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Written by Cole McMullen
JD Candidate 2026 | UCalgary Law In recent years, environmental, social, and governance (ESG) considerations have moved from the periphery of corporate strategy to its core. Nowhere is this more evident than in the evolving regulatory landscape in Canada, where climate-related financial disclosures are fast becoming a cornerstone of corporate governance. As investors, regulators, and the public demand greater accountability from businesses, ESG is no longer a voluntary initiative—it is an imperative. This blog post explores the growing importance of ESG disclosure in Canada, with a particular focus on climate risk, and considers how startups and growing ventures can align with emerging expectations without being overwhelmed. Climate Risk as Financial Risk The concept of climate risk has undergone a fundamental transformation. What was once considered a matter of corporate social responsibility is now viewed as a financial issue with direct implications for asset valuation, insurance, and long-term viability. The Bank of Canada and the Office of the Superintendent of Financial Institutions (OSFI) have repeatedly emphasized that climate-related financial risks—both physical and transitional—can pose systemic threats to the stability of the Canadian economy [1]. These risks include the physical consequences of climate change (such as extreme weather events) as well as policy and market shifts associated with the transition to a low-carbon economy. For companies in carbon-intensive industries, failure to adapt may mean diminished access to capital and heightened exposure to legal liability. The Role of Disclosure: From Voluntary to Mandatory In 2022, the Canadian Securities Administrators (CSA) proposed new climate-related disclosure requirements that closely align with the framework developed by the Task Force on Climate-related Financial Disclosures (TCFD) [2]. These guidelines ask publicly listed companies to disclose information in four key areas: governance, strategy, risk management, and metrics and targets related to climate issues. While these requirements were initially voluntary, the regulatory tide is turning. The federal government’s 2023 budget announced its intention to work toward standardized ESG disclosure requirements, particularly for federally regulated financial institutions [3]. Meanwhile, the Canadian Sustainability Standards Board (CSSB), launched in 2023, is actively working to adopt and adapt global ESG reporting standards to the Canadian context [4]. This move toward mandatory ESG disclosure reflects a broader recognition that transparency around climate risks is essential for market stability. It also reflects growing investor demand for consistent, comparable, and reliable ESG data. Implications for Startups and SMEs Though current disclosure mandates are primarily targeted at large public companies, startups and small to medium enterprises (SMEs) are not immune to these changes. As part of supply chains, as recipients of venture or institutional capital, or as future IPO candidates, smaller firms increasingly face pressure to demonstrate ESG awareness. In particular, venture capital funds are beginning to incorporate ESG metrics into their investment theses. Firms that fail to account for environmental impacts or that lack internal governance policies may find themselves at a disadvantage when seeking funding. This trend has been reinforced by global movements such as the Principles for Responsible Investment (PRI), which count several major Canadian funds among their signatories [5]. For early-stage companies, the key is to adopt scalable ESG frameworks that evolve with growth. Founders should consider setting internal climate-related goals, documenting risk management processes, and communicating their ESG vision to stakeholders—even if formal disclosure is not yet required. A Legal Lens on ESG Governance The legal implications of ESG governance are expanding. Directors and officers now face fiduciary duties that extend to material climate-related risks, especially as case law and regulatory expectations evolve. In 2023, the Canadian Association of Pension Supervisory Authorities (CAPSA) released guidelines stating that pension fund administrators have a duty to consider climate risk as part of their fiduciary obligations [6]. Although these principles currently apply to pension administrators, the logic applies more broadly. As climate risk becomes increasingly material to long-term financial performance, boards and executives have a legal obligation to inform themselves and act accordingly. Failure to do so could give rise to claims of mismanagement or breach of duty. The Path Ahead: Strategic ESG Integration As ESG continues to shape the contours of Canadian corporate governance, proactive integration will be a marker of resilient businesses. While startups may not be bound by current disclosure rules, embedding ESG considerations early offers several advantages. It can enhance brand reputation, improve investor relations, and prepare companies for the inevitable tightening of regulatory frameworks. Moreover, tools and guidance are becoming increasingly accessible. Organizations such as the Global Reporting Initiative (GRI) and the Sustainability Accounting Standards Board (SASB) provide sector-specific disclosure templates, while Canadian think tanks and law societies are beginning to offer training and resources tailored to SMEs. Ultimately, the integration of ESG is not about compliance alone—it is about building companies that are better equipped to thrive in a complex, climate-conscious world. Conclusion Canada’s corporate governance landscape is entering a new phase—one where climate risk and sustainability are integral to fiduciary responsibility and strategic direction. Startups and established enterprises alike must respond to this shift with agility and foresight. By treating ESG not as a burden but as a blueprint for innovation and resilience, Canadian businesses can position themselves to lead in the decade ahead. [1] Office of the Superintendent of Financial Institutions. OSFI's Climate Risk Management Guideline B-15, (2022), online: https://www.osfi-bsif.gc.ca/Eng/fi-if/rg-ro/gdn-ort/gl-ld/Pages/b15.aspx. [2] Canadian Securities Administrators. Proposed National Instrument 51-107: Disclosure of Climate-related Matters, (2022), online: https://www.securities-administrators.ca/. [3] Government of Canada. Budget 2023: A Made-in-Canada Plan, (2023), online: https://www.budget.canada.ca/2023/report-rapport. [4] Canadian Sustainability Standards Board. Mandate and Activities, (2024), online: https://www.frascanada.ca/cssb. [5] Principles for Responsible Investment. Signatory Directory, online: https://www.unpri.org/signatories/signatory-directory. [6] Canadian Association of Pension Supervisory Authorities. ESG Considerations in Pension Plan Management, (2023), online: https://www.capsa-acor.org/.
