Business Venture Blog
This is where we post about business, ventures, law, and business venture law.
Anything interesting, really.
Anything interesting, really.
Business Venture Blog
A Summary of Proposed New Rules for Cryptocurrency Exchanges
Cryptocurrency exchanges, depending on how they operate and the crypto assets they make available for trading, may already be subject to securities and/or derivatives regulation. Canadian regulators are proposing new rules to govern cryptocurrency exchanges aimed to curtail the risks associated with those trading platforms. The consultation paper was published on March 14, 2019 and can be found here:
At the time of writing this, it’s unclear when any new regulations would come into effect.
Part 3 of the Proposed Regulations: Risks Related to Platforms
Any start-up considering crypto assets, as a potential avenue for financing, need to be aware of the risks associated with these Platforms. These include:
The regulators are looking to have Platforms that build consumer confidence, expand business in Canada and globally, foster greater market integrity, provide clarity, and protect investors. These are objectives are similar to those of traditional exchanges such as the TSX and the TSX-V. Currently there are no Platforms recognized as an exchange or otherwise authorized to operate as a marketplace or dealer in Canada.
The consultation paper seeks input from the fintech community, market participants, investors and other stakeholders looking at how regulatory requirements may be tailored for crypto-asset trading Platforms operating in Canada. Comments are due by May 15, 2019 and include the following areas:
5.2.1 Custody and Verification of Assets
The regulations contemplate requiring that Platforms obtain SOC Type II reports as well as yet-to-be determined standards specific to crypto assets if they are seeking registration as an investment dealer and IIROC membership.
Traditional custodians that hold assets for clients typically engage an independent auditor to perform an audit of the custodian's internal controls and prepare an assurance report, such as SOC 1 and SOC 2 Reports, pertaining to the design of the controls (Type I Report) and a report assessing whether such controls are operating as intended (Type II Report).
There have been challenges with crypto asset custodians and Platforms obtaining SOC 2, Type II Reports, in part due to the novel nature of crypto asset custody solutions and the limited period of time that Platforms have been in operation to allow for the testing of internal controls.
5.2.2 Price Determination
Platforms will be required to foster price discovery for the crypto assets they offer for trading. Where the Platform or an affiliate acts as a market maker and provides quotes, the mechanisms for determining those quotes are expected to be available to participants. When trading as a market maker against its participants, a Platform will also be required to provide participants with a fair price.
5.2.3 Market Surveillance
The regulations propose that Platforms not permit dark trading or short selling activities, or extend margin to their participants.
The existing types of marketplaces have different regulatory responsibilities. Exchanges are responsible for conducting market surveillance of trading activities on the exchange and enforcing market integrity rules. All of the existing equity exchanges have retained IIROC to monitor trading activity and enforce market integrity rules.
Alternative trading systems, by contrast, are not permitted to conduct market surveillance or enforcement activities and are required to engage a regulation services provider (RSP). IIROC currently acts as an RSP to all equity and fixed income marketplaces.
5.2.4 Systems and Business Continuity Planning
Marketplaces are currently required to:
5.2.5 Conflicts of Interest
Platforms will be required to identify and manage potential conflicts of interest and will be required to disclose whether they trade against their participants, including acting as a market maker, and the associated conflicts of interest. To the extent Platforms are required to become IIROC Members, they will also be subject to requirements in the Universal Market Integrity Rules aimed at mitigating the risks associated with trading against their participants.
5.2.6 Crypto-asset Insurance
Dealers are required to maintain bonding or insurance against specific risks and in specified amounts. This requirement may not address the specific operational risks of Platforms.
There may be significant difficulty and costs for a Platform to obtain insurance, in part due to the limited number of crypto asset insurance providers, and the high risk of cyber-attacks. Therefore, some Platforms have indicated that they are considering limited coverage that only extends to certain crypto assets, crypto assets in "hot wallets" or "cold wallets", loss as result of hacking, or loss from insider theft.
5.2.7 Clearing and Settlement
All trades executed on a marketplace are required to be reported and settled through a clearing agency.
Without exemptive relief, this requirement would also apply to Platforms that are marketplaces. However, currently there are no regulated clearing agencies for crypto assets that are securities or derivatives.
The regulators are considering whether an exemption from the requirement to report and settle trades through a clearing agency is appropriate. In these circumstances, Platforms will still be subject to certain requirements applicable to clearing agencies and will therefore be required to have policies, procedures and controls to address certain risks including operational, custody, liquidity, investment and credit risk. The Regulators plan to revisit such exemptions in the future, as the space continues to develop and evolve.
