Continuity: Why Estate Planning is Good for Business

The worst nightmare for an entrepreneur is getting sick. Not the sniffles – really, truly, sick. Not only are there no sick days when you own and operate your own business, but there are also often no long-term contingency plans. And when there is, someone still needs to be empowered to make decisions on your behalf. That is where proper estate planning comes in.

Estate planning is more than just a will for when you die. It includes documents for when you’re still alive and unable to make decisions for yourself and your business, such as powers of attorney and personal directives. If you can’t sign the cheques, who does? Who makes important decisions on business items during periods when you are incapable? Is there a backup plan?

It’s easy to put off drawing up a will as most people prefer not to think about their fallibility. Those that do have one often discover it’s out of date. Sometimes people forget that they have named a person their attorney or executor, and that person is no longer part of their life. For many reasons, periodically reviewing your estate planning documents is essential, especially when you experience substantial life changes.

Wills

The most common part of an estate plan is a will. Your will must be clear about who is to run your business after you die, for instance, your executor or someone else, and what to do with your shares. In estates that take time to settle or contain trusts that will run for years, it is crucial to delineate who is in charge and what they are to do with the business. Do they sell it or keep it for a minor beneficiary? Should they wait until a specific time or sell the shares to other remaining shareholders or another individual? These questions should be answered in your will, subject to existing restrictions if any. 

Enduring Powers of Attorney

For business continuity, powers of attorney are vital. The person named must know they are to step in should you not be able to act or make decisions. Closely held businesses which depend on many fast-paced decisions by a small team or individual need clear seconds in command, including the legal authority to take that role.

Even if the business is more informal, an untimely accident could throw a wrench into deal negotiations or large transactions, including the sale of the business. Ensuring someone has the legal authority to act in the event of an accident or disability can save what otherwise might kill a deal.

Key Person Insurance

If one person, or a handful of key people, drive the value of the business, you should evaluate the need for Key Person Insurance. Policies range in coverage and benefits, but generally, they cover the death and disability of the key person.

Key Person Insurance can help a business in two ways. First, it can provide the necessary funds to keep it operating as the hiring process gets underway. Second, if the running of the business depends solely on that key individual, insurance proceeds can help satisfy the business obligations and compensate the survivors. An example is the repurchase of shares by a corporation for value. 

Unanimous Shareholders Agreements

Although it may not seem like it, shareholder agreements can play an important role in estate planning for businesses. Without a unanimous shareholders agreement, the shares of individual shareholders may end up in the hands of people not intended to own or operate the business. That can have a detrimental effect on value. 

The shareholders’ agreement may also require that a corporation repurchase shares of a disabled or deceased shareholder, helping the shareholder and their family with medical expenses and loss of income or business revenue.

Conclusion

Estate planning makes good business sense. Make continuity plans for yourself and your business before it’s too late.

Listed Issuer Financing Exemption: An Easier Way for Public Companies to Raise Capital

Raising capital is about to get a bit easier for public companies.   

Starting November 21, 2022, public companies will be able to raise funds under a new prospectus exemption recently announced by the Canadian Securities Administrators. The Listed Issuer Financing Exemption under NI 45-106 uses a simplified offering document which avoids the cost and time needed to create a prospectus. 

To use this exemption, companies must fill out a Listed Issuer Financing Document (45-106F19), file a news release, and post the document on its website if it has one. After completing the offering, companies using the Listed Issuer Financing Exemption must file a report of exempt distribution (45-106F1) as if they completed a private placement. 

