The general opinions expressed herein are for information purposes only and are not to be relied on. Individuals are encouraged to seek legal advice as it relates to their specific fact scenario to ensure they are fully aware of their legal rights and obligations.
Table of Contents
Corporate and Commercial Law:
Wills & Estates
Notary Public & Commissioners of Oaths
Corporate and Commercial Law:
Start a Business and Incorporate . . .
There are several considerations when making such a decision. The first advantage of incorporating is that it provides a limit to the liability of an individual shareholder. Generally, the shareholders are only risking the value of their shares in the corporation and the shareholder loans that have been made to the corporation. The same cannot be said for a sole proprietor, who is risking every personal asset that he or she owns when they own their business personally.
Another important factor to consider is the tax advantage of incorporating. For example, there are certain tax rate reductions available for qualified small business Canadian corporations.
Other advantages to incorporating include: the continuity of life as the corporation cannot die, the transferability of the shareholder’s interests and the ability to raise capital.
Whether you set up a corporation depends upon the circumstances. It is a very complicated question that requires an analysis of all the facts. There are instances whereby it is better to delay incorporating.
Difference between Joint Venture and Partnership . . .
Generally, the definition of partnership is a business with the intention of profit that is carried on by at least two persons or entities. A partnership is not a legal entity, and each partner is an agent of the partnership. Each partner is also jointly liable for the debts of the partnership.
A joint venture is similar to a partnership in that it is also an operation carried on with the intention of profit by at least two entities, but it is an operation with a limited life (usually a specific project). As well, the liability of the joint venture is not joint and several in that one joint venturer is not liable for the liabilities of the other joint venturers. There are certain tax advantages available to a joint venture that are not available to a partnership.
If I am going to sell my business, is it more beneficial to sell the shares of the operating corporation or sell the assets of the corporation?
Sell Shares of Corporation vs. Sell Assets of Corporation: Generally, it is more advantageous for the vendor to sell shares of the operating corporation than to sell the assets of such a corporation. From a liability perspective, the selling shareholder has removed the hassle of dealing with any hidden liabilities that may arise after the closing date (subject to an indemnification that may be included in the share purchase agreement). There may also be a tax advantage to the seller.
However, these advantages do not apply to the Purchaser.
Holding Corporation . . .
In the Business Corporations Act (of Alberta) there is no distinction between a holding corporation and an operating corporation. It is a description of function that is based on fact.
Generally a corporation is considered to be a holding corporation if it owns the shares in an operating corporation. If an individual owns shares in the holding corporation, it provides the individual with the ability to shift excess cash out of the operating corporation and into the holding corporation. This is referred to as tax free inter-corporate dividend and it does not trigger a corporate tax consequence. The individual also does not have a tax consequence in such a circumstance as long as the individual does not subsequently transfer funds to themselves personally from the holding corporation.
The transfer of funds to a holding corporation decreases the risk of loss that can occur as funds held by the holding corporation are no longer at risk of liability due to activities of the operating corporation.
Liability of Shareholder . . .
Our corporate laws provide for limited liability to shareholders as such liability relates to the corporation’s activities. The risks of liability to shareholders are limited to the value of their shares and shareholder loans owed to them by the corporation. If a corporation goes bankrupt, a shareholder’s other personal assets are not at risk (subject to certain improper acts by shareholders or in a situation whereby the shareholder has guaranteed a corporation’s debt).
What are my risks as a director of a corporation . . .
Risks as a Director: Unlike a shareholder, a director can be held liable for certain liabilities of the corporation. These liabilities are based on certain legislative provisions. Examples of liability are found in:
(1) the Excise Tax Act (of Canada) which provides that directors are liable for unremitted Goods and Services Tax of the corporation; and
(2) the Income Tax Act (of Canada) which provides that directors may be liable for employee’s withholdings that are not remitted by the corporation.
There are also situations whereby a director can be responsible for corporate employee’s wages and certain environmental infractions.
These and many other types of director liabilities can usually be avoided by a director if the conduct in question is determined to be appropriate in the circumstances (traditionally known as the “due diligence” defence). An individual should avoid consenting to become a director prior to familiarizing themselves with the respective responsibilities that the position holds and the potential director personal liabilities.
With whom the children reside . . .
Most often, the parents work together to make decisions about their children. If the parents cannot agree, the parties will apply to Court and a judge will decide.
The factors a Court will look at in making its decision can include:
the history of care for the child;
the child’s physical, psychological, and emotional needs;
the nature and strength of the relationship between the child and other people
residing in the child’s household; and
the ability and willingness of each the parents to care for and meet the needs
of the child.
Additional compensation if spouse leaves me . . .
In Canada the law is based on the premise of a “no fault” divorce. This means that, for example, if your spouse leaves you and ends the marriage, he/she is not deemed to be at fault for the marriage ending (even if adultery is involved). In short, you will not get compensated simply for your spouse leaving you.