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Written by Craig Kelba
JD Candidate 2025 | UCalgary Law Business ideas can take many forms and operate in countless places. Often, entrepreneurs will consider the assets that they have and how they can make these assets work for them. Alberta is no stranger to the short-term rental boom. Apps like Airbnb and Vrbo offer a platform for property owners to connect their asset to potential customers. However, the short-term rental market, as with many other industries, can be full of different parties with conflicting motivations. Often, these conflicting motivations add layers of complexity to what appears to be a simple business on the surface. Not everybody feels supportive of the short-term rental market. Cases where a short-term rental owner wishes to operate under a condominium corporation can give way to conflict, due to the nature of the condominium corporation’s obligations, powers, and governance. The collective nature of condominium complexes can be restrictive to the operation of business. If you are considering operating a short-term rental business out of a condominium owned property, this post provides information about the relationship between short-term rental owners, condominium corporations, and conflicts which may arise. 1. Condominium Property Act and creation of bylaws In Alberta, condominium corporations are governed by the Condominium Property Act (the “Condominium Act”).[1] In the Condominium Act, bylaws set out by the corporation shall regulate the corporation and provide for control, management and administration of the units, real and personal property of the corporation, the common property and the managed property.[2] Further, bylaws of the corporation are set on the initial registration of the condominium plan, and remain in force until they are repealed or replaced by special resolution.[3] 2. Special Resolutions According to the Condominium Act, any bylaw may be amended, repealed or replaced by a special resolution, however, any amendment, repeal or replacement of a bylaw will not take effect until:
The majority of special resolutions are passed in writing, as it is generally difficult to gather the sufficient number of voters at a properly convened meeting to pass a special resolution.[6] Additionally, amending, repealing or replacing bylaws by special resolution requires appropriate notice of the proposed change given to all interested parties (i.e., owners or registered mortgagees). This notice period is set in the bylaws of that particular condominium corporation (for example, the bylaws may state that a 30-day notice period is required before a special resolution can be passed). Conversely, the Condominium Act, or associated regulations do not provide a limit for how long a special resolution may take to receive the appropriate number of votes or signatures. Simply put, the threshold provides only for the number of “yes” votes required to pass the special resolution. Abstaining from voting does not explicitly constitute a vote of “no”, unless this is accounted for in the bylaws. Failure to sign a written special resolution is more clearly defined as simply not having voted yet. 3. Personal Information Protection Act Although they may fit the definition of a not-for-profit organization under other legislation, condominium corporations have been defined as “organizations” under the Personal Information Protection Act (“PIPA”).[7] Consequently, condominium corporations are permitted to collect and use personal information for purposes that are reasonable, with a general requirement that collection, use and disclosure of personal information must be consented to by the individual.[8] It is important to note that consent does not necessarily need to be explicit for collection, use and disclosure of personal information required under PIPA. In certain situations, consent may be implied. For example, a person who has signed a waiver has given implied consent that information identifying them as the signor could be disclosed to show that they did sign the document. Under Section 20 of PIPA, there are also situations where personal information may be disclosed without the consent of the individual.[9] For the most part, being allowed to disclose personal information without consent of the individual under PIPA is related to specific organizations; governmental statutes, regulations, or bylaws; emergencies; or investigations.[10] However, under Subsection 20(a) of PIPA, there is an exemption given where a reasonable person would consider the disclosure of the information is clearly in the individual’s best interests, or that individual would not reasonably be expected to withhold consent.[11] Special Resolutions Under PIPA: With regard to signed special resolutions an individual consenting for the disclosure of their identifying information is dependent on the circumstances. Under the Condominium Property Regulation (“Condo Regulation”), the text of written ordinary and special resolutions voted on by the corporation and the results of the voting on those resolutions, may be disclosed pursuant to a written request of an owner, purchaser or mortgagee, the solicitor of an owner, purchaser or mortgagee, or a person authorized in writing by any of those persons (see S 44(1) of Condominium Act).[12] The Alberta government addresses voters who give their signature supporting a special resolution. Under PIPA, this is addressed in Section 8, where consent to collect, use or disclose personal information can be given to an organization by voluntarily providing information to the organization for that purpose.[13] In this case, giving your signature for a special resolution is deemed consent for the purposes of that special resolution. The disclosure of identifying information is less clear for those who have not given their signature, however. The condominium board is a representation of the condominium corporation, and a condominium corporation is defined under S 25 of the Condominium Act as all persons who are owners of the units or entitled to the parcel of land if the condominium corporation is terminated.[14] The Office of the Information and Privacy Commissioner (“OIPC”) has been clear that although personal information collected by the condominium corporation is subject to PIPA, but so long as the condominium corporation is carrying out its duties or powers under the CPA and does not include extraneous or irrelevant information in carrying out those duties and powers, then it will generally not be disclosing personal information in a breach of PIPA.