preservation of moral rights, potential liability regarding usage rights, and commercial exploitation looms large. As such, there is a need to understand what rights each party is entitled to when engaging in any such collaboration, some of which will be covered by this article. Rights in Joint Authorship As defined in the Copyright Act, computer programs are considered "literary works" and are entitled to the protections and rights offered elsewhere.[1] Works of joint authorship are produced by the collaboration of two or more authors, where the contribution of one author is not distinct from the contributions of the other(s).[2] Real-world examples of joint authorship are multitudinous in the modern age: Hackathons, Game Jams, etc. As a particular example, one must look no further than GroupME – a chat app developed at the TechCrunch Disrupt Hackathon in 2010 by Jared Hecht and Steve Martocci, which was pursued as a business after the completion, ultimately being acquired by Skype for $80 million.[3] Establishing intellectual property rights can provide a framework for efficiently managing and exploiting such code. It allows for the smooth transition between a mere idea that a small group has worked towards making a reality and the entrepreneurial pursuit driven by a larger belief about the market's need for this specific technology. Ownership of Joint Authored Works in Canada Another critical reason for explicitly defining intellectual property rights in jointly authored code is to prevent disputes over ownership and usage. The author of a work is the first owner of the work of the copyright.[4] This means that each of the authors in a jointly authored work will be afforded the full suite of rights under the Copyright Act. Thus, they are granted rights to make assignments of their rights under the Act, limiting the ability of other joint authors to control who is involved with the copyrighted work. This is even more important when considering the term in which these rights are afforded – in the case of joint authorship, the rights afforded by the Copyright Act will exist during the life of the author who dies last and for 70 years after. Further still, copyrights carry moral rights with them, which need to be waived independently from any assignment of the copyright.[5] These moral rights can be infringed where the work is used in association with a product, service, cause, or institution to the author's prejudice.[6] It takes only a little imagination to conceive of a situation where some such program was developed by a group of three, where two decided to spin it into profitability. Somewhere down the road, just as they start seeking serious capital, the third author comes out of the woodwork demanding a claim on the intellectual property on which their business is founded. Or where two authors might have drastically different ideas for using their code. Each of them is well within the rights afforded under the Copyright Act to pursue their diametrically opposed objectives, making it difficult for either to establish their business. While collaboration was simple initially, the transition into founding a company around some such technology proves far more difficult. How Can This Be Addressed? To pre-empt such challenges, developers engaging in collaborative coding projects should seek to clearly establish intellectual property rights early in the process. This involves delineating each contributor's role and outlining the extent of each of their contributions to the development of any code. They may also seek to enter into agreements where other parties agree to assign any works and waive their associated moral rights. It is imperative to clarify and establish intellectual property rights for jointly authored software is undeniable. Whether in open-source endeavours, business applications, or academic projects, collaborative coding efforts should be guided by meticulously drafted agreements that clearly outline the rights of each contributor. By doing so, developers protect their coding endeavours and set the stage for a collaborative landscape that fosters innovation and can flourish without the shadows of uncertainty and conflict. With confidence in the protection of their contributions, developers are more likely to engage in future joint ventures. Clear intellectual property rights not only shield programmers' rights in the work at hand but also cultivate an environment conducive to sustained collaboration, fostering a market favouring innovation and giving developers peace of mind to charge forward with the development of potentially world-changing programs. [1] S.2, Copyright Act, RSC 1985, c C-42 [Copyright Act] [2] Supra. [3] Wikimedia Foundation. (2023, November 25). GroupMe. Wikipedia. https://en.wikipedia.org/wiki/GroupMe [4] Copyright Act, s.13(1) [5] Copyright Act, s.14.1 and s.28.1 [6] Copyright Act, s.28.2(1)(b) Written by Ranjot Brar