Some Platforms may operate a non-custodial (decentralized) model where the transfer of crypto assets that are securities or derivatives occurs between the two parties of a trade on a decentralized blockchain protocol (e.g. smart contract). These types of Platforms will be required to have controls in place to address the specific technology and operational risks of the Platform.
Evan Thomas, a lawyer at Osler, Hoskin & Harcourt LLP who specializes in blockchain technology warns that “the cost, time and other practical difficulties of complying with many of the regulatory requirements contemplated by the paper would effectively shut out many innovative crypto asset trading platforms from the Canadian market.”
Colin Patterson is a third year student at the Faculty of Law, University of Calgary, and is a JD and CPA candidate.
 Supra note 1
So, You’re Ready to Incorporate You’re Business: Where to Start.
You’ve had a great idea for some time. You’ve considered it deeply. You’ve made a business plan, and now it’s time to turn your dream into a reality. But where to start?
There are a variety of forms a business can take, but the corporate structure has tended to predominate for start-ups in Canada.  There is a good chance therefor you might settle on the corporate form for your new business. This post will not consider the pros and cons of different business structures. If you would like information that could help you choose a business structure, please contact the BLG Business Venture Clinic (the “Clinic”).  Incorporation, particularly in Alberta, is the subject of this writing. The purpose of this post is to shine light on resources that can help get you started and raise important considerations.
There are many free resources available online. It is important to ensure the information you find is trustworthy before relying on it to make business or legal decisions. The BLG Business Venture Clinic does not certify the correctness of the information in the resources that follow.
The Government of Canada provides a “Business Start-up Checklist” which offers a wide variety of information, including direction to provincial and territorial business registration resources.  The business registration information is separated by province and territory.  This is important because a business can be incorporated in a province, a territory, or at the federal level. The Government of Alberta offers information on registry costs and categorizes registries by services offered.  To find a business registry that offers incorporation services in your area, registry locations can be searched by city or town. 
Before you head to your local registry, there are a number of steps and information to gather. The Government of Alberta provides a list of steps to incorporate a business in the province.  They are as follows:
An entrepreneur could use the resources above, pay the NUANS report and incorporation fees and successfully incorporate a business in Alberta. The incorporation documents discussed are the legal foundation of a business and considerable thought should go into drafting their substance. For example, in the articles of incorporation or an appendix thereto, the drafter can add desired provisions. A provision in the articles can allow the board of directors to increase the number of directors by up to one third (1/3) of those elected at the last annual general meeting.  This increase can remain in effect until the following annual general meeting. 
Another consideration is, “[t]he securities law regime in Canada requires that certain restrictions on the transfer of shares be included in the articles of a company if certain exemptions from prospectus and registration rules are to be available.”  One of these exemptions is the “private issuer” exemption which “is one of the easiest and least complicated to use in the very early stages of a growth company’s financing.” 
Aside from the documents discussed above, a corporation should consider having by-laws ready to sign upon incorporation. The by-laws of a corporation deal with a variety of internal elements including processes, powers, and roles. Ensuring a corporation has by-laws in place from the start can avoid uncertainty and potential issues. There are boiler-plate by-laws available online, but they often are ill suited to a particular corporation. Certain boiler-plate provisions “will be removed as a condition of any future financing.”  They should be avoided at the outset instead of requiring amendment later. Aside from issues to avoid, the by-laws should be drafted to appropriately reflect the needs of the corporation. This means including the right provisions and the correct balance of powers.
Resources are available to incorporate a business on ones own. There are however considerations and drafting of language that may warrant the services of a lawyer. Finances are often tight during the start-up phase and it may be tempting to avoid the cost of legal fees. However, there are options that may help control costs. The BLG Business Venture Clinic is one resource that can help do just that. The Clinic offers free legal assistance, provided by law students. The assistance offered includes drafting of documents discussed in this post and the writing of memos on specific issues or questions a business might have. It is recommended that clients of the Clinic have the work reviewed by a lawyer. A review of prepared documents should however cost less than having a lawyer draft the documents themselves.
Neil Thomas is a member of the BLG Business Venture Clinic, and is a 2rd year student at the Faculty of Law, University of Calgary.
 Bryce C. Tingle, Start-up and Growth Companies in Canada: A Guide to Legal and Business Practices, 3rd ed (Canada: LexisNexis Canada Inc, 2018) p 58 [Tingle].
 University of Calgary, “We’re here to help – Contact us!” (2017), online: BLG Business Venture Clinic <thttp://www.businessventureclinic.ca/contact.html >.