[15] In another decision, the OIPC defined the actions of condominium corporations as “unit owners making collective decisions regarding the upkeep and management of the condominium.”[16] It is reasonable to consider that condominium corporations may disclose information of potential voters to ensure that those voters have the opportunity to provide their own decision in the collective group. Directors of a corporation must consider different stakeholders when making decisions on behalf of the corporation, but ultimately, these decisions can be justified if the director acts honestly and in good faith with a view to the best interests of the corporation.[17] The best interests of the corporation does not necessarily mean that all parties need to be satisfied. Rather, it would be a situation where the board of directors is concerned with the overall good of the corporation as a whole. Note on PIPA: A special resolution is a collective decision of the owners in a condominium corporation. Although carrying out these decisions requires good faith, it would appear that a corporation would need to be able to identify and contact potential voters on a decision in order to ensure that it is carrying out its duties, obligations, and powers. Ultimately, personal information may be disclosed for a reasonable purpose, and only to the extent reasonably required to meet that purpose.[18] 4. Short Term Rentals Under Condominium Corporations Under the Condominium Act, Section 32(5), bylaws cannot operate to prohibit or restrict the devolution of units or any transfer, lease, mortgage or other dealing with them or to destroy or modify any easement implied or created by the Act.[19] Effectively, condominium bylaws cannot prevent a person from leasing out their condominium. However, short term rentals on platforms such as AirBnB operate differently, as Alberta Courts have previously identified these types of rentals as licenses rather than leases.[20] Further, the Court in Kuzio established that licenses are not referenced in S 32(5) of the Condominium Act, meaning they are not protected from bylaws in the same manner that leases are, and that “unit owners share common property and agree that management of the condominium will be under the control of the Board of Directors which may pass Bylaws governing all unit owners.”[21] Finally, the Court in Kuzio concluded that the bylaws of the condominium corporation were valid, and further that they were allowed to use these bylaws to prohibit short term AirBnB style rentals where no lease has been entered into.[22] 5. Final Notes Condominium boards are created to represent the common interests of all owners in the condominium plan. As such, the powers of management can be far reaching so long as the board is acting in what appears to be the best interests of the condominium corporation as a whole. This includes usage of personal information, as well as passing, amending and replacing bylaws by special resolution. Issues with condominium boards can be very difficult to navigate. Often times these issues are complex and time consuming. If you are experiencing an issue with your condominium board, it may require you to seek a lawyer who practices in corporate governance, residential tenancy, or real estate law. [1] RSA 2000, c C-22 [ABCA]. Note: in force since April 1, 2023 [2] Condominium Act, S 32(1). [3] Condominium Act, S 33. [4] Condominium Act, Ss 32(3, 4). [5] Condominium Act, S 1(1)(x). [6] https://cci.ca/resource-centre/view/1900 [7] Alberta, Office of the Information and Privacy Commissioner, Order P2005-005 (Edmonton: OIPC, 2006), at para 22, online: <https://oipc.ab.ca/wp-content/uploads/2022/01/Order-P2005-05.pdf>.; SA 2003, c P-6.5 <https://canlii.ca/t/5619m>. [8] PIPA, S 19. [9] PIPA, S 20. [10] PIPA, S 20(b-r). [11] PIPA, S 20(a). [12] Alta Reg 168/2000, S 20.52(l), <https://canlii.ca/t/569zk>; Condominium Act, S 44(1). [13] PIPA, S 8(1),(2). [14] Condominium Act, S 25(2). [15] Alberta, Office of the Information and Privacy Commissioner, Order P2009-003 (Edmonton: OIPC, 2009), at para 22, online: < https://oipc.ab.ca/wp-content/uploads/2022/01/Order-P2009-03.pdf>. [16] [16] Alberta, Office of the Information and Privacy Commissioner, Order P2016-02 (Edmonton: OIPC, 2016), at para 47, online: < https://oipc.ab.ca/wp-content/uploads/2022/01/Order-P2016-02.pdf >. [17] Condominium Act, S 28(2)(a). [18] Condominium Act, S 2(a). [19] Condominium Act, S 32(5). [20] Condominium Corporation No 042 5177 v Kuzio, 2020 ABQB 152 (CanLII), (“Kuzio”) <https://canlii.ca/t/j5jjh>, at para 26. [21] Kuzio, at paras 40, 42. [22] Kuzio, at para 74. Written by Ayman Khan
JD Candidate 2025 | UCalgary Law Startups often begin with an idea birthed by a single entrepreneur or a group. Most companies have more than one founder, and the life cycle of a start-up company shows that these founders pool their skills together to create a viable entrepreneurial venture, buoyed primarily by the hopes, dreams and ambitions of the founders. Thus, start-ups also represent a labour of love from the point of view of the founder, who may resist any changes or challenges to the path visualized for the proverbial brain-child of the founder. The skillset required for these initial few stages in a start-up’s life is oftentimes different from the skillset required to further grow such an enterprise once it is established. This leads to conflicts, mainly over vision and plans for the start-up. There may also be issues due to the temperament and competency of founders, which did not prove to be a hindrance during the initial stages but have now reared their head after growth. A 2008 Harvard study found that 50% of founders were no longer the CEO after their venture passed the two-year mark[1]. This indicates that most start-ups and nascent enterprises realise the need for professional management fairly quickly into their life-cycle as Founders’ skillsets are critical primarily at foundation of the company. This leads to several issues as Founders may all be loyal to each other, thus making removal much more difficult. It may also be rendered even more complex by the nature of start-ups as the majority of employees at the onset may also have directly been hired by the founders personally. The aforementioned Harvard study found that 4 out of 5 entrepreneurs in such