Employment Contracts: Put it in Writing

It is well recognized that employment contracts govern employee-employer relationships, under Canadian law. These agreements establish the parties' duties and obligations to each other in their employment relationship. Despite the benefits gained by establishing clear understanding of the parties' responsibilities at the outset—by way of a well-thought formal written agreement—many early-stage companies opt for a more passive approach, opting for verbal or implied contracts (i.e., handshake agreements).

The motive for electing a less formal approach may be haste, cost, lack of knowledge or awareness, or simply trust between parties. Regardless, the risk is too great to forgo this critical formality at the outset of the employment relationship. Both parties have everything to gain by establishing their relationship before commencing work. If terms cannot be agreed upon at this stage—when both parties are excited to tie to one another—then when? Delaying or failing to enter into a comprehensive and professionally written employment contract is likely to result in significant headaches, or worse, down the road.

These troubles tend to surface when conflict arises between the parties with respect to terms of their employment agreement (e.g. hours, wages, overtime, raises, scope of work, holidays, benefits, etc.) and at the point of contract termination (i.e., when the employment relationship ends). These can be contentious times. Absent a written agreement between the parties, these situations are likely to escalate into a word against word conflict in front of a judge. In addition to the significant monetary expense, litigation can consume an early stage company by devoting time, resources, and energy to a peripheral matter that could have been contained at the outset. Therefore entering into a written contract that clearly establishes the essential terms of the employment agreement between the parties is certain to go a long way to reduce possibility and impact of dispute or disagreement that later develop.

Ryan Logan is a caseworker at the BLG Business Venture Clinic and a 2018 JD Candidate at both the University of Calgary and the University of Houston. 

You’ve Created a Corporation… Now What?

You’ve just finished filing your forms and articles of incorporation, you’ve received your certificate of incorporation; congrats! You created a corporation. You are well on your way to a (hopefully) successful business venture. However, before you are in the clear, there are formal requirements that must be met early in the life of the corporation. The first of these steps is the organization meeting, which as it indicates, is designed to internally structure the corporation. The second is the first annual shareholders meeting.
 
The Organization Meeting
Corporations incorporated in Alberta are governed by the Business Corporations Act RSA 2000 c B-9 (the “Act”). The Act requires that the board of directors meet after the certificate of incorporation is issued. At this first meeting, the directors institute certain foundational elements of the corporation. At the organization meeting the directors may:

1. Make by-laws. By-laws are the rules that govern the internal operation of a corporation. you may set out rules that are not deal with by the Act, or if permitted by law, you may modify the rules of the Act. The directors may make, repeal and amend the bylaw. Every new by law requires shareholder approval at the next regular shareholders meeting.
2. Adopt forms of security certificates and corporate records.
3. Authorize the issue of securities.  Directors may issue shares by majority vote; this resolution must be recorded in the minute books. A share cannot be issued until the corporation receives full consideration for the share. This consideration may be money, property, or services given to the corporation.
4. Appoint officers. Officers typically include a CEO or president, a CFO or treasurer, and a secretary. The officers and directors form the management of the corporation. The Officers are responsible for the daily operation of the corporation.
5. Appoint an auditor. This auditor will hold the office of the auditor until the first annual meeting of the shareholders. At which time the shareholders may choose to elect the same or a different auditor.
6. Make banking arrangements. The corporation will need a bank account to transact business, and may have short term borrowing requirements.

 
The Annual Shareholder Meeting
The next milestone for the corporation will be the first annual shareholders meeting. The Act requires that this meeting be called by the directors within 18 months of the date of incorporation. At this meeting the shareholders will:

1. Elect the directors: the first directors were indicated on the forms required for incorporation. The shareholders may elect these first directors, or other individuals nominated.  
2. Confirm, modify or reject the by-laws: by-laws are first approved by the directors. If the by-laws are approved by the shareholders they are retroactively effective as of the date they received directors’ approval.
3. Appoint an auditor: this may be the same auditor as appointed by the directors.

 
Shareholders meeting are required to be held annually. Each meeting must take place within 15 months of the last shareholders meeting.
 
Following the Act and properly documenting the directors’ and shareholders’ meetings will go a long way to ensuring that your corporation stays onside the law. A few simple steps early in the corporation’s life will allow you to focus on the business and keep the lawyers’ fees to a minimum.

Kevin Major-Hansford is a 2018 JD/MBA Candidate at the University of Calgary and a caseworker at the BLG Business Venture Clinic. 

Should your website have Terms and Conditions? A Privacy Notice? A Cookie Policy?
 
The answer is, in a typical lawyer fashion, “maybe”. These policies can set out rules for using your website, protect intellectual property within the website, limit liability, and more. Terms are often of particular importance for companies that provide services or sell products through their websites. Of course, as law students we are unable to give your business advice as to whether it has a specific need for any of the abovementioned policies. We can, however, provide information that may help you to come to your own conclusion.
 