 Government of Canada, “Business Start-up Checklist” (September 28, 2018), online: Government of Canada <https://canadabusiness.ca/starting/checklists-and-guides-for-starting-a-business/business-start-up-checklist/>.
 Government of Alberta, “Find a business registry” (2019), online: Alberta <https://www.alberta.ca/find-business-registry.aspx>.
 Government of Alberta, “Level 2: advanced registrations” (2018), online: Alberta <http://servicealberta.ca/Find-a-business-advanced-registrations.cfm>.
 Government of Alberta, “Alberta Corporations” (2018), online: Alberta <https://www.servicealberta.ca/712.cfm>.
 Government of Alberta, “Incorporation forms” (2019), online: Alberta <https://www.alberta.ca/incorporation-forms.aspx>.
 Business Corporations Act (Alberta), RSA 2000, c B-9, s 106(4).
 Tingle Supra note 1 at p 63.
 Tingle Ibid; Prospectus and Registration Exemptions – Consolidated Version for Periods Relating to Financial Years Beginning Before January 1, 2011, NI 45-106, s 2.4.
 Tingle Ibid.
What are they?
A non-compete clause is a provision designed to limit a former employee’s ability to work for a competitor or open a competing business. Non-compete provisions are sometimes included in employment contracts, but they can also form a standalone agreement.
Non-compete clauses are very common, especially among start-up companies. After all, the last thing a company wants when an employee resigns or is terminated is for that employee to launch a competing business or head straight to the nearest competitor. Employees may have intimate knowledge of their former employer’s trade secrets, operations and business plans, and may have gained access over the course of their employment to valuable information relating to customers, clients, new products and marketing strategies.
Are they enforceable?
Despite their popularity, non-compete clauses can be difficult to enforce. From a public policy perspective, the courts want to ensure that individuals are not unfairly prevented from earning a living. This has resulted in courts frequently striking down non-compete provisions that are deemed to be “an unreasonable restraint on trade”.
However, there are a number of surrounding factors that courts consider in assessing the reasonableness and validity of a non-compete clause. Understanding these considerations can help employers craft effective non-compete provisions that are as minimally restrictive as possible. To design a non-compete that will protect the company and withstand a legal challenge, consider the recommendations below.
Limit the scope
The more limited a non-compete is with respect to duration and geographic scope, the more likely courts are to enforce it. In Kohler Canada v Porter, the provision in question restricted a manager from competing anywhere in North America for one year after termination of employment “in a line of business…in which the employee worked”. The court struck down the provision for being too broad.
Moreover, the geographic scope should be clearly and unambiguously defined. In Shafron v KRG Insurance Brokers (Western) Inc., the court refused to uphold a non-compete clause they deemed unenforceable due to ambiguity. The contract in question sought to prevent a former employee from working anywhere in “the Metropolitan City of Vancouver”, which is not a legally recognized geographic area. As a consequence, the court held that the entire agreement was invalid.
Employers should also embed in the agreement itself the rationale for the geographic and temporal scope. Courts may consider such factors as the duration of the employee’s tenure, the size of the market in a geographic region, and the nature of the information to which the employee had access or how closely they worked with clients. Being transparent about the factors that inform the scope of the non-compete can help a court assess whether or not it is reasonable.
Further, a company may choose to tailor a non-compete clause in terms of the specific jobs its employee will be prevented from taking, or the competitors they will be prevented from joining for a period following the termination of their employment. This way, the company can protect itself in the areas in which it is most vulnerable, without unduly hampering the employee’s ability to find subsequent employment. This means that non-compete clauses must be specific to the employee, having regard for the roles and competitors where that employee most poses a risk to the company.
Don’t impose non-compete agreements on everyone
While it may be tempting to bind every employee to a non-compete agreement, such indiscriminate application can actually weaken the protection afforded by such provisions. If every employee is required to sign a non-compete agreement regardless of how tangential their role is to the company’s main business, the courts may view this as demonstrating a company’s unreasonableness. In assessing whether a non-compete clause is necessary or reasonable, courts will consider whether a departing employee had influence over clients or customers and how much damage the employee could do in the same market as the company. A receptionist leaving the company likely doesn’t pose the same risk that a software engineer or salesperson does. A company’s use of non-compete agreements should reflect that.