JD Candidate 2025 | UCalgary Law Competition (antitrust) law has been thrust into the forefront of tech regulation today. Recent enforcement of competition has focused on big tech and addressing the anti-competitive acts of large digital platforms. The dominance of tech giants such as Apple and Google is evident, and abuse of power is not always apparent in these data-driven markets. While the EU and US have stepped up enforcement of competition law in the digital era, Canada continues to act slowly. Case comparisons between the US, Canada and the EU illustrate that competition law enforcement in Canada lacks teeth. The European Commission has charged Google on three occasions for abuse of dominance in breach of competition laws, and the resulting fines have been in the billions of dollars. In 2017, the European Commission fined Google €2.42 billion for prioritizing its comparison shopping service to the detriment of competitors following a multi-year investigation.[1] In 2018, the Commission found that Google had abused its dominant position by requiring manufacturers to pre-install Google Search and Chrome onto Android devices, and the result was a record-breaking €4.3 billion fine for stifling competitors and innovation.[2] In 2011, The FTC shut down the US’ initial investigation for abuse of dominance as a search engine despite key staff members raising concerns about anti-competitive behaviour that harmed consumers and competitors in the search engine and advertising market.[3] Google is currently in the midst of the most significant antitrust trial since the 1990s Microsoft litigation in the US. They are accused of making important deals, specifically with Apple, that assisted them in maintaining dominance as a search engine while blocking competitors from gaining market share.[4] A verdict in this landmark case is expected in early 2024, and the decision will reshape how Google and antitrust enforcement operate in the US. Meanwhile, Canada reviewed similar anti-competitive behaviours by Google. It closed the investigation in 2016 for lack of sufficient evidence of anti-competitive acts and lessening competition in the market.[5] A similar investigation was commenced by the Competition Bureau in 2021 but has yet to find an abuse of dominance by Google.[6] Key Canadian allies are clearly tightening antitrust enforcement of large digital platforms while Canada continues to watch from the sidelines. Whether from a lack of funding to the Competition Bureau or problematic provisions in the Competition Act[7], Canadian competition policy requires substantial reform. [1] European Commission, “Antitrust: Commission fines Google €2.42 billion for abusing dominance as search engine by giving illegal advantage to own comparison shopping service” (27 June 2017), online: <ec.europa.eu/commission/presscorner/detail/en/IP_17_1784>. [2] Tom Warren, “Google fined a record $5 billion by the EU for Android antitrust violations” (18 July 2018), online: <theverge.com/2018/7/18/17580694/google-android-eu-fine-antitrust>. [3] Brody Mullins, Rolfe Winkler & Brent Kendall, “Inside the U.S. Antitrust Probe of Google” (19 March 2015), online: <wsj.com/articles/inside-the-u-s-antitrust-probe-of-google-1426793274?ns=prod/accounts-wsj>. [4] Adi Robertson, “The antitrust trial against Google Search starts today – here’s what to expect” (12 September 2023), online: <theverge.com/2023/9/12/23868141/google-search-antitrust-trial-what-to-know>. [5] Competition Bureau Canada, “Investigation into alleged anti-competitive conduct by Google” (19 April 2016), online: <ised-isde.canada.ca/site/competition-bureau-canada/en/how-we-foster-competition/education-and-outreach/position-statements/investigation-alleged-anti-competitive-conduct-google>. [6] Competition Bureau Canada, “Competition Bureau obtains court order to advance an investigation of Google” (22 October 2021), online: <canada.ca/en/competition-bureau/news/2021/10/competition-bureau-obtains-court-order-to-advance-an-investigation-of-google.html>. [7] Competition Act, RSC 1985, c C-34, s 1.1. Written by Krystian Sekowski
JD Candidate 2025 | UCalgary Law The recent turbulence at OpenAI sent shockwaves throughout the tech landscape, unveiling a story of corporate upheaval, power struggles, and the intersection of ethics, profit motives, and governance. The drama began when Sam Altman, a central figure within OpenAI and pivotal to its direction, was abruptly ousted from his role as CEO by the company's nonprofit board of directors. Altman's alleged lack of transparency and honesty was the catalyst for this decision, an accusation tantamount to exile in the corporate world. The sudden dismissal of Altman, a revered figure in the tech community, rattled not just the internal dynamics of OpenAI but also triggered a chain reaction of resignations and concerns among investors, notably Microsoft, a major stakeholder. The resultant outcry from within the organization and the influential pressure from external stakeholders led to a swift series of negotiations and mounting tension upon the board of directors. The high-stakes nature of the situation became apparent as Altman, supported fervently by Microsoft and amidst threats of mass resignations from almost the entire OpenAI workforce, ultimately regained his CEO position. However, it was not without conditions—Altman, alongside Greg Brockman, OpenAI's president, also ousted from the board, did not immediately reclaim their board seats. Instead, the board was now chaired by Bret Taylor, formerly a co-CEO at Salesforce, joined by eminent personalities