The requirements to use the Listed Issuer Financing Exemption are: 

  • Must be listed on a stock exchange recognized by Canadian Securities regulators, such as the TSX, TSXV, and CSE.
  • Must be a reporting issuer for at least 12 months immediately before announcing the offering.
  • Have active business operations (not a Capital Pool Company or any other company whose primary assets are cash or its listing.) 
  • Be up to date on all disclosure requirements.
  • Issue a press release announcing the offering.
  • Prepare a Listed Issuer Financing Document (and post it on its website if the issuer has one)’

Limitations of the new Listed Issuer Financing Exemption include: 

  • Issuers are limited to raising $5,000,000 or 10% of their market capitalization (up to a maximum of $10,000,000), whichever is greater. 
  • In any 12 months, the Listed Issuer Financing Exemption cannot raise the outstanding listed equity securities by more than 50%. 
  • The funds raised cannot fund a significant acquisition, a restructuring transaction, or any other transaction requiring the approval of any security holder. 
  • Only a listed equity security (i.e. the class of publicly listed shares) or units of listed shares and a warrant convertible into listed shares are eligible for the exemption. 
  • Investment funds are not eligible. 

One benefit of the Listed Issuer Financing Exemption is that it provides greater flexibility to issuers. It allows them to decide who can assist them with raising capital. Raises under the exemption do not require an agent or underwriter. As a prospectus-exempt distribution, exempt market dealers can facilitate distributions and help public companies raise funds. 

It’s an exciting opportunity for both public companies and exempt market dealers, enabling them to expand their services into the public markets and giving public companies more choices in selecting partners to help them raise capital. 

Another benefit to investors is that the securities purchased under the Financing Document will not have a four-month hold and will be freely tradeable. Compared to a private placement, the subscription agreement can be simplified, as companies will not have to confirm the investor is eligible for other exemptions, such as being an accredited investor. Investors may value the increased flexibility compared to a private placement, allowing public companies to attract a wider pool of investors to the primary market. 

It is anticipated that TSXV and CSE will apply private placement pricing rules, including allowing the securities to be issued at a discount to the market price, within the rules of the applicable exchange. That makes the Listed Issuer Financing Exemption even more attractive to potential investors making the capital raise easier for companies. 

In contrast to many recently implemented exemptions, the national scope, increased flexibility for both issuers and investors, and the low compliance burden for issuers make the Listed Issuer Financing Exemption an attractive one that is expected to be used frequently by issuers. 

Additional research by Farhan Ahmed

Jean-Yves Simard Quoted in Canadian Lawyer Article on Reverse Vesting Orders

Reverse vesting orders have become increasingly common in the past two years. Although courts that have granted them in the past have stressed that they should remain “exceptional remedies”, at least two opinions this year suggest that RVOs will remain a driving force in insolvency practice for the years to come.  Their use cannot be ignored anymore. Jean-Yves Simard explains why in this article from the Canadian Lawyer.

Does your company disagree with a Canada Border Services Agency decision?

There is a mechanism you can use to overturn this decision

Each year, the Border Services Agency (“CBSA“) conducts more than 200,000 commercial checks or audits of Canadian businesses. In the normal course of business of a company that imports or sells goods in Canada, it is likely that you may be verified in the course of the CBSA’s port-importation audit process.  This is a process undertaken to verify and confirm an importer’s compliance with the various dispositions administered by the CBSA in the course of import operations.

The CBSA is responsible for the enforcement of several acts including the Customs Act,  the Special Import Measures Act and the Customs Tariff, as well as a multitude of other federal acts and regulations, in partnership with other agencies and departments. When importing goods into Canada, the Act allows CBSA to determine the tariff classification, origin or value of the imported goods. However, the law stipulates that it is the responsibility of the declaring party (usually the importer or seller in Canada) to ensure the accuracy of the information provided, particularly on the Coding Forms (“B3“).

Based on the information reported, administrative audits by a CBSA officer may, however, take place up to four (4) years after the goods are accounted for. An importer or vendor may be assessed on a random basis or as an “audit priority”, for example, in cases of previous non-compliance, large number of entries or type of goods imported or as part of the CBSA’s Risk-Assessment Priorities (Historical verification priorities (cbsa-asfc.gc.ca)).

