Starting your own business can be quite exciting. It is the realization of your dreams coming true. However, there is also a tremendous amount of hard work behind the scenes in order to get started and we know that you want to keep the focus on your products or services. That is why we offer a small businesses legal service package.
While business start-ups operate in diverse areas of our economy, many of the legal issues facing these businesses are the same. We routinely assist small and medium sized enterprises with their employment matters, shareholder and partnership agreements and commercial leasing contracts. We have experience dealing with many aspects of law that a new business could encounter.
Small and medium-sized enterprises are one of the fastest growing employers in Canada and employees are often their greatest attribute. Complying with employment standards and using the law to help build a stronger team can be difficult in this ever-changing field. Drafting the right employment contracts and helping you deal with employee issues before they become conflicts will help you grow your business and make it stronger.
A common concern among start-ups, particularly in the technology sector is how to retain employees. When you are starting a new business, it can be quite frustrating to search for and hire a new employee, provide that employee with training and then see him or she leave, possibly to go work for your competitor. We can assist by advising you on the drafting and enforcement of confidentiality agreements, non-solicitation agreements and non-competition covenants. While non-competition covenants are the most onerous of these and are only enforced by courts in very limited circumstances, the other kinds of agreements listed previously typically are enforceable. For any of these kinds of agreements, you want to ensure that they are properly constructed. Unreasonable restrictions and ambiguous terms could lead to a court striking down the entire agreement. Getting legal advice on the enforceability and content of these agreements is key before anyone signs on the dotted line to ensure that you are getting the agreement you intended.
Changes to the regulation of the employment relationship have occurred quite recently and more changes are anticipated in the coming year. On November 20, 2014, the Ontario Government’s changes to the Employment Standards Act (the “ESA”) was passed. Among the changes impacting start-ups is the new method for how the minimum wage is calculated. The minimum wage rate will now be tied to the Consumer Price Index of Ontario and new minimum wage rates will be published on April 1st of the year to come into force on the following October 1st. The ESA changes also provide a new ability for employment standards officers to order companies to perform self-audits of their employment practices and account for any irregularities. These changes and more will impose positive obligations on employers, including start-ups.
Shareholder and Partnership Agreements
Businesses are dynamic and never more so than at the start-up phase. A well-drafted shareholder or partnership agreements are part of the foundation upon which a business succeeds. It is therefore important that these agreements accurately reflect the needs, duties, rights and obligations of the parties.
Approval of material decisions, exit strategies, and dispute resolution mechanisms are just a few of the provisions which should be included in such an agreement. In addition, the valuation of the shares clause, is a clause that should be addressed in your shareholder agreement. This provision should include a mechanism to either appoint an independent valuer or require parties to agree to a valuation on a regular basis. In either case, the fair market value of the shares developed through this mechanism will be the basis of the valuation in the event a sale of the shares is necessary. Including a provision like this in your shareholder agreement can prevent disputes between founders or investors.
Commercial Leasing Contracts
When it comes time to operate your business from commercial premises, there are a number of factors to consider when entering into a lease agreement. Due to the volatile nature of the start-up enterprise, the right to sublet the premises or assign the lease to a third party is a clause you should pay close attention to. Having the flexibility to get out of your lease quickly may be necessary for your company to survive and thrive; this could be the situation whether you need more space to operate your business effectively or less space is better because your business is experiencing a downturn. Most commercial leases require the consent of the landlord to a proposed assignment or sublease. This consent is subject to subsection 23(1) of the Commercial Tenancies Act, which provides that unless there is a clause to the contrary, a landlord cannot unreasonably withhold consent to a sublease or assignment of the lease.
Other aspects to consider in the lease include the lease term, pricing, your renewal options, whether you have exclusivity that prevents the landlord from locating another business in direct competition with you in the same complex, whether you can use the premises for a different business purpose, any plans for any capital improvements, insurance requirements, any relocation clause, and clauses on extensions, waivers and disputes. Your lawyer can seek to negotiate better terms in your commercial lease than the landlord’s standard agreement.
What Merovitz Potechin LLP Can Do For You
At Merovitz Potechin LLP in Ottawa, we understand that it is difficult to start up, maintain and grow a successful business over the long-term. We can help you to formulate and implement your business plan, including setting up the structure of your business. We can prepare employment contracts, shareholder and partnership agreements and help to negotiate your commercial lease, among other services. We keep current on all business legislative developments. We can answer any questions you may have along the way and provide ongoing support as the need arises, including addressing any disputes with your landlord, employees, suppliers, vendors or even customers. If you choose to incorporate from the outset, we can keep your corporate minute book for you and update it annually in order to help you to keep your corporation in good standing.
We are proud to act for many Ottawa area businesses that have grown from start-ups to market leaders over the years. A small business lawyer from our Ottawa business team is ready to help you. To consult with a member of our firm, please email us at Merovitz Potechin LLP or contact us at 613-563-7544.