Consider a non-solicitation agreement instead
A non-solicitation agreement can be used to prevent a departing employee from poaching the company’s clients, investors, suppliers and other employees. While non-solicitation agreements can also be struck down if they are too broad, they are more likely to be enforceable than are non-compete agreements. Non-solicitation agreements may be as (or more) effective as non-compete agreements at protecting a company. A salesperson leaving to join a competitor’s team can do far less damage if they are not allowed to take clients with them. Although non-solicitation clauses should be customized just as non-competes are too avoid being struck down for over breadth, there are a few good rules of thumb. First, limit them to one year or less. Second, the clause should be drafted to prevent an employee from soliciting only those individuals with whom they developed a relationship over the course of their employment. Attempting to prevent the employee from contacting anyone the company does business with has greater potential to be viewed as unreasonable, particularly in smaller markets.
Melanie Bowman is a member of the BLG Business Venture Clinic, and is a 2rd year student at the Faculty of Law, University of Calgary.
 Bryce C. Tingle, Start-up and Growth Companies in Canada 3rd ed (LexisNexis Canada Inc., 2018), at 131.
 Kohler Canada Co. v Porter  OJ No.2418, 26 BLR (3d) 24 (Ont SCJ).
 Shafron v KRG Insurance Brokers (Western) Inc.,2009 SCC 6,  1 SCR 157.
 Supra, note 1 at 132.
 Lisa Stam, “Is My Employee’s Non-Compete Agreement Enforceable?” (21 February 2018), online (blog): Employment and Human Rights Law in Canada < https://www.canadaemploymenthumanrightslaw.com/2018/02/employees-non-compete-agreement-enforceable/>
 Supra, note 1, at 132.
 Supra, note 5.
Amendments to Trademark Legislation
On June 17, 2019 the Trademarks Act will undergo substantial changes. The changes are an attempt to help align Canada with the rest of the developed world in regards to Intellectual Property legislation. This article will briefly summarize some of the proposed changes, and outline how it may affect Canadian businesses.
Registering a Trademark
Currently, Canadian trademark legislation requires applicants to include details outlining the trademarks “use”. Therefore, applicants need to claim or declare that they had “used” the trademark in Canada. Additionally, they would have to include a date of first use. Alternatively, if applicants had not “used” the trademark in Canada, then a Declaration of Use would need to be submitted before a registration could be filed. On June 17, 2019 details of use and registration of the trademark abroad is no longer required. Anyone will be able to file a trademark application regardless of whether they intend to use the trademark or whether the trademark was previously used.
Unfortunately, these changes have opened up Canadian trademarks to “trolls” (or “squatters”). Since the announcement that the Trademarks Act would undergo changes in 2014, trolling applications are on the rise. In 2017 there were 427 “all-class” applications on the Canadian database. Compared to the 4 filed in 2016, this represents a significant increase in the number of filings. This increase appears to be due to trademark trolls. This increase in trademark trolling creates problems for brand owners. To avoid becoming a victim of these trolls, many intellectual property law firms are advising clients to file their applications in Canada promptly, especially in cases where a trademark has a reputation abroad but not in Canada.
The amendments will require all goods and services listed in a trademark application to be classified in accordance with the Nice Classification system. This differs from the current system which allows the registrants the option to indicate the classes of goods and services into which the trademark will be associated with.
Trademark term length and eligibility
Trademark term length will be shortened from 15 years to 10 years, requiring trademark holders to apply for renewals more frequently. Renewals will cost $400 CAD for the first class of goods and services, with an extra $125 CAD for every additional class the holder wants to renew in. Therefore, if you are a current owner of a multi-class trademark that expires after June 17, 2019 it may be wise to renew while there are no fees attached to each class.
Under the new amendments what may be considered an eligible trademark for registration purposes will be broadened. Colours, holograms, animated images, sounds, scents, tastes, and textures will soon be eligible for trademark protection. These non-traditional trademark classes will be vetted for their distinctiveness at the time of use. Distinctiveness will be determined based on the unique characteristics the trademark holds, not based on consumer recognition and goodwill.
This post highlights just some of the changes to the Trademarks Act. If your business is looking to file a trademark in the near future, it will be beneficial to familiarize yourself with the proposed changes. If you have any questions related to trademarking in Canada feel free to contact the BLG Venture Clinic.
Tyler Anthony is a member of the BLG Business Venture Clinic, and is a 2rd year student at the Faculty of Law, University of Calgary.
 Christopher Heer, Toba Cooper and Daryna Kutsyna, “Amendments to the Trademarks Act will Come into Force of July 17, 2019 – Are you and Your Business Ready?” (26 January 2019), Heer Law Resources (blog), online: <https://www.heerlaw.com/upcoming-changes-trademarks-act/>.
