Articles & Resources
Why do you need a corporate lawyer for your business?
Recently Nava Wilson LLP was named the Best Corporate Lawyers in Toronto by The Best Toronto. The Best Toronto serves as a guide to the best things that Toronto offers, from the top products to the most dependable services. In light of this event, we’ve decided to share some core information business owners should know about corporate law.
What is corporate law?
Corporate law deals with the formation, governance, and operations of corporations and how shareholders, directors, employees, creditors, and other stakeholders interact with a corporation and one another. In addition, corporate law includes the laws governing the incorporation, dissolution, and registration of corporations. In simpler words, corporate law focuses on the laws and regulations that businesses follow.
Canadian corporations may be formed under federal or provincial laws that govern and permit the formation and registration of corporations within their respective jurisdictions. Accordingly, corporate lawyers are expected to be familiar with the issues a corporation and its stakeholders are likely to face.
Why do you need a corporate lawyer?
Operating a business is usually both empowering and overwhelming. But, unfortunately, with managing responsibilities come risks and legal issues.
From the very start, every business owner must ensure if their company is subject to any regional laws and regulations and, if so, whether they comply. Beyond that, as a business owner, you need to mitigate your business's risks while making important decisions every day. If you make the wrong one, your company may become vulnerable to time-consuming and expensive litigation.
1. Buying an existing business.
Before buying a business, there are several things you need to consider. First, it is essential to research the said business to ensure you’ll get exactly what you expect. Such a process is referred to as due diligence and is undertaken to provide all the facts a seller presents are correct, including but not limited to the following:
- Reviewing and verifying financial documents;
- Reviewing any third-party contracts and commitments of the business;
- Reviewing the lease terms of the business premise;
- Conducting relevant searches on the business as needed (work orders, bankruptcy, litigation, etc.);
Your lawyer will be involved in your due diligence based on your experience (or lack thereof).
Second, you may require assistance deciding whether to structure the deal as an asset or share purchase.
- In an Asset Purchase, the buyer only acquires selected assets and most, if not all, of the liabilities remain with the seller.
- In a Share Purchase, the buyer purchases all the company shares, transferring all the company’s assets and liabilities to the purchaser.
2. Choosing the appropriate type of business structure.
A corporate lawyer can assist business owners in selecting the appropriate type of business structure while pointing out the aspects that influence what kind of company fits their specific operation, thus avoiding common mistakes.
3. Getting incorporated.
Even though there is technically no legal requirement to retain a lawyer to incorporate a company, there are many benefits to utilizing a lawyer’s help.
Reserve a name for your company.
The first step in opening a new company is to reserve a name. A corporate lawyer can help you review the existing companies to determine if the chosen or similar names have already been taken. If the lawyer determines that the Registrar will not approve the chosen names, they will ask you to come up with other names. Therefore, saving you some time and money.
Determining share structure.
A corporate lawyer, working in conjunction with your accountant, can assist you in determining which type of share structure is most suitable for your business. You may need to issue shares to your company's investors and create different classes of shares, for example, with the right to vote and without or with the right to receive dividends. This type of operation often requires a lawyer’s insight.
Post-incorporation documents and paperwork.
Determining a list of every document you need can take time and effort. Using a corporate lawyer can ease the process of figuring out what paperwork is required to incorporate a business.
The list of documents usually consists of the Certificate of Incorporation, Articles of Incorporation and the Company’s Minute Book. While depending on your particular situation, there will also be other documents.
Overall, the main reason to have a lawyer assist you with incorporating your business is to ensure your company is set up correctly. But, more importantly, getting a lawyer involved from the early stages of your business will also be helpful as your business grows because you will have a legal advisor familiar with your company and your circumstances.
4. Legal troubles.
While running a business, you’ll stumble upon issues regarding contracts, employee disputes, unpaid invoices, or other conflicts at some point. When such a problem arises, having the legal backing of a professional litigator can help you feel protected. In addition, a lawyer can always advise you on the best course to take and how to settle disputes as efficiently as possible.
5. Rules and regulations of your business industry.
Every industry in Canada has its own rules and regulations. So naturally, there will be different regulations if your business operates in the food industry as opposed to construction. An experienced corporate lawyer can help clarify the rules and potentially additional licenses applicable to your company.
6. Drafting paperwork.
Every business requires contracts and agreements drawn up. It can be lease agreements, employee contracts, service agreements, invoices, etc. In this case, a lawyer can help clarify all written terms on your legal paperwork to protect your business from legal trouble.