scenarios are forced to step down from the CEO’s post, with most also being shocked that investors had insisted that they give up control [2]. All of these factors only serve to increase the likelihood of issues with founder ousting. A start-up’s leadership transition from founder to professional management may thus make or break the start-up. Thus, there is a need to “Founder Proof” companies to prevent such founder conflicts from potentially sinking the company. The first step in founder-proofing a startup is to establish a comprehensive founders' agreement. This document outlines each founder's roles, responsibilities, and equity distribution, along with procedures for handling disputes and exit strategies. Said agreement should also address decision-making authority, conflict resolution mechanisms, and the process for adding or removing founders, in order to prevent conflict. Critically, the agreement should be drafted in a manner that prevents “hold-up risks” or deadlocks, wherein the consent or a particular action is required on part of a founder in order to move forward with a decision. This could also take the form of decision-making procedures wherein the approval or consent of all founders is required. Another potential hold-up risk may arise from onerous exit procedures for founders, it is thus prudent to ensure that founder and officer exits do not contain unnecessary requirements. Therefore, it is advisable to seek legal counsel when drafting this agreement to ensure that it complies with Canadian business laws and best practices. The Business Venture Clinic shall be able to assist with providing an informational memo regarding such. Another essential element in protecting a startup is implementing strong corporate governance practices. Incorporating the business as a corporation under the Alberta Business Corporations Act [3] creates a legal framework that defines shareholders' rights, board responsibilities, and officer roles. By structuring the company with a well-defined board of directors and adopting robust corporate bylaws, founders can ensure that key decisions are made transparently and with accountability to each individual founder or officer, thus reducing the likelihood of conflict or ambiguity. Intellectual property (IP) ownership is another critical factor in founder-proofing a startup. Founders must ensure that all IP, including software code, branding, and proprietary processes, is assigned to the company rather than individual contributors. This is particularly important when founders collaborate on innovations before formal incorporation. Founders should use written agreements such as a separate IP assignment agreement and a non-disclosure agreement (NDA) in the series of agreements that form the individual’s employment agreements, in order to establish clear ownership rights. Registering trademarks, patents, or copyrights further protects the startup's valuable assets. Failure to register IP ownership with the company as opposed to individual founders may lead to negative behaviour as it does not align the incentives of the founders with the company, thus leading to the founder having too much power. Finally, founder-proofing requires a strong focus on financial controls and transparency. Establishing clear financial reporting processes, budgeting protocols, and expense tracking systems ensures that all founders have visibility into the company's financial health. This may mean, amongst other measures, defining the company’s mandate realistically, not including contradictions when it comes to officer and founder responsibilities (especially those responsibilities that are fiscal management and reporting), and having clear time frames and milestones for debt and financing agreements. Additionally, startups should implement written financial policies that outline expense approvals, investment decisions, and revenue distribution to reduce the risk of financial mismanagement. By implementing a comprehensive founders' agreement, establishing strong governance practices, protecting intellectual property, and ensuring financial transparency, Canadian entrepreneurs can effectively founder-proof their startups. Taking these proactive steps not only safeguards the business from internal conflicts but also enhances its credibility with investors and stakeholders, thus leading to more positive outcomes. Building a resilient company requires planning and foresight, therefore founder-proofing is a crucial component of ensuring long-term success for any company, particularly start-ups. [1] Wasserman, Noam. "The Founder's Dilemma," Harvard Business Review (2008) <https://hbr.org/2008/02/the-founders-dilemma> [2] Ibid [3] Business Corporations Act, RSA 2000, c B-9, Written by Shahzaib Farooq
JD Candidate 2025 | UCalgary Law Once businesses start to grow rapidly, they often look to various avenues to expand their success and further grow their business. One avenue open for businesses is to franchise and expand their business via franchising. Franchise Overview What is a Franchise A franchise is a type of business arrangement in which the franchisee buys the right to market certain products and services from a franchisor for a specific time in a particular location.[1] What is the Law Various federal and provincial laws apply to franchising. Federal laws such as (e.g. Competition Act) govern income tax, competition, privacy, packaging and labelling, and intellectual property.[2] If you decide to go the route of franchising, you will have to consider more than just the Franchise Act (Alberta) (the “Act”),[3] as certain federal laws also apply to franchising. The Act and Franchises Regulations (the “Regulations”)[4] outline the franchisor’s responsibilities to disclose information and provide legal options when the rules in the Act or Regulations are not followed.[5] The Act imposes a duty of fair dealing on both parties, this includes the duty to act in good faith and in accordance with reasonable commercial standards.