Any “compensation” would come by way of spousal support. Spousal support is payable on three grounds:
compensatory: which addresses the economic advantages and disadvantages flowing from the marriage and the roles adopted during marriage (this ground is not about need);
non-compensatory: considers the needs of the receiver and the ability of the payer to pay spousal support; and
contractual: spousal support is payable under this model if there is an express or implied agreement regarding financial obligations to your spouse.
Length of marriage and settlement . . .
The general rule is: the longer the marriage, the longer the duration of spousal support. The longer the duration of your marriage also means that you may expect to have roughly the same standard of living between the spouses after separation; this affects the amount of spousal support paid.
How long do I have to live with someone to be common law?
How long for "Common-Law": In Alberta, the term “common law” has been replaced with the term “Adult Interdependent Partner” (AIP). You can become an AIP three different ways:
you live together for at least 3 consecutive years in a relationship of interdependence;
you have a child together and live together with some degree of permanence; or
you enter a contract to become an AIP with each other.
Real Property Report . . .
A Real Property Report is prepared by an accredited Alberta Land Surveyor and is comprised of a legal survey of a parcel of real estate, a printed representation of the registered legal title of that parcel of real estate, and the certification and opinion of the accredited Alberta Land Surveyor who prepared the Real Property Report.
The survey portion of the Real Property Report will show where the property lines are located, the location of improvements within the survey area (e.g. buildings, decks, patios, hot tubs, fences, etc.) and the location of identifiable third party interests and rights-of-way within the survey area.
The printed representation of the registered legal title will identify all of the registered interests in the property and registered agreements concerning the property, including registered rights-of-way and encroachment agreements on the date that it is searched.
The certification and opinion of the accredited Alberta Land Surveyor who prepared the Real Property Report will include a certification that the Real Property Report accurately reflects the state of the property at the time of the legal survey in accordance with the Alberta Land Surveyors’ Manual of Standard Practice, as well as the written opinion of the Surveyor with respect to any issues concerning the legal survey such as encroachments.
Do I need a Real Property Report . . .
As a Buyer you are not required to obtain a Real Property Report to buy real estate in Alberta if you are paying for the property using only your own existing resources and without any form of third party financing. (Please note that any debt secured by an interest in land creates a mortgage. This is true whether the debt is repaid in a fixed instalment manner or if it is revolving debt, such as a line of credit. If a lender is registered against your title as a condition of advancing a loan or establishing a line of credit, then that lender, by definition, has a mortgage against that property.)
However, most lenders will require you as a Borrower to provide a Real Property Report and evidence of the property’s compliance with the municipal land use bylaw to the lender as a condition of financing. Alternatively, if a Real Property Report is not available most of these lenders will accept a policy of title insurance in lieu of a Real Property Report, but such a relaxation is not guaranteed and should be confirmed by the Buyer.
As a Buyer, you are only entitled to have a Real Property Report provided to you by the Seller, if the Seller is obligated by contract to give you one. Accordingly, if you intend to obtain financing to assist in the purchase of real estate, you should make sure that you will be able to satisfy all of the lender’s requirements for financing, including a Real Property Report and evidence of the property’s compliance with the municipal land use bylaw if it is required.
Condominium Units that are made up of the right to occupy an identified space within a building, but do not create an exclusive right to land, are an exception to this because the legal title to the Unit is identified on the registered Condominium Plan, and there is no land exclusively associated with the Unit to survey. A Condominium Unit that does create an exclusive right to land is known as a Bare-land Condominium, and is subject to the same concerns previously addressed concerning Real Property Reports.
Are there any other costs when buying a home . . .
Most contracts dealing with real estate allow for adjustments to be made for costs that are paid for by either the Buyer or the Seller directly, but benefit both the Buyer and the Seller. These adjustments are presented on a document known as the Statement of Adjustments and commonly include an adjustment for property taxes that have either been paid by the Seller or will be paid by the Buyer, an adjustment for condominium fees in the case of transactions involving Condominium Units, and adjustments for damage deposits and paid up rental in the case of transactions involving rental property.
When a Seller has made payments that are adjusted to reflect the fact that the Buyer will have a benefit from that payment after becoming the owner of a property, then those amounts are added to the total that the Buyer must pay to the Seller on closing. When the Buyer must make payments after becoming the owner that the Seller has already received a benefit for, such as property taxes, then those amounts are deducted from the total that the Buyer must pay to the Seller on closing.
Additionally, Buyers and Sellers will need to pay legal costs. A Buyer will need to pay the costs of registration of the transfer of land and, in the case of a Buyer with financing, the Buyer will also have to pay for the costs of preparation of financing documents and registration of security, usually by way of a mortgage, for the Buyer’s lender.
How fast can I close a real estate . . .