 Anna Loparco, “Upcoming changes to Canada’s trademark and anti-counterfeit laws” (19 July 2018) Dentons Insights (blog), online: <https://www.dentons.com/en/insights/alerts/2018/june/11/major-changes-to-canadas-trademark-laws/>.
 Philip Lapin, “ The date is set: June 17, 2019 – Canada’s New Trademark Law will be in Force” (14 November 2018) Smart & Biggar Fetherstonhaugh Articles (blog), online <http://www.smart-biggar.ca/en/articles_detail.cfm?news_id=1491/>[Lapin].
 Kohji Suzuki and Jamie-Lynn Kraft, “ The Trolls have arrived: Suspicious trademark applications on the rise” (12 March 2018), Smart & Biggar Fetherstonhaugh Articles (blog), online <http://www.smart-biggar.ca/en/articles_detail.cfm?news_id=1368/>.
 Lapin, supra note 3.
 Heer, supra note 1.
 Lapin, supra note 3.
 Heer, supra note 1.
How CASL Affects your Ability to Market your Start-up
Canada’s Anti-Spam Legislation (“CASL”) came into effect in 2014. CASL governs businesses or individuals (“the Sender”) that send promotional materials, through electronic channels, to a Canadian recipient (“the Recipient”). It is important to understand this legislation if you or your company is using emails, texts, or other electronic means for promotional purposes.
It is vital to understand the terminology used in CASL. CASL applies to any commercial electronic message (“CEM”) that is sent to an electronic address. Here are some terms you should be familiar with:
There are three elements the Sender needs to meet to send a CEM:
Consent is often an issue for a new start-up that lacks an extensive network of potential customers. It is important to note that consent can be implied or expressly given. There are three situations for which consent can be implied:
Overall, relying on any type of implied consent is difficult. The onus of proving that there is implied consent lies with the Sender. The few cases that have discussed these sections of CASL have shown that the courts construe implied consent narrowly.  It is best for any start-up to get express consent to send any type of marketing message. Contravening CASL by not getting consent can result in very high administrative monetary penalties.
Rick Josan is a member of the BLG Business Venture Clinic, and is a 3rd year student at the Faculty of Law, University of Calgary
 Parliament of Canada, “House Government Bill: 40th Parliament, 3rd Session” (20 February 2019), online: Parliament of Canada LEGISinfo <https://www.parl.ca/LegisInfo/BillDetails.aspx?Language=e&Mode=1&billId=4543582&View=6> [https://perma.cc/SW4M-PXTJ].
 An Act to promote the efficiency and adaptability of the Canadian economy by regulating certain activities that discourage reliance on electronic means of carrying out commercial activities, and to amend the Canadian Radio-television and Telecommunications Commission Act, the Competition Act, the Personal Information Protection and Electronic Documents Act and the Telecommunications Act, RSC 2010, c 23 [CASL] at s1(2).
 Ibid at s 1(3)
 Ibid at s 1(1).
 Government of Canada, “Frequently Asked Questions about Canada’s Anti-Spam Legislation” (last modified1 February 2019), online: Canadian Radio-television and Telecommunications Commission <https://crtc.gc.ca/eng/com500/faq500.htm> [https://perma.cc/7FBV-C25E] [FAQ].
 Government of Canada, “Canada's Anti-Spam Legislation (Infographics)” (last modified 16 August 2018), online: Canadian Radio-television and Telecommunications Commission <https://crtc.gc.ca/eng/internet/infograph.htm> [https://perma.cc/XHX6-NPPA].
 CASL, supra note 2 at s 11.
 FAQ, supra note 5.
 CASL, supra note 2 at s 6(1)(a).
 CASL, supra note 2 at s 10(9).
 FAQ, supra note 5.
 Blackstone Learning Corp, Re  CarswellNat 12052,  CarswellNat 12053.
 PIPEDA Report of Findings No 2016-003, Re  CarswellNat 2533,  CarswellNat 2534.
 FAQ, supra note 5.
Quick Guide to Bankruptcy Law
Entrepreneurs seeking to expand their businesses must consider the law that applies when things turn sour. While unpleasant, organizing capital and planning for contingencies is a necessary step to prevent higher costs that may arise in the future. As for a potential bankruptcy, the following is information regarding its procedures.
When consulting a lawyer in connection to planning for bankruptcy, according to professional ethics, he or she cannot provide advice on diverting assets in any way that might delay, defeat or hinder creditors. Doing otherwise may place him or her in risk of liability, professional disbarment or imprisonment. As a result, the retainer may not mention any form of guaranteed result. In addition, an accounting of assets would be required to determine whether there are sufficient funds to pay the creditors upon transfer. If a transfer renders a client insolvent, the courts may reverse it. This includes giving a trustee the power to reel-in any transfer that a client makes to gain a fraudulent exemption or place property outside the jurisdiction.