The verification process begins following receipt of a letter providing the importer with 30 days to comply with the request for information and documentation. The customs officer will review the situation and determine if further information is required or if the information is sufficient to make a determination (interim report). Unless there is a change, a final report will then be issued within 30 days, listing the importer’s obligations and the corrective actions that must be undertaken. In cases where audits result in findings of non-compliance, duties and taxes owed, plus interest as well as in many cases administrative penalties may be demanded, based on goods imported over a period going back four years. Of course, this means that the amounts owed, if any, may have to be amortized other than by the selling price of the goods involved. In other words, these assessments will hit a company’s bottom line.

Two findings are generally possible depending on whether the importer had “reason to believe” that his own declarations were incorrect. It is important to understand that the “reasons to believe” concept refers more specifically to the legislative provisions of which the Customs Tariff is a part, as well as Interpretative Notes, to all “official” documents, letters or written communications from the CBSA, any internal notice or reports brought to the importer’s attention, as well as to any decision in customs matters including all the applicable precedents. These are all considered as “reasons to believe” that can justify or not the payment of customs duties or taxes to the CBSA.

Based on these “reasons to believe”, the CBSA determines that specific information was not available or conversely was available from the importer.

Possible outcome #1: CBSA determines that specific information was not available

CBSA identifies errors in the declarations but determines that the importer did not have “reason to believe” that the statements were incorrect. In this case, the importer must correct all erroneous declarations within the audit period (usually one year) as well as returns after that period, i.e., on a prospective basis and going forward. In some cases, a correction of a customs declaration may even result in a refund of customs duties to the importer.

Possible outcome #2: CBSA determines that specific information was available

CBSA identifies errors and determines that the importer had “reason to believe” that his customs declarations were incorrect. This is the case, for example, when a prima facie, evident and transparent tariff classification provision in the legislation were not followed. With respect to value for duty, i.e., the CBSA may determine that the importer had “reason to believe” that subsequent payments (royalties, license fees, revenue, interest) from the importation of goods should be included in the price paid at the time of the annual financial statement and therefore reported to the CBSA at year-end. Thus, CBSA normally takes the position that the importer ” knew”, or “should have known”, that the values reported were incorrect from the time the year-end adjustment is recorded. In all cases, if the corrections result in the payment of duty, the importer will be required to self-correct for returns dating back to the specific information date for up to four years.

Dispute and appeal

In such circumstances, there is an administrative dispute procedure and appeals can be filed under the Customs Act within a strict 90-day period following the CBSA’s final report, notice or decision.

An importer or vendor who disagrees with the CBSA’s decision may file a request for review but should keep in mind that there can be no suspension of payment in the event that amounts are to be paid. Notwithstanding the initiation of the dispute, the importer or vendor will be required to pay the amount of the assessment within 30 days before interest accrues. Security may be posted if the amounts owed are substantial or represent a significant burden to the importer. However, non-payment of duties and taxes will result in a penalty under the Administrative Monetary Penalty System (“AMPS“) and is sufficient reason for any challenge to be dismissed.

Several conditions must be met for the appeal to be accepted by the CBSA and it is therefore recommended that a lawyer or customs broker be retained to maximize the chances of successfully challenging an unfavourable determination. In all cases, the importer appealing a determination must present persuasive and relevant arguments and documentation to support their position. There must be a logical reason behind the request. If the applicant is successful, the fees and interest will be refunded. If fees are due, they must be paid within 30 days of the decision.

Importers who disagree with a CBSA re-determination may appeal within 90 days to the Canadian International Trade Tribunal (“CITT“), a quasi-judicial tribunal, where the matter will be heard on a de novo basis (i.e a fresh start).  Written argument and evidence, witness testimony and a hearing will take place before a Tribunal member.  It is highly recommended that a customs attorney be retained for this type of proceeding.

Conclusion

If you, your association or your company have any questions regarding commercial remedies in Canada, please do not hesitate to contact one of our legal advisors.  

DS Avocats has an experienced team of lawyers with expertise in trade remedies and advocacy. We also provide comprehensive expertise in customs issues.

Foreign arbitral award subject to 10-year prescription for judgments

Quebec Court of Appeal rules that ten-year prescription applies to foreign arbitral awards in Quebec: what implications does this have for international arbitration in Canada?