such as Larry Summers and Adam D'Angelo. During a Friday video conference, the crisis erupted unceremoniously when the board abruptly dismissed Altman, followed by a cryptic announcement on OpenAI's website, citing discrepancies in Altman's communication with the board. This sparked outrage and a wave of resignations, both internally and from investors, including the influential Microsoft. Efforts to quell the unrest eventually led to Altman's reinstatement, albeit under the shadow of an internal investigation into the reasons for his initial dismissal. Apart from the internal turmoil and potential fallout from resignations, OpenAI faced the jeopardy of losing critical strategic discussions, notably a substantial sale that valued the company at $80 billion. This mounting pressure eventually forced the board's hand, resulting in Altman and Brockman regaining their roles, signifying a hard-earned victory for the embattled AI powerhouse. The saga at OpenAI unveiled the intricate interplay between corporate governance, investor influence, employee morale, and the complexities inherent in the AI landscape and corporate world. It underscored the challenges organizations face in balancing profit motives with altruistic goals, which Effective Altruism principles aim to reconcile but often find challenging in practice. An essential takeaway from this tumultuous episode was the need for a clear delineation between board responsibilities and management. The blurred lines in OpenAI, where Altman's influence seemed to transcend traditional board authority, highlighted a significant governance concern: a board should not merely serve to support management but also assert independent oversight and decision-making. Furthermore, the unified expression of no confidence in the board by OpenAI's workforce underscored the potential impact of employee sentiments on significant leadership decisions. This highlighted the rising influence of employee activism in shaping corporate outcomes, prompting reflection on its implications across industries. While the saga unfolded within the tech industry, its lessons extend far beyond, serving as a valuable guide for governance structures, decision-making processes, and leadership responsibilities across diverse industries. Should a board of directors decide to remove someone as prominent as the CEO, they ought to be more prudent by privately negotiating the departure with the executive, preserving their credibility and reputation. Springing the news of termination on anyone moments before the public announcement stands out as a significant misstep, marking a crucial lesson for all future boards: the importance of handling such matters discreetly and with due respect. Boards of directors ought to also hold a finger on the pulse and know the attitudes of critical employees and investors before making such drastic moves. In conclusion, the OpenAI saga laid bare the complexities inherent in navigating governance, ethical dilemmas, and the high-stakes dynamics of the technology sector. It serves as a compelling narrative, offering multifaceted lessons applicable within the AI domain and across all industries. Sources: Perrigo, B. (2023, November 22). How Sam Altman Returned to OpenAI: A Timeline. TIME. Retrieved from https://time.com/6338789/sam-altman-openai-return-timeline/ Peregrine, M. (2023, November 27). Leadership lessons from OpenAI's wild week. Forbes. https://www.forbes.com/sites/michaelperegrine/2023/11/27/leadership-lessons-from-openais-wild-week/?sh=46f1241f7a13 Written by Kyle Murdy
JD Candidate 2025 | UCalgary Law As a start-up company grows in size, it will invariably need to add employees to support this growth. When hiring employees, managers are often thinking about the work the employee will be doing, their fit within the company, and the impact of this employee on the company's budget. Conversely, the employee will often be most concerned with their compensation, benefits, as well as their job description. Needless to say these are all valuable considerations; however, both companies and employees often neglect to consider some important provisions should the working relationship cease to exist. Below are a few of these, and some notes to consider. Termination: One of the key factors in the long-term success of start-up companies is their ability to limit their costs when terminating an employee who has not worked out. Consequently, it is important for this to be considered prior to the beginning of the working relationship. The first thing to note is that an employment agreement should detail that an employee may be terminated at the discretion of the company. Notice periods are another point of interest, as these are prescribed both by statute (Employment Standards Code) and by the common law. The common law should be on the forefront of entrepreneurs minds, as awards are much higher than minimums prescribed by law. As such, explicit provisions in the employment agreement will aid in removing discretion from the courts. It must be noted however, that it is not possible to contract out of the minimum provisions provided by statutes. Non-Competition Provisions: In the context of start-up companies, non-competition provisions function to prevent