An accounting of assets could go as far back as five years. This includes any accounting of corporations that the client controls, manages or acts as an agent for.
How does this relate to business law?
A client would be required to consider the rules of bankruptcy in the case of corporations, partnerships, or other business entities. In all cases, it is important to know whether the client is insolvent or in financial difficulties, or would be thus immediately subsequent to any transfer or reorganization.
In the case of corporations, a shareholder would generally not be liable for all debts of the corporation; this is because liability is limited to the equity investment. However, the courts may render director shareholders liable to creditors by employing the oppression remedy in the Business Corporations Act. To reduce this risk, a corporation should split divisions into several subsidiaries and avoid any cross-collateralization or guarantees that would create interdependency. This way, liability to creditors would be narrowed to each corporate entity rather than the group as a whole. Furthermore, when there are multiple shareholders, the shareholder agreement should contain appropriate clauses for each remedy concerning shareholder bankruptcies, matrimonial issues or estate freezes.
The same applies to franchises. If the client keeps the franchise separate and independent, there would be little risk of issues regarding creditor liability bleeding into the other business units.
Finally, partnerships have a bit of a different application. Each entity is composed of separate units — the partners — that invest capital into the business. Liability extends to the partners jointly and severally, which means that a creditor may collect from one partner who may sue the others for the difference. However, limited partners or those within professional LLPs have liability restricted to their initial capital investment or each of their own negligence, respectively.
Nick Konstantinov is a member of the BLG Business Venture Clinic, and is a 3rd year student at the Faculty of Law, University of Calgary.
General Data Protection Regulation – The Global Standard
What is it?
The General Data Protection Regulation (“GDPR”) is a regulation that came into force on May 25, 2018 on consumer data protection and privacy for all individuals within the European Union (“EU”). However, though the Regulation was introduced by the EU, it can apply to any individual or corporation who processes “personal data” regardless of their location.
The GDPR Regulation should be taken seriously as it is designed to help consumers gain a greater level of control over their data, while offering more transparency throughout the process.
Factors to think about to be GDPR Compliant
The GDPR Regulation is a lengthy and complex document that took over 4 years of negotiation to establish. Therefore, using a general perspective, the basic factors that an individual or corporation should be thinking about to be GDPR compliant are listed below:
Consequences for Non-Compliance
There are two tiers of fines that can be used as penalties for non-compliance:
The GDPR is an important piece of regulation that affects global corporations and individuals. When you intend to obtain “personal data” keep in mind the factors above and ensure that your corporation is GDPR compliant to limit any further consequences.
Vikas Chadha is a member of the BLG Business Venture Clinic, and is a 2nd year student at the Faculty of Law, University of Calgary
Start-Ups and E-Commerce
While online shopping has become prevalent due to its ease and convenience, many are still unaware of how they are impacted by laws governing e-Commerce. These laws have implications on both the online buyer and the online seller and are of particular importance to a start-up company that engages in e-commerce and operates largely online.
When a purchase is made online, the seller and the buyer are entering into a contract. In order to enter into the agreement, the seller must provide the buyer with certain information regarding the business to allow the buyer to make a fully informed decision when purchasing a product or service. The necessary information is as follows:
Finalizing the Internet Sales Contract
Before finalizing any agreement, the sellers’ website must be designed to allow the buyer to correct any errors that may arise in the course of making their purchase. An example of such an error is the buyer choosing to purchase two units of a product when it was their intention to purchase one. Before completing the transaction, the buyer should be provided with a summary of the transaction allowing them to recognize their error and make the necessary corrections before completing their order. If a buyer was not provided with the opportunity to review their order for errors prior to the transaction being finalized, this may provide them with cause for the cancellation of the order upon receipt, so long as this is done within a reasonable amount of time.
Once the internet sales contract has been finalized and entered into by the buyer, the seller must provide a receipt of the transaction. It is acceptable for this receipt to be provided by e-mail to an e-mail address provided by the buyer. The receipt should contain the buyers name, the date the order was placed and should be provided within 15 days of when the order was placed.
Right of Cancellation
In addition to the right to cancel where an opportunity to review the order prior to completion was not provided, there are other situations where a buyer may cancel an internet sales contract. A buyer may cancel an internet sales contract any time prior to the commencement of the services or delivery of the goods if:
If the buyer wishes to cancel for any legitimate cause, they must do so by providing notice to the seller. If the buyer fails to communicate cancellation to the seller despite having legitimate cause such as the examples discussed above, the contract will not be cancelled. Methods by which a buyer may cancel an agreement with a seller include mail, e-mail, phone or fax. Keep in mind that the buyer must be able to prove what day they requested the cancellation. The date will be relevant in determining whether the cancellation was justified.