In recent years, due to the volume of transactions being submitted to the Alberta Land Titles Offices (i.e. North and South), the turn around time for registrations has gone from an ideal of 2 business days to more than 20 business days during some periods. This means that many transactions will not be completed for several weeks after all of the legal conveyancing documents and financing documents have been signed and sent for registration.
Accordingly, depending on the turn around time for the registration of a transaction, a real estate deal may easily take 8 weeks or more from the date of signing until all elements of the transaction are registered.
Because of this periodic slow down, a parallel method of closing a real estate deal has developed using insurance coverage provided through third party Title Insurance providers or by virtue of the use of the Western Law Societies Conveyancing Protocol. When closing a real estate deal using “gap” insurance coverage, funds are paid to the Seller before the Buyer is registered as the owner, provided that the only remaining steps is to secure registration at the Land Titles Office.
If closing using insurance coverage is possible for a particular transaction, and if a Buyer is comfortable using an insurance based closing, and a Buyer’s lender (if any) will allow it, then a real estate deal can be closed without the delay associated with waiting for registration at the Land Titles Office. However, the Buyer will not be the legally registered owner of the property until such registration occurs and the insurance coverage in place for the purposes of closing the real estate deal is intended to protect any funds advanced until the Buyer becomes the legally registered owner.
When to contact the Bank . . .
In truth, a Buyer should look into financing before even starting to look for real estate. Accordingly, the answer must be to do so as soon as possible, if a Buyer intends to finance part of a purchase of real estate with borrowed funds.
I have been pre-approved for a mortgage loan . . .
Yes. Pre-approval for a mortgage loan does not mean that a lender will approve financing for the purchase of any particular piece of real estate.
It is wise to seek pre-approval for financing, as it will give a Buyer an idea of what kind of real estate is reasonably available, but a lender will need to review any contract and usually obtain an appraisal prior to finally approving financing.
What is the benefit of assuming a mortgage . . .
It may be beneficial for a Buyer to assume an existing mortgage if that mortgage loan was granted at a lower rate of interest than the interest rates available to a Buyer on mortgage loans at the time that the Buyer is seeking to Purchase real estate.
Conversely, if a Seller can market an existing mortgage debt which carries a lower rate of interest than the interest rates available to a Buyer on mortgage loans at the time that the Seller is seeking to sell real estate, then the Seller may be able to ask a higher price for the real estate than the existing market might otherwise support.
However, in the event that a Seller obtained a mortgage loan that is insured in favour of the lender against default, then the Seller should be very careful about allowing a Buyer to assume that existing mortgage as the Seller has personally guaranteed the mortgage debt. In our office, we recommend that any Seller whose existing mortgage is insured by the Canadian Mortgage Housing Corporation, or a private insurer for high-ration mortgage loans not allow that mortgage to be assumed.
Wills & Estates
What happens if I die . . .
If you die without a Will, everything you own (except joint property) will be distributed under the rules of the Intestate Succession Act.
For example, if you are married and have four children (minor children or adult children) your estate would be distributed as follows:
$40,000.00 would go to your spouse
the remainder of the estate would be divided as follows: 1/3 to your spouse, and 1/6 to each child
If you want to control where your property goes on your death, you must have a Will.
What happens to my children . . .
If your child has another guardian, nothing needs to happen. That guardian can continue to ensure that the child is taken care of.
If you are the only guardian of your child and have not named a guardian in your Will, your child becomes “a child in need of intervention” under the Child, Youth & Family Enhancement Act. The Director (more commonly known as “Social Services”) steps in to ensure that the child is placed with an appropriate guardian. This may be a family member but might not be the person you would have chosen to be a guardian for your child.
How do I leave money for my minor children . . .
Most of our clients choose upon our instruction to set up a trust in their Wills. The typical trust allows the guardians to use the funds of your estate to take care of the children until they reach adulthood. Then the money left is distributed to the children at an age chosen by the person making the Will.
What is an executor . . .
The executor is the person that you appoint in your Will to ensure that the wishes you stated in your Will are carried out. In Alberta, the term “Personal Representative” is often used to describe this person. “Executor” and “Personal Representative” are used interchangeably.
Probating a Will . . .
Probate is a Court process where the judge determines and certifies that the Will is valid. Probate can be an expensive process but is sometimes necessary. When drafting your Will, we can discuss things that you can do in order to make probate of your Will less likely to be required.
Notary Public & Commissioners of Oaths
Do my documents need to be notarized or commissioned . . .
Whether a document must be commissioned or notarized depends on the document and its jurisdiction of origin. In most cases, documents prepared in other provincial and international jurisdictions require a Notary Public of Alberta.
How to notarize or commission a document . . .
Prior to meeting with our clients, we prefer to review the documents that require notarization or commissioning so that we can ensure that we are prepared and that the documents are properly completed.