When a Non-profit closes its doors

I just had a question from an accountant friend of mine who asked me the following: a nonprofit client is shutting down its operations and it has a suplus. Where does the surplus go? The answer is "it depends". If the non-profit is a registered charity - the surplus should go to another registered charity. The articles or by-laws of a corporate charity may indicate what sort of charity (usually similar in nature) the proceeds will be disbursed to. If the organization is a nonprofit but not a charity, the proceeds can be disbersed to its members, unless its articles or by-laws stipulate otherwise. Of course this is just Ontario law, folks! Every jurisdiction has different rules.

Barrie Senior Awards

Do you know an exceptional senior in Barrie? Nominate them for an award for their community service at http://bit.ly/cqa2JI

Can't Pay the Rent?

In these economic times I have, unfortunately, had a few clients who have been struggling to continue to make their monthly lease payments on their commercial or industrial space. When they call, I usually give them this advice: let's call the landlord. The most practical piece of advice a lawyer can give in these situations, in my opinion, is to keep the lines of communication open. Sure the landlord wants to get paid, but he may also be willing to negotiate with you, over the short term, in order to keep you as a long term tenant. Often, the last thing he wants is to have to look for a new tenant. Of course, every situation is different, and yes, sometimes landlords are just waiting for the opportunity to distrain a tenant's goods and lock them out, but if your business has always paid its rent on time, and you are simply in need of a little flexibility to get you over a short-term hurdle, a phone call to the landlord can't hurt. We have had some success in negotiating alternative rental arrangements to get clients through hurdles. Letting the landlord know that you want to pay the rent, and asking him for a plan to make that happen, can be an up-front and straight-forward approach, and an excellent alternative to simply ignoring his calls and not paying your rent on time.

Small Claims Court Limit Increase

Effective January 1, 2010, the limit for claims in Ontario small claims courts has increased from $10,000 to $25,000. With the process being relatively user friendly, and not requiring a lawyer, I would imagine the number of claims will increase significantly, providing access to justice for people who may have otherwise declined to pursue a claim due to legal costs. For businesses, this means larger accounts receivable, for instance, can be collected through this process, with few upfront legal expenses. Good news for the small business community.

Non-Competition Covenants

When an employer hires an employee, they are often concerned with what might happen if that employee was to leave and work for a competitor or start a competitive business. Quite often, employment agreements will contain non-competition covenants which stipulate that, upon termination of employment for any reason, the employee agrees not to compete with the employer within a certain georgraphic region and a certain period of time. Difficulties can arise where these covenants are too broad, and not necessary for the reasonable protection of the employer's interests. Sometimes these covenants are entirely unenforceable. A good question to ask yourself, as an employer, is: can I reasonably protect my business by using a confidentiality clause (employee agrees not to disclose any confidential information of the business) and a non-solicitation covenant (employee cannot solicit the existing customers or prospects of the business). If your interests can be protected using these means, it may make sense to draft your employment agreement accordingly. Having an agreement that is both reasonable and enforceable makes good business sense.

Medicine Professional Corporations - fee break!

For those doctors out there with medicine professional corporations, you may be interested to know that fees for annual renewal of your license with the College of Physicians and Surgeons have actually been reduced. This is a rare occurrence indeed! Renewal fees for 2009 were $195.00 but this has been reduced to $125.00 for 2010. Nice to know something is going down in price!

Buying Shares

I have a client who sent me a Letter of Intent that she has received for the purchase of her business. It struck me, as I was reading through it, that the potential purchaser did not understand the ramifications of his own offer. He started out offering to buy all of the shares of the corporation that my client owns. But the body of the offer looked more like an asset purchase. He did not want to assume any liabilities of the business and he wanted to pick and choose which employees stayed on and have my client fire the rest and be responsible for severence packages. What this purchaser did not understand is that, if he is purchasing all of the shares of the company, he inherits the liabilities and employees. The corporation is a separate legal entity and it stays the same, regardless of who the shareholders are behind it. The upside is the purchaser can have a seemless transition where no one even has to necessarily know that ownership of the company has changed, the downside is that, with the company, comes its history, its liabilities, and its employee seniority. Knowing the difference between a share purchase and an asset purchase and assessing the pros and cons of each before making your offer, makes good business sense.