Richie Aujla is a member of the BLG Business Venture Clinic, and is a 2nd year student at the Faculty of Law, University of Calgary
 Alta Reg 81/2001, s 4(1).
 Ibid, s 4(2).
 Ibid, s 5.
 Ibid, s 6(2).
 Ibid, s 6(3).
 Ibid, s 8(1).
 Ibid, s 8(3).
Blockchain: Decentralized Ledgers & Smart Contracts
A blockchain is a ledger, similar to a Microsoft Excel spreadsheet. A blockchain is maintained in a decentralized manner. Blockchain ledgers keep track of “transactions”. Transactions occur without external third parties, no escrow needed. These transactions are grouped together in a data structure called a block, where the term block refers to a group of transactions that have been processed at the same time. The transactions are related temporally and are recorded serially. Each block includes a hash (a cryptographicaly generated code) that refers to the last block so any attempt to change a prior block has a cascading effect on each subsequent block. This relationship between blocks gives rise to the term blockchain. Every user on a blockchain sees and maintains the same copy of the ledger through a concept called “reaching consensus”. A reliable consensus procedure is required to ensure the accuracy of the ledger and maintain the security of the system. A blockchain can be public, where anyone can participate, or the blockchain can be permissioned, where only authorized participants can access and add transactions to the ledger.
A blockchain is a peer-to-peer system with no central authority managing the data flow. To maintain data integrity a large distributed network of independent users is encouraged. The computers making up the network are in more than one location. The term “node” typically refers to a computer in the network.
Blockchains are built to create trust between unknown parties. Blockchains are meant to be honest systems that self correct without the need of a third party to enforce the rules. A consensus algorithm enforces the rules. Consensus develops agreement among a group of commonly mistrusting shareholders. Each blockchain relies on its own algorithm for creating agreement within its network.
The main focus areas for decentralized ledger technology are:
Hashgraph as an example of a decentralized ledger
Hashgraph is a virtual-voting decentralized ledger technology. Everyone is a node on the network and each can submit data in parallel at the same time on the graph.
Hashgraph is not blockchain but boasts that it can provide a comparable or possibly better security level while simultaneously performing transactions faster. Hashgraph patented its algorithm to ensure stability. Hashgraph has a governance system where 39 international, independent blue chip organizations control two thirds of the network’s cryptocurrency. The governance system is based on Dee Hock’s formative book, One From Many: VISA and the Rise of Chaordic Organization, that chronicles the creation of the VISA network among other things where banks associated to benefit all customers.
Smart contracts are contracts formed with blockchain technology. They are not subject to linguistic interpretations and are marketed as a way to prevent ambiguity, ensuring both parties understand exactly what has been agreed to. A smart contract uses computer code to determine the relations and obligations between parties. The resulting interpretation is designed to be more predictable. Smart contracts can remove third-party or escrow agents since performance can automatically be determined by monitoring compliance with a set of conditions. The contract is administered as the conditions are met. This may lead to an “inexorability” problem if a vulnerability within the code is exploited.
Szabo predicted that smart contracts would overcome legal barriers that prevent local businesses from entering global markets.
“Smart contract” has evolved to encompass more than one meaning. When referring to blockchain application development, smart contract does not refer to a legal contract but rather a snippet of programming code that gets executed on the blockchain, typically in an automated fashion (although some parts may require human input and control). To simplify things, the snippet of programming could be referred to as “smart contract code” and the entire legal contract expressed and implemented in software could be referred to as a “smart legal contract”.
Ricardian contracts as an example of smart contracts
A Ricardian contract records the “intentions” and “actions” of a particular contract, no matter if it has been executed or not. The same Ricardian contract has to be both readable by people and parsable by computer programs. Each Ricardian contract has its own unique hash that refers uniquely to that document (a cryptographic message digest). That hash ensures the Ricardian contract is immutable (not susceptible to change). While it is possible to implement a Ricardian contract as a smart contract, not every Ricardian contract is a smart contract. The creator, Ian Grigg (a specialist in financial cryptography working at Systemics Inc), defines a Ricardian Contract as a single document that is:
While a Ricardian contract is a design pattern that captures the intent of the agreement of the parties before performance, it can implement the concept of the smart contract by using a hash as a reference that links to external documents of code.