Find out by reading this article by Laurent Crépeau, in The Lawyer’s Daily

How to protect your rights when trial cannot wait: enter the provisional injunction

1. Your rights are in jeopardy and time is of the essence – what now?

When a dispute arises, parties cannot always wait several months for the Court to make a final ruling on the questions at issue. However, for some, waiting can mean that their interest in the litigation will lose all its value.

Here are a few examples to illustrate:

  • an important football game is scheduled to take place at the Olympic Stadium in Montreal, but the supplier who undertook to deliver the playing surface claims that it cannot reach an agreement with its supplier to deliver the surface in time;
  • a clothing retailer desperately awaits delivery of its spring collection from its manufacturer but the latter requires additional unlawful payments before it agrees to deliver;
  • a tenant of restaurant premises cannot operate their restaurant because their landlord keeps the premises locked;

In each example, the parties cannot afford to wait several months for their rights to be vindicated in court. In the case of the football game, with the game due to take place shortly, failure to deliver the playing surface will result in the cancellation of the event. In the case of the clothing retailer, its spring collections will lose considerable value once that season has passed. Finally, each day that the tenant cannot operate its restaurant will entail loss of goodwill since its customers will gradually move to other restaurants.

In each of these examples–all of which were actually litigated before the Superior Court of Quebec–the plaintiffs were able to obtain a provisional injunction from the Court which allowed them, respectively, to receive their playing surface in time for the scheduled football game, obtain their spring collection, and regain access to their restaurant, in each case, within days of filing their application to the Court.

DS Lawyers Canada represented the plaintiffs in the last two cases–how did we succeed?

2. Provisional Injunctions: A Cure for Emergencies

The Quebec Superior Court can issue various orders to force a party to perform a specific act or refrain from doing something. This type of remedy is called an injunction.

Different types of injunctions can be issued at various stages of a court proceeding. In urgent situations, the relevant injunction is called a provisional injunction.

In order to obtain a provisional injunction, a party must show that

  1. their application raises a serious question to be tried;
  • they would suffer serious or irreparable harm if the Court did not issue an injunction;
  • this serious or irreperable harm would be more significant than the harm that the opposing party would suffer if an injunction were granted; and
  • this serious or irreparable harm, moreover, is likely to occur imminently, hence why the court must intervene without delay.

3. Some Difficulties Associated with Provisional Injunctions – Or the Importance of Dealing with Experienced Counsels

A provisional injunction is not easy to obtain. Additional difficulties may further arise if an injunction would have the effect of ruling on the merits of the claim before the court. In other words, a provisional injunction will be more difficult to obtain if, in order to grant the injunction, a court has to render judgment on an issue that would normally be resolved at a more advanced stage of proceedings with the support of a complete evidentiary record and extensive oral arguments from the parties’ lawyers.

This situation was present in all three cases cited above. Indeed, in each case, the court had to determine that the party seeking the injunction was likely to succeed on the merits after a full trial.

In addition, a court may be even more reluctant to grant an injunction if it orders a party to make specific actions as opposed to merely refraining from doing certain things. Indeed, judges are more inclined to grant provisional injunctions when its effect is simply to maintain the status quo between the parties. On the contrary, when the effect of an injunction would be to force a defendant to make specific acts while greater uncertainty remains as to the merits of the plaintiff’s claim, judges will be more reluctant to grant an injunction.

Conclusion

Despite its challenges, securing an order for provisional injunction is far from impossible. Counsels at DS Lawyers Canada have obtained these on numerous occasions for their clients and know how to best present these types of applications in court. The two cases mentioned above–which were both won in the last six months–are good examples of this.

Do not hesitate to reach out to the authors of this post for more information or a consultation.

5 suggestions from the government to reduce administrative burdens on businesses

In order to reduce administrative delays, abundant paperwork and costs affecting businesses, Lucie Lecours, Minister for the Economy of the Coalition Avenir Québec (hereinafter the “CAQ“), tabled Bill 44 on June 7 in accordance with the government Action Plan on Regulatory and Administrative Relief 2020-2025. The CAQ envisages Quebec as one of the best places to do business in a simpler and more competitive environment. With the thirty-five (35) measures proposed relating to implementing flexible business hours, abolishing specific rules for advertising contests and the liquor industry, the Quebec government expects to save entrepreneurs in the province $7 million annually.