[6] Section 1 of the Act, provides, that a: (d) “franchise” means a right to engage in a business (i) in which goods or services are sold or offered for sale or are distributed under a marketing or business plan prescribed in substantial part by the franchisor or its associate, (ii) that is substantially associated with a trademark, service mark, trade name, logotype or advertising of the franchisor or its associate or designating the franchisor or its associate, and (iii) that involves (A) a continuing financial obligation to the franchisor or its associate by the franchisee and significant continuing operational controls by the franchisor or its associate on the operations of the franchised business, or (B) the payment of a franchise fee, and includes a master franchise and a subfranchise. [7] Under the Act, a “franchisor” means one or more persons who grant a franchise and includes a subfranchisor with regard to its relationship with a subfranchisee.[8] Obligations of Franchisor Disclosure Documents Before the franchisee signs any binding agreements, or pays any non-refundable deposits to the franchisor, the franchisor must provide the prospective franchisee with a copy of the franchisor’s disclosure documents.[9] A Franchisor must deliver the disclosure documents to the prospective franchisee at least 14 days before the prospective franchisee signs any agreement relating to the franchise or pays any consideration (meaning: anything of value) relating to the franchise, whichever is earlier[10] (unless the payment is fully refundable).[11] If a franchisor fails to provide the disclosure documents as referred to above,[12] the prospective franchisee may rescind all the franchise agreements by giving notice of cancellation to the franchisor.[13] Further, if any of the information you provide in your disclosure documents is incorrect or incomplete, your franchisee will be able to sue you and every person who signed the disclosure document for any monetary (or other) loss they suffer as a result of that incorrect information.[14] This loss due to misrepresentation can have detrimental effects upon not only the business but also those individuals who signed the disclosure documents. Section 4(3) of the Act, outlines that the disclosure documents must:
According to Section (1)(1)(n) of the Act, “material change” means (i) a change in the business, operations, capital or control of the franchisor or its associate, or (ii) a change in the franchise system, that would reasonably be expected to have a significant adverse effect on the value or price of the franchise to be sold or the decision to purchase the franchise and includes a decision to implement the change made by the board of directors of the franchisor or its associate or by senior management of the franchisor or its associate who believe that confirmation of the decision by the board of directors is probable.[20] The written description of the material change must be provided to the prospective franchisee as soon as practicable after the change has occurred and before the franchisee signs any agreement relating to the franchise, or before the franchisee makes any non-refundable payment relating to the franchise.[21] If the written description of the material change is not provided within the allocated timeframe, this could result in an incomplete disclosure document, giving the franchisee the potential to rescind (meaning: cancel the contract and put the parties in a position as if it had never happened) any financial agreements.[22] Additionally, the disclosure documents must include information about the franchisor, including, but not limited to: (a) the name, address, and the name under which the franchisor does or intends to do business; (b) the principle business address of the franchisor and, if the franchisor has an attorney for service in Alberta, the name and address of that person; (c) the business form of the franchisor; (d) the length of time the franchisor has conducted a business of the type to be operated by the franchisee; and (e) the names of the persons with day-to-day franchise management responsibilities.[23] Further, the disclosure documents must also include a certificate as set out in Schedule 2 of the Regulations. The certificate acts as an acknowledgement that the disclosure documents contain no untrue information of a material fact, they do not omit to state a material fact that is required to be stated, and they do not omit to state a material fact that needs to be stated for the information not to be misleading.[24] However, under the Act and the Franchises Act Exemption Regulations, there are instances where a franchisor is not required to provide a disclosure document[25] or is not required to include financial statements in the disclosure documents. [26] The burden is on the party claiming the exemption, typically the franchisor, to prove that such an exemption exists, and disclosure compliance is not warranted.[27] The Franchise Agreement The Franchise Agreement is a contract that sets out the terms and conditions of your franchise arrangement.[28] The Agreement should include a number of details, including, but not limited to, (a) rights and responsibilities of both franchisor and franchisee; (b) every verbal written promise agreed upon; and (c) the conditions under which the agreement will be renewed and the cost of renewal.[29] [1] Canada, Alberta Government, Franchises in Alberta (Alberta: Service Alberta, October 12, 2022) at 1 online: <alberta.ca/opendata> [perma.cc/2H7J-FV2R]. [2] Mel Garbe, “Franchising and Alberta’s Franchise Act” (last visited 12 March 2025), online: <liftlegal.ca> [perma.cc/53WX-8DUR]. [3] Franchises Act, RSA 2000, c F-23. [4] Franchises Regulation, Alta Reg 240/1995. [5] Franchises in Alberta, supra note 1 at 1. [6] Franchise101, “Franchise Regulations in Canada” (last visited 12 March 2025), online: <franchise101.net> [perma.cc/64XT-GY4X]. [7] Franchises Act, supra note 3 s 1(1)(d). [8] Ibid, s 1(1)(j). [9] Ibid, 1 s 4(1). [10] Ibid, s 4(2). [11] Ibid, s 6. [12] See note 10 above. [13] Franchises Act, supra note 3 s 13. [14] Ibid, s 9. [15] Ibid, s 4(3). [16] Franchises Regulation, supra note 4 s 2(1). [17] Franchises Act, supra note 3 s 1(1)(o). [18] Franchises Regulation, supra note 4 at Schedule 1. [19] Franchises Act, supra note 3 s 4(4). [20] Ibid, s 1(1)(n). [21] Ibid, s 4(5). [22] Bryan & Company LLP, “Franchise Disclosure in Alberta: What the Franchise can Expect and What is Expected from the Franchisor” (4 November 2019), online <bryanco.com> [perma.cc/XC3W-CS9H]. [23] Franchises in Alberta, supra note 1 at 1. [24] Franchises Regulation, supra note 4 at Schedule 2. [25] Franchises Act, supra note 2 s 5. [26] Franchises Act Exemption Regulation, Alta Reg 312/2000. [27] Bryan & Company LLP, supra note 22. [28] Franchises in Alberta, supra note 1 at 2. [29] Ibid. Written by Fahad Malik
