The recession is over, thank goodness, but the economy in Medicine Hat is not nearly as vigorous as in the rest of the province. Valiant attempts are being made by our City and other organizations to set the economy on fire and hopefully this occurs soon.
During tougher times we often see people who try to get things done spending the least amount of money as possible. Saving money does make sense when it is more difficult to make. The problem that I see though is people start cutting corners as a way to save money. This is not only for individuals, but for corporations as well. Once you start cutting corners then you and/or your corporation are exposing yourself to greater risk and greater liability. If this greater exposure leads to real liability or requires the corners to be fixed, usually the cost to remedy is much greater than the saving from cutting corners.
With all businesses I strongly encourage my clients to put in place the appropriate legal tools to deals with the business as a going concern and to address common issues that arise within the business.
One of the simplest matters which can turn into a big problem is the corporate minute book. I have a lot of people who come to me with their corporation that they set up themselves. Now they want financing to provide capital to their business and the bank they are dealing with requires certain legal/corporate documents. They do not have these documents, the corporate minute book is not up to date (and often contains no documents) and so long as these “little things” are not in order, the bank is not willing to provide financing.
The client comes to me to “get the documents I need”. This can be a very time consuming, and therefore costly endeavor. One that would not have been necessary had the client come to me in the first place to incorporate his company and manage the minute book.
I also often see situations where a Corporation with a single shareholder decides to bring in another shareholder as an investor. In addition to ensuring the investor qualifies for an exemption under the Alberta Securities Act (not complying with that Act can lead to fines and imprisonment), I will give advice to ensure the relationship between the two shareholders is put down in paper in the form of a unanimous shareholders’ agreement (for a corporation) or a partnership agreement (for a partnership). These documents will spell out with certainty what the relationship is between the shareholders/partners, and what happens if they get into a disagreement, or something happens to one of them.
Without these documents the problems and subsequent cost to deal with such problems can be financially detrimental to a corporation and its shareholders.
We cannot predict the future. We cannot predict if a business will be a failure or a success. We cannot predict if partners in a business will be able to get along and successfully run their business for 5 years, 10 years, indefinitely, or at all. What we can do is make sure your documents are in order, and that you have the proper agreements in place to address future potential situations.
The purpose behind such agreements is to create certainty, and to save money in the long run. We encourage all businesses to have your corporate lawyer review your company to ensure the proper documents and necessary documents are in place to protect you, carry out your wishes, and protect your business.