1. Hours and days of admission to commercial establishments

First, the Bill proposes to amend the Act respecting hours and days of admission to commercial establishments and to enact the Regulation respecting hours and days of admission to commercial establishments. In essence, these changes would now allow the government to set the hours of admission to commercial establishments entirely by regulation. The current hours of admission to commercial establishments would not change, however. They would simply be easier to access under one regulation. This flexibility would give municipalities the power to vary these conditions within their respective jurisdictions for different types of businesses, a power currently given only to the city of Montreal.

2. Provisions for the alcoholic beverages sector

The Bill makes several proposals that could affect businesses selling alcoholic beverages. First, the Bill proposes to eliminate the delivery permit under the Act respecting liquor permits and the Act respecting offences relating to alcoholic beverages. This permit currently authorizes public transportation services to transport alcoholic beverages.

Instead, the proposed legislation could allow public carriers to store and transport alcoholic beverages and permit the consumption of alcoholic beverages in vehicles used to transport persons while the vehicle is in motion without the need of a delivery permit.

It should be noted, however, that the place where the liquor is stored could be subject to inspections or seizures by a police officer if the officer has reasonable grounds to believe that the place is being used for the storage of liquor by a public carrier.

3. Provisions for advertising contests

Currently, the fees for holding a contest in Quebec are very onerous and entrepreneurs wishing to do business in the province could benefit from their reduction. The Act respecting lotteries, publicity contests and amusement machines require contest holders to fill out several forms setting out all the conditions of the contest and several rules limiting their advertising display. Note that they must also give up to 10% of the value of the prize to the Régie des alcools, des courses et des jeux (hereinafter the “Régie“). 

Thus, an important part of the government’s reform plan is to repeal all the rules surrounding advertising contests so that businesses will no longer have to complete as many administrative formalities to hold a contest, including the payment of fees to the Régie. Also, in the Act respecting lotteries, publicity contests and amusement machines, the government proposes to abolish all references to publicity contests.

4. Provisions concerning the publication of rights

With respect to the publication of rights, four (4) provisions of the Civil Code of Québec could be amended to reduce the time limit for making certain rights effective against third parties from fifteen (15) to seven (7) days. Thus, the reservation of ownership of a vehicle or any other movable property, a sale with a right of redemption, the rights of ownership of a lessor as well as the rights resulting from a lease will have to be published within seven (7) days of their acquisition in order to be enforceable against third parties. Specifically, the Bill would amend Articles 1745, 1750, 1847 and 1852 of the Civil Code of Québec.

5. Provisions Concerning the Names of Enterprises

Currently, entrepreneurs wishing to register with the Registraire des entreprises du Québec (hereinafter the “REQ“) are required to pay fees for the production of a search report of the names used and declared in the register. Through Bill 44, Minister Lecours proposes to remove this formality by amending the provisions of the Act respecting the legal publicity of enterprises, the Business Corporations Act and the Companies Act governing the formalities for searching and reserving a company name. This change could make the registration of companies in the REQ more accessible.

Conclusion

In conclusion, according to the Minister Lucie Lecours, these changes would significantly facilitate administrative processes for businesses, thus sparing them from unnecessary costs and delays. This  article offers an overview of the legislative changes proposed by Bill 44 that could affect businesses, but several other rules may be applicable, notably in respect of municipal matters and building security. Professionals at DS Lawyers Canada are available to answer any questions or to provide information regarding Bill 44.

Bill 96 – What companies doing business in Quebec need to know

If you own a corporation doing business in Quebec, employ more than 25 people in that corporation, or finance a corporation with personal property security, the new French language requirements may have an impact on your business operations.