JD Candidate 2025 | UCalgary Law Entrepreneurs can often begin their ventures as sole proprietors or partnerships due to simplicity and lower initial costs. However, as businesses expand, incorporating can offer benefits such as limited liability and potential tax advantages. It is usually the natural course of action an entrepreneur will take. A key tax planning tool in this transition is the Section 85 rollover. It is a provision in the Income Tax Act (“ITA”) that allows for tax-deferred transfers of assets to a corporation. Section 85 in the ITA is one of the tools entrepreneurs can use to ensure effective tax planning for their business. Understanding a Section 85 Rollover Section 85 enables business owners to transfer eligible property like equipment, real estate, or goodwill to a taxable Canadian corporation without triggering immediate tax liabilities.[1] This deferral is achieved by electing an "elected amount," which is typically set between the property's original cost and its fair market value (“FMV”).[2] By doing so, entrepreneurs can postpone recognizing capital gains until the corporation eventually disposes of the assets. Under Section 85 of the ITA, eligible property that can be transferred to a taxable Canadian corporation on a tax-deferred basis includes:[3]
Benefits for Entrepreneurs Incorporating a Growing Business: As a sole proprietorship flourishes, incorporating can provide benefits like limited liability protection and enhanced credibility. However, directly transferring assets to the new corporation might result in immediate tax consequences due to capital gains that can be triggered. Utilizing a Section 85 rollover allows entrepreneurs to defer these taxes, facilitating a smoother transition to an incorporated entity. Reorganizing Business Structures: Entrepreneurs may need to restructure their businesses for various reasons, such as bringing in new investors or segregating different business operations. A Section 85 rollover permits the transfer of assets between corporations without immediate tax implications, aiding in efficient reorganization.[4] Succession Planning and Estate Freezes: For business owners planning to pass their enterprise to the next generation, a Section 85 rollover can be instrumental. By transferring assets to a corporation, owners can implement estate freezes, locking in the current value of the business for tax purposes and allowing future growth to accrue to successors, thereby minimizing potential tax liabilities upon death.[5] Practical Examples Incorporating a Sole Proprietorship: Jane operates a successful consulting business as a sole proprietor. Her business assets, including equipment and client contracts, have appreciated over time. By using a Section 85 rollover, Jane transfers these assets to a newly formed corporation without incurring immediate taxes on the appreciated value, allowing her to benefit from incorporation advantages seamlessly. Business Reorganization: John owns a company that manufactures and distributes products. To attract investors specifically interested in the manufacturing segment, he decides to separate the manufacturing operations into a distinct corporation. Through a Section 85 rollover, John transfers the manufacturing assets to the new corporation without triggering immediate tax liabilities, making the investment opportunity more appealing. Estate Planning: Jane wishes to pass her family-owned business to her children. By implementing an estate freeze using a Section 85 rollover, she transfers the business assets to a corporation in exchange for fixed-value preferred shares. Her children then subscribe to common shares, allowing future growth to accrue to them. This strategy helps in managing and potentially reducing the family's tax burden upon succession. Conclusion The ITA is filled with man tax planning tools and section 85 is a crucial tool to use at the beginning of an entrepreneur’s journey. Failing to be aware of it can lead to tax liabilities that the new business will have trouble handling. Depending on the property the tax burden can be huge! [1] Income Tax Act, R.S.C. 1985, c. 1 (5th Supp.), Section 85. [2] Ibid. [3] Income Tax Act, R.S.C. 1985, c. 1 (5th Supp.), Section 85(1.1). [4] Wright, Nicholas dePencier. "S. 85 Rollovers under the Income Tax Act (Canada)." Wright Business Law, November 19, 2024. https://wrightbusinesslaw.ca/s-85-rollovers-under-the-income-tax-act-canada/. [5] Ibid. Written by Mohamed Barre
JD Candidate 2026 | UCalgary Law That spark of an idea, the vision of your own business – it's exhilarating! But then reality hits: incorporation. Suddenly, you're navigating a maze of provincial vs. federal, ABCA vs. CBCA, and a mountain of forms. Feeling overwhelmed? You're not alone. Choosing the right incorporation path is crucial, and today, we're cutting through the confusion. Let's break down the differences between incorporating federally vs. provincially, focusing specifically on the provincial process here in Alberta, and get you one step closer to launching your dream. To start, the processes for incorporating under the ABCA and CBCA are substantially similar. In Alberta, the process of incorporation is set out in Sections 5-14 of the ABCA. The ABCA requires three documents:[1]
Prescribed incorporation fees must also be paid before a certificate of incorporation is issued.[2] Furthermore, pursuant to section 20.1(1) of the ABCA, all corporations are required to:
1. Fees The cost of provincial incorporation is $275.[4] The cost of federal incorporation is $200 for online applications or $250 for paper applications.[5] Both carry additional fees such as a $45 NUANS report, and a registrar service fee or if using a law firm to incorporate then the fees of their services. While incorporating a federal corporation is comparatively less costly in terms of incorporation fees, federal corporations are also required to extra-provincially register in the provinces in which they will carry on business. The definition of “carry on business” triggering the registration requirement encompasses running a business, having an address, post box or phone number, or offering products and services for a profit.[6] This is an additional cost consideration for a business seeking to incorporate federally. The fee to register an extra-provincial corporation in Alberta is $275 plus service fees.[7] 2. Address The ABCA requires a business to have its registered office in Alberta.