Ricardian contracts have not been presented in Canadian court, however, contract law will apply if the agreement has the basic components of a contract, regardless of the form. To prove a meeting of the minds all the essential terms of contract must exist: 1. an offer, 2. an acceptance, 3. certainty of the agreed terms, 4. consideration, and 5. the intention to create legal relations.
Shannon Peddlesden is a member of the BLG Business Venture Clinic and a 2nd year student at the Faculty of Law, University of Calgary.
Shawn S Amuial, Josias N Dewey, Jeffrey R Seul, The Blockchain: A Guide for Legal and Business Professionals, (Danvers, MA: Thomson Reuters®, 2016).
Digital Economy Update, “Smart contracts – can code ever be law?” (1 March 2018), online: < www.ashurst.com/en/news-and-insights/legal-updates/smart-contracts---can-code-ever-be-law/>.
Hackernoon, “Merkle Trees” (15 December 2017), online: < https://hackernoon.com/merkle-trees-181cb4bc30b4>. Hashing refers to transforming data of any size into short, fixed-length values, this incorporates a technology called Merkle trees. Merkle trees allow for efficient and secure verification of large amounts of data.
EliNext, “Smart vs. Ricardian contracts: what’s the difference?” (28 February 2018), online: <https://www.elinext.com/industries/financial/trends/smart-vs-ricardian-contracts/>.
Choosing a Business Name
One of the most important steps when starting a new business is choosing the right name. There are, of course, a number of common concerns about the quality of a business name. It must appeal to your target market. It ought to suit your business and industry and work well in marketing. It should be catchy and memorable, helping your business stand out from the competition. It should be able to be used online easily and not already have an existing social media presence. However, there are also a number of legal concerns when it comes to choosing and potentially registering a business name.
The first question you should ask yourself is whether or not your business is a corporation. If you are not incorporated then your business name will not constitute its own separate legal entity but will simply be the name you conduct business under, or a “trade name”. You will also not be allowed to use the words incorporated, limited or corporation (or their abbreviations) in your trade name. In Alberta when you run a business as the sole owner under a name other than your personal name you must register this trade name. You may also register your trade name in a partnership, limited partnership, limited liability partnership, or sole proprietorship that uses only the owner’s legal name with no additions - but you aren’t required to do so under the Partnership Act. You are also not required to provide a NUANS (Newly Upgraded Automated Name Search) business name report when registering a business name, but it is generally recommended. While a business name does not have to be unique, you can still be taken to court by an existing business with a similar trade name.
If you are incorporated there are additional requirements as you will often carry out business under the name of your corporation. An Alberta corporation name must consist of 3 elements: distinctive, descriptive, and legal. For example, ‘XYZ Consulting Ltd.’. A distinctive element must be the unique word(s) of the business name. The made up title or potentially even the location of the business, in this example ‘XYZ’ is the distinctive element. The descriptive element describes what a business is or does, in this case ‘consulting’. Finally, a corporation name must have a legal element at the end of their name to indicate to the world their status as a corporation and put clients on notice that it is a limited liability business. These legal elements are listed in the Business Corporations Act as Limited, Incorporated, Corporation, Ltd., Inc., or Corp.. In this example the legal element is ‘Ltd.’. Corporate names must also be unique. So if you don’t wish to use the assigned ‘number name’ from the Corporate Registry you must get an Alberta NUANS report on your proposed name. This is required for federal incorporation as well. You may also choose to register a business name for your corporation, as a corporation may carry on business under a name other than its corporate name. However, this business name cannot use the legal elements listed above, must still be unique and must still comply with the trade name rules under the Partnership Act.
Overall, naming your business remains a crucial decision in any start-up but keeping in mind these simple requirements can help the decision a bit simpler.
Kiara Brown is a member of the BLG Business Venture Clinic, and is a 3rd year student at the Faculty of Law, University of Calgary.
 Business Corporations Act, RSA 2000, c B-9, s. 10(3).
 Partnership Act, RSA 2000, c P-3, s. 110(1).
 Alberta Government, Incorporate an Alberta corporation, https://www.alberta.ca/incorporate-alberta-corporation.aspx
 Supra note 1 at s. 10(1)
 Ibid at s. 12(1)
 NUANS Corporate name search, https://www.nuans.com/eic/site/075.nsf/eng/home
 Government of Canada, Steps to incorporating, https://www.ic.gc.ca/eic/site/cd-dgc.nsf/eng/cs06642.html#toc-02
 Supra note 1 at s. 10(9)
Blog posts are by students at the Business Venture Clinic. Student bios appear under each post.