On June 1st, 2022, the Act respecting French, the official and common language of Québec (the “Bill 96”) received assent, bringing into force several provisions amending the Charter of the French language (also known as the “Bill 101” and hereinafter referred to as the “Charter”) and twenty other regulations and legislative measures.

With the affirmation of French as the common and official language in Quebec as a cornerstone, the following article will explore and demystify the main changes your corporation will need to make to comply with this new Bill 96.

Language of the legislature and the courts

As of September 1st, 2022, all legal documents issued by a legal person must be drafted in French or accompanied by a certified translation in that language, such as documents filed to settle a dispute between shareholders or to sue a client in default. In this regard, a document that does not comply with this requirement can no longer be filed at a court office in Quebec.

Language of the civil administration

Communications between companies and Quebec government agencies that relate to obtaining a permit, financial assistance or any other authorization must be made exclusively in French.

Contracts entered into with the government in Quebec must also be written in French, although certain exceptions apply.

Note that this requirement will come into force on September 1st, 2022.

Language of labour relations

An important part of the government’s reform with the coming into force of Bill 96 is to provide a French language workplace for employees in Quebec. It also prohibits discrimination and/or harassment of a person on the basis that he or she has exercised the right to communicate in French or does not speak a language other than the official language.

On one hand, individual employment contracts must also be drafted in French when they are adhesion contracts. Thus, in a contract where the essential clauses are decided in advance by one party (generally the employer) and whose terms cannot really be negotiated, the parties will only be bound by a version in a language other than French:

  • when they have read the French version of the contract first; and
  • that they have expressly decided to be bound by the version in another language.

On the other hand, the individual contract of employment concluded by mutual agreement between an employer and an employee (we frequently find this when hiring an executive, for example) may be drafted only in another language, at the express wish of the parties.

In addition, employers will have to prove certain additional criteria when they require the use of a language other than French within their corporation (particularly when hiring). Under the Charter, employers only had to demonstrate that knowledge of another language was necessary to perform the job. Now, the employer must have taken all reasonable steps to avoid imposing such a requirement. To that end, the employer must have previously:

  1. assessed the actual language needs associated with the duties to be performed;
  2. made sure that the language knowledge already required from other staff members was insufficient for the performance of those duties; and
  3. restricted as much as possible the number of positions involving duties whose performance requires knowledge or a specific level of knowledge of a language other than the official language.

Language of commerce and business

As mentioned above, adhesion contracts must be written in French. For a party to express a wish to be bound by a version in a language other than French, it must have been given the opportunity to read the French version in the first place. Therefore, the usual clause inserted in contracts providing that the parties agreed to conclude transactional documents in a language other than French will no longer be sufficient for adhesion contracts.

The same applies to catalogs, brochures, social media and other documents that must be written in French as required by the Charter. If a corporation decides to make such a document available to the public in a language other than French, the corporation must make a French version available in conditions that are at least as favourable.

Under the Charter, the requirements for public sign of the business name visible from the outside are reinforced and French must now appear in a manner that is predominant over any other language. A 2:1 ratio between the two languages is considered adequate in the circumstances. There is also an exception for certain trademarks that allows for an override of the predominance of French requirement. Thus, if a trademark is duly registered and there is no corresponding French version in the trademark database, the corporation may benefit from the exemption and display its mark outside exclusively in another language. It should be noted that the provisions of this subsection will come into force three years after assent, that is, on June 1st, 2025.

In addition, registrations in the Register of Personal and Movable Real Rights (the “RPMRR“) will have to be drafted exclusively in French. Security interests such as movable hypothecs will therefore no longer be registered in a language other than French.

Francisation of enterprises

Under the Charter, only corporations with 50 or more employees were subject to the francization process. With the amendments made by Bill 96, these requirements will be extended to corporations with more than 25 employees (the number of employees is calculated over a six-month period). In other words, the Office Québécois de la langue française (the “OQFL”) will have the power to require the creation of a francization committee for this category of corporation if it concludes that the use of French is not generalized at all levels within the corporation.

It should also be noted that the provisions related to this francization process will come into force three years after Bill 96 is assented to, that is, on June 1st, 2025.