[8] The requirement to have a registered office in Alberta is not satisfied by merely having a post office box in Alberta.[9] The requirement is a physical address in Alberta accessible during normal business hours.[10] The ABCA requires shareholder meetings to be held in Alberta unless all shareholders entitled to vote at the meeting agree to hold it outside of Alberta, or if the articles so provide.[11] The CBCA allows a federally incorporated business to have a registered office and hold annual meetings in any province in Canada.[12] 3. Filing Requirements The CBCA entails additional paperwork by requiring a corporation to file annual returns.[13] Current annual federal filing fees are $12 (online) or $40 (paper filing).[14] The filing requirements must be completed annually, whether or not there have been director or address changes for the corporation. The ABCA also has annual return requirements.[15] These requirements also apply to registered extra-provincial corporations.16 A federal corporation registered in Alberta will have to file annual returns under the ABCA to comply with the statute. A corporation operating in Alberta has more onerous filing requirements if it incorporated federally as opposed to provincially. 4. Name Protection Federal incorporation allows a business to use its corporate name across Canada.[16] This degree of name protection can only be defeated by a trademark. Federal name searches are therefore more rigorous than provincial name searches. Provincial incorporation only allows a business to use its corporate name in Alberta, and a corporation will need to conduct a name search in each additional province in which it wishes to carry on business. There is a risk that its corporate name will be rejected in another province, requiring the use of an alternative name. 5. Privacy Corporations Canada maintains a register of the Registered Office Address, Directors, Annual Filings, and Corporate History of federal corporations, publicly available online at no cost.[17] Provincial corporations have relative privacy with respect to the accessibility of their corporate data, as such information from provincial corporations is not publicly available online, and a fee is required for a search. [1] ABCA, ss 6-7, 20, 106. [2] Service Alberta, “Incorporate an Alberta Corporation” (2023), online: Government of Alberta <https://www.alberta.ca/incorporate-alberta-corporation.aspx>. [3] CBCA, ss 7, 19, 106. [4] Open Alberta, “Registry agent product catalogue” (2023), online: Government of Alberta <https://open.alberta.ca/publications/6041328>. [5] Corporations Canada, “Services, fees and turnaround times – Canada Business Corporations Act” (2020), online: Government of Canada <https://corporationscanada.ic.gc.ca/eic/site/cd-dgc.nsf/eng/cs06650.html>. [6] Corporations Canada, “Steps to Incorporating” (2020), online: Government of Canada <https://corporationscanada.ic.gc.ca/eic/site/cd-dgc.nsf/eng/cs06642.html#toc-06>. [7] Service Alberta, “Registry agent product catalogue” (2020), online: Government of Alberta <https://open.alberta.ca/publications/6041328>. [8] ABCA, s 20. [9] ABCA, s 20(4). [10] ABCA, s 20(6). [11] ABCA, s 131. [12] CBCA, ss 19(1), 132. [13] CBCA, s 263. [14] Corporations Canada, “Services, fees and processing times – Canada Business Corporations Act” (2020), online: Government of Canada < https://www.ic.gc.ca/eic/site/cd-dgc.nsf/eng/cs06650.html >. [15] ABCA, s 268. 16 ABCA, s 292. [16] Corporations Canada, “Is incorporation right for you?” (2020), online: Government of Canada <https://www.ic.gc.ca/eic/site/cd-dgc.nsf/eng/cs06641.html>. [17] Corporations Canada, “Search for a Federal Corporation” (2020), online: Government of Canada <https://www.ic.gc.ca/app/scr/cc/CorporationsCanada/fdrlCrpSrch.html>. Written by Abdul Abbas
JD Candidate 2025 | UCalgary Law This blog outlines the legal effect of incorporating indemnification rights in a contract, as opposed to relying on a common law claim for breach of contract or tort, including:
1. Brief Summary Indemnity remedies are enforceable when the event stipulated in the indemnity clause occurs, regardless of the circumstances that led to the event. While remedies commonly take the form of monetary relief, an indemnity remedy can take whatever form the parties agree upon. When indemnity clauses are disputed, a court’s discretion is used to decide whether the terms of the indemnity clause have been fulfilled, rather than what the appropriate remedy is. In contrast, common law claims and remedies are typically determined at the court's discretion, through the application of established legal tests. Therefore, indemnity clauses streamline the remedial process by providing indemnified parties the right to obtain monetary reimbursement for demonstrated losses sustained. Indemnity clauses allow contracting parties to better manage what remedy each party will and will not be entitled to, so as to mitigate and allocate risk. 2. Analysis A. Available Remedies and Enforcement Without an Indemnity Clause Remedies Remedies available for breach of contract and tort claims at common law are generally limited to damages,[1] injunctions,[2] and, in rare circumstances, declarations.[3] The court may decide at its discretion what remedies it awards, in accordance with the common law. Enforcement Tort Claims A simplified version of the test for tort claim damages (the “Tort Remedies Test”) is:
Breach of Contract To receive damages for a claim in respect of a breach of contract, the plaintiff is required to prove the non-performance of a contractual provision by the defendant. Unlike tort claims, neither foreseeability nor proximity are considered when determining breach of contract claims.[7] Rather, “any award for contract damages is based on the undertakings or promises made by the defendant”.[8] The damages awarded are intended to represent “the losses that the promisee has already incurred and the court’s estimate of any future losses for which the promisee might be entitled to compensation”. [9] Enforcement of breach of contract remedies also involve the duty to mitigate, which requires plaintiffs to take all reasonable efforts to reduce their losses after a breach of contract.