What are Terms and Conditions?
 
Terms and Conditions explain the rules that visitors to your website have to comply with. A court would look to the terms and conditions if a claim was ever filed against your company. Terms might include clauses that address: a description of the services offered, intellectual property rights, termination of the agreement, governing law, e-commerce terms, restrictions on use, and liability.
 
What is a Privacy Notice?
 
If you are collecting data from visitors to your website, there are legal requirements as to how that information must be handled. A privacy notice explains: what information is collected from what sources; how that information is used; how that information is stored; if and how that information is disclosed. A notice will also set out the choices available to the visitor with respect to their personal information.
 
What is a Cookie Policy?
 
A cookie policy describes how technologies (not just cookies but also flash cookies, HTML5, etc.) are used when a visitor interacts with your website. The policy will also set out any choices a visitor has with respect to the use of such technologies.
 
Online Contracts in General
 
For a contract with a visitor to your website to be binding, the visitor must consent to the terms of that contract. Depending on the type of website, relying on a link to a “legal terms and conditions” page might not be sufficient. The visitor might have to scroll through the contract and click an “I accept” button (browse-wrap agreements vs. click-wrap agreements).
 
Students at the Business Venture Clinic can provide memos that detail the relevant laws and the specific differences between click-wrap and browse-wrap agreements. We can also provide draft terms and conditions, draft privacy notices, and draft cookie policies.

Britta Graversen is a third year student at the University of Calgary and is a caseworker for the BLG Business Venture Clinic. 

The Legalization of Marijuana: Opportunities for Entrepreneurs
           
            In April 2017, the federal government introduced the Cannabis Act (Bill C-45) to legalize and regulate the production, distribution, sale and possession of Cannabis. The legislation has not yet been enacted, but legalization will open up significant new markets for startups. This is a unique opportunity, as the Canadian economy does not often spawn an entirely new industry very often.
 
            Most case studies on marijuana startups come from businesses that operate in the United States, where medical marijuana is available in 20 states, while recreational marijuana is legal in Colorado and Washington. Although there are significant differences in the opportunities for finance between companies which operate in the United States in comparison to their Canadian counterparts, there are still important lessons for Canadian entrepreneurs seeking to enter this industry based on the countless marijuana startups in the USA that have attracted interest from investors.
 
            There are many reasons why investors who have never backed a cannabis company before are now looking at investment in this field as increasingly viable. First, compared to other startups, the marijuana business will be able to leverage one important advantage. While most startups often face the need to create a demand or educate their potential customer base, marijuana startups face no lack of demand. Accounting firm Deloitte posits that 22% of the Canadian adult population consumes recreational marijuana on at least an occasional basis, with a further 17% showing some willingness to try it if it were legal. A total marketplace of 40% of the adult population is an enticing proposition for entrepreneurs. In light of such demand, it will not be surprising to see significant investment funnelling into the cannabis industry.
 
            The sheer variety of business and industry opportunities is another attraction for investors to cannabis startups. For example, take a look at Eaze, an early stage company that offers medical marijuana delivery, helping their 800,000 customers order cannabis on demand. It has been described as the “Uber of Weed,” and currently operates in more than 100 cities within California. At this time, Eaze has raised $51.5 million over 5 funding rounds. Eaze gets a cut of each sale but does not actually sell cannabis itself, instead acting as an intermediary between the customer and the dispensary. A business doesn't even need to touch the plant to have success, as there are ancillary opportunities including firms that provide security for marijuana dispensaries.
 
            Another attraction to cannabis startups for investors are the rapid valuation shifts that take place in a very compressed time period. There is often liquidity in these markets, whether through the public market or private market, and this gives a diligent investor the opportunity for good returns, especially when considering the businesses involved and the opportunities that could arise if they succeed.
 
            The cannabis industry also has the potential of bringing capital and expertise from a wide variety of previous businesses. Cannabis touches on a range of business enterprises, from marketing to retail, science, agriculture, food, health and pharmaceuticals. This gives investors who have experience in other industries an advantage, as they can use and share their knowledge from other areas and serve as both investors and advisors. As the profit potential for marijuana-related businesses increases, it will not be surprising to see diverse sources of capital enter this market.
 
            Despite the questions surrounding the legal and regulatory framework that will govern the cannabis industry in Canada, the bottom line is that legalization will represent a significant revenue opportunity for Canadian businesses and entrepreneurs that do things right and work within the confines of the legislation. 

Hussein Ghandour is a 3rd year law student at the University of Calgary and is working with the BLG Business Venture Clinic for the 2017/2018 year.