Consequences and non-compliance

Bill 96 broadens the range of sanctions against corporations for non-compliance with the provisions of this Act. Any person may now bring a civil action when he or she believes that his or her French language rights have been violated. Fines have been increased to the amount of $3,000 to $30,000 for a first offence (previously the maximum fine was $20,000). They will double and may even triple for subsequent offences.

There is now a presumption that the directors committed the offence perpetrated by a corporation under Bill 96. The proof by the directors that they acted diligently in taking all necessary precautions to avoid this situation, however, counterbalances the rule.

A party who feels aggrieved by the provisions of a contract that does not comply with the requirements set out in Bill 96 may apply to have the contract declared null and void or to have its concurrent obligations reduced.

Finally, the OQFL may use injunctions to stop conduct that is found to be in violation of the Act (or to force an offender to comply with the provisions of Bill 96). An injunction will also be used to order the destruction or replacement of signs, advertisements, illuminated signs and billboards that do not comply with the requirements of the Act.

While this article contains a global analysis of the main rules directly affecting corporations, there are several other specific rules. With its professionals well versed in Bill 96, the DS Lawyers team is available to support you in the implementation of the changes necessary to ensure your corporation’s compliance with the requirements imposed by Bill 96. Please do not hesitate to contact a member of our team if you have any questions regarding this article or if you would like to receive more information about Bill 96.

The federal government is amending some rules regarding trade remedies. What are the impacts for SMEs and associations in Canada?

In an effort to make Canada’s trade remedies regime more accessible, the federal government has made amendments to the Special Import Measures Act (SIMA) and the Canadian International Trade Tribunal Act (CITT Act).

These changes are the result of public consultations undertaken by the Department of Finance Canada between August 6 and December 2, 2021. One of the purposes of these changes is to improve access to the trade remedies system for small and medium-sized businesses and labour organizations.

Following Royal Assent of Bill C-19, the legislative changes that came into force on June 23, 2022, target five specific areas.

1. Promoting the accessibility and participation of unionized workers in certain complaints 

The CITT Act has been amended to allow union associations to file comprehensive safeguard complaints and requests for extensions of safeguards. This type of remedy is specifically targeted at cases where certain goods are being imported into Canada in such increased quantities and under such conditions that their importation is causing or threatening serious injury to workers and jobs in Canada. Employee organizations will now be able to file complaints on behalf of domestic producers whether or not the complaint is directly supported by these producers.

This legislative addition will be interesting to follow in the coming years, as there is no requirement that domestic producers directly support the complaint. The criteria for openness, however, continues to apply. Under the legislation, the complaint must be brought by or on behalf of domestic producers of a “significant share” (generally 35% of Canadian production) of like or directly competitive goods produced in Canada, i.e., by a trade union group whose members are engaged in Canadian production of the like or directly competitive goods.

In practice, however, it may be difficult for a union to bring such actions without obtaining a minimum of support from the domestic producing companies, i.e., their employers, since such actions must be supported by sufficiently detailed evidence, particularly with respect to profits, sales, cash-flow, losses, market share and the level of productivity in the industry.  

2. Strengthen protection for domestic producers and workers in Canada

The criteria necessary to demonstrate injury are slightly relaxed and simplified, where the impact on “workers in the domestic industry” and on “jobs” in Canada which will now be considered in any assessment of “injury”. The Act adds two new interpretive provisions to guide the CITT in its injury assessment. The CITT will have to take into account the ” impacts “, as various as they may be, on workers and on jobs in Canada. This type of interpretive provision could increase the likelihood of success of complaints at the injury assessment stage, although situations where the CITT finds that there is no injury to domestic producers remain rare.

Finally, modifications are made with respect to the time limit for providing notice of complaints. In the case of dumping investigations, the governments of the exporting countries will now be notified of the filing of complaints in Canada seven days rather than twenty-one days in advance. In this way, Canada significantly reduces the ability of foreign exporters to move their products quickly into the Canadian market before an investigation is conducted, without