former employees from working for competitors. Due to restrictions, these are often unenforceable in Canada due to the common law protection of an individual's ability to make a living. As a result, the best course of action is to explain the rationale behind the non-compete clause, as well as to narrow the scope of the provision - both geographically and temporally - to aid in the court finding it to be acceptable. Intellectual Property Ownership: At law, there is a presumption that a patentable invention will be the property of the employee, unless it can be rebutted by the company demonstrating that: a) there is a contractual provisions stating otherwise; b) the employee has a duty to the company due to their seniority - provided the invention relates to the business of the company; and c) the employee was employed specifically for the purpose of inventing. For things that are subject to copyright law rather than patents such as software, creations are presumed to belong to the employer as long as they were produced during the course of employment. As a result of these two presumptions, it is wise for start-up employment contracts to provide that employees will assign any patents they may secure while employed, along with broadening the scope of ‘the course of employment’ to allow for the allocation of copyrightable material to the company. Written by Colton Manton
JD Candidate 2025 | UCalgary Law Occasionally, start-up companies are lucky enough to benefit from a great idea, founders with previous business experience, or a base of customers right out of the gate. One thing that is not often part of that list is an amount of capital that is more than sufficient to meet the early needs of the company. There is a limit to the funds the founders (or their Uncle Jim) can contribute to the company before any kind of outside investment, and there are many costs associated with incorporating, hiring the first employees, and developing intellectual property. Start-ups are generally not incredibly keen on adding hefty legal bills to that list. What follows are five ways start-up companies can reduce their legal bills and risks at the early stages of their journey. 1 - Use a Free Legal Clinic Legal clinics are an excellent resource for start-up companies and small businesses when money is tight. There are often some very bright and eager students ready to help. In the case of our Business Venture Clinic, we work with supervisor lawyers to help ensure we are providing a quality work product. On the flip side, it is essential to note that the students volunteering at legal clinics are not lawyers, and some risks are associated with receiving work from them; students don’t have practice insurance like lawyers do, and they (most likely) can’t be sued in the unlikely event that something goes wrong. They don’t have all the training and knowledge of a practicing lawyer yet. Obtaining the services of a free legal clinic is a business decision, and the pros and cons of saving on legal fees and obtaining work from a student should be compared for each different legal task at hand. 2 – Find a Law Firm that will be Flexible or Creative with Payment Options Occasionally, a law firm will allow a start-up company to defer the payment of their legal fees until they receive their first round of financing. In other cases, law firms have accepted an equity stake in a company they advise in lieu of payment. You might want to consider one of these payment options, depending on your situation. 3 – Arbitration If they haven’t brought it up with you already, consider discussing arbitration clauses with your lawyer. Arbitration can be faster, more efficient, and less expensive than the traditional court system. In addition, if the subject matter of the potential dispute is sensitive or confidential, arbitration can help keep that information private. 4 – Put Everything in Writing Brand new start-ups often conduct themselves in informal meetings where agreements and decisions are made orally. Employment agreements, investments from family, and decisions about who is on the board of directors have often been the subject of litigation. You don’t want to have any ambiguity arising from oral agreements where different people have different interpretations of what was decided. 5 - Distinguish Between Important and Less Important Issues and Considerations A lawyer typically wants to bill for as much work as they can. They also usually want to ensure that every bit of risk for a company they are advising is considered and allocated for. However, start-ups are not like large oil and gas companies with millions of dollars to spend on legal bills; they can’t pay to ensure that ten lawyers dot every “i” and cross every “t” on their contracts. Generally, the most important issues or risks in a contract or business plan should be considered and accounted for, but you may be unable to cover everything; that is just part of operating within a smaller budget. A good lawyer representing a start-up company will make some judgement calls about the most efficient ways to reduce risk for the start-up while not billing them for frivolous tasks; make sure you have one of those. |
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