[10] An injured party that fails to mitigate may be awarded reduced damages by a court. Drawbacks of Not Including Indemnity Clauses Indemnity clauses allow contracting parties to mitigate the risk of extensive legal procedure. Plaintiffs must establish substantial deprivation of benefit[11] and reasonable mitigation efforts in order to be awarded damages for breach of contract claims, and must satisfy the Tort Remedies Test to be awarded tort claim damages. Both types of claims require extensive legal analysis and are ultimately decided at the discretion of the court, which leaves the parties in a state of uncertainty regarding the court’s final decision. A. Available Remedies and Enforcement With an Indemnity Clause Overview Indemnity clauses allow contracting parties to avoid having to satisfy common law requirements to claim contract/tort damages. Instead, indemnity clauses allow parties to agree in advance that one contracting party will owe another contracting party a specified amount of money (or be liable for a specified category of damages, which may be broadly defined) if a certain event takes place. Remedies The application of an indemnity remedy is more flexible than breach of contract or tort claim remedies since the parties have control over drafting the indemnity clause. Therefore, indemnity remedies can take any form, but commonly take the form of monetary relief. As long as the event stipulated in the indemnity clause takes place, the indemnified party is owed the agreed upon remedy, without having to satisfy common law tests for damages. Enforcement An indemnified party only needs to prove the loss specified in the indemnity clause occurred to receive the indemnity. Essentially, if a contracting party forgoes the inclusion of an indemnity clause, they also forego their ability to pursue remedies without having to prove fault or mitigation efforts (subject to the terms that the parties agree must be satisfied for such indemnity to be applicable in the first instance). The event that triggers an indemnity can be any event the parties agree upon and does not need to be a breach-of-contract-like event (e.g. non-performance of contract provision). Also, similar to common law claims, the extent to which indemnity-based damages are enforced is subject to the indemnified party’s duty to mitigate against losses.[12] Benefits of Indemnity Clauses Indemnity clauses provide contracting parties with greater control over undesired scenarios that often result from the common law awards process, such as:
Indemnity remedies are also not limited to the losses recognized at common law, as is the case with claims for breach of contract or in tort. For instance, legal costs on a solicitor-and-client basis do not generally fall within the scope of damages recognized by courts.[15] However, an indemnity clause can account for that type of loss, since it allows contracting parties to control not only the events that trigger the indemnity, but also the extent indemnified parties are compensated. A practical example of this is an indemnity clause that states compensation shall include all loss resulting from an event, rather than only reasonably foreseeable losses, as is the case for common law remedies. B. Limitations Limitations of Indemnity Clauses in Jurisprudence There are limitations to what can be included in indemnity clauses, as courts generally tend to read down “sweeping” [16] or overly broad contractual provisions. The interpretation of indemnity clauses is essentially consistent in this respect with general contractual interpretation considerations, with courts attempting to balance parties’ freedom of contract with overly broad or onerous provisions. A couple general rules to keep in mind in this respect are that courts (i) will interpret contractual provisions on a contextual basis,[17] and will read down a provision to give it a more context appropriate effect, and (ii) tend to read down contract provisions less frequently between parties it believes to be of “equal bargaining power”.[18] An example of a sweeping contractual provision that would be more likely to be read down absent express evidence of the parties’ intentions to the contrary is an indemnity clause that protects a party against its own negligence or deliberate wrongdoing.[19] As a general rule, when drafting indemnity clauses, a drafter should therefore consider the scope of the indemnity clause (how broad or narrow the language used is) and the perceived bargaining power between the contracting parties. [20] Exclusive Remedy Clauses It is not uncommon for "exclusive remedy" clauses to accompany indemnity clauses, so as to limit indemnified parties from pursuing any remedies other than those prescribed (whether in the contract as a whole, or in a particular provision, as applicable).[21] Exclusive remedy clauses act as a risk mitigation tool for the indemnifying party and eliminate the possibility of "incurring liability beyond the remedy specified in the agreement".[22] In such case, the drafter should pay particular attention to the scope of the indemnity – if the scope of the indemnity is broad (in terms of both the types of loss or damage it covers, as well as the extent of available damages), such indemnity being an “exclusive remedy” may be acceptable. However, drafters should not assume that having an indemnity within an agreement, as an exclusive remedy, is necessarily preferable to having access to other common law remedies, particularly if the indemnity applies narrowly. [1] Canadian Encyclopedic Digest [CED], Contracts at s 260. [2] Ibid. [3] CED, Torts at s 57. [4] Vaughan v Menlove (1837), 132 ER 490. [5] Cooper v Hobart, 2001 SCC 79. [6] Mustapha v. Culligan of Canada Ltd, 2008 SCC 27. [7] Canadian Contract Law, Angela Swan, Jakub Adamski, Annie Y. Na, LexisNexis, Fourth Edition [Canadian Contract Law] at 409. [8] Ibid. [9] Canadian Contract Law, supra note 7 at 407. [10] Southcott Estates Inc. v. Toronto Catholic District School Board, 2012 SCC 51. [11] Hong Kong Fir Shipping Co. Ltd. v Kawasaki Kisen Kaisha Ltd., [1962] 2 QB 29. [12] Parc Downsview Park Inc v Penguin Properties Inc, 2018 ONCA 666 at para 89. [13] CED, Guarantee, Indemnity and Standby Letters of Credit [“CED on Indemnities”], at s 116. [14] Ibid. [15] CED on Indemnities, supra note 13 at s 122. [16] The Law of Guarantee, Kevin McGuinness, 3rd ed, LexisNexis [“The Law of Guarantee”] at 8.12. [17] Rizzo & Rizzo Shoes Ltd, [1998] 1 SCR 27. [18] Globex Foreign Exchange Corp v Kelcher, 2005 ABCA 419 at para 28 [“Globex”]. [19] The Law of Guarantee, supra note 16. [20] Globex, supra note 18. [21] Risk Allocation in Commercial Contracts, Practical Law Canada, at Practice Note 3-617-7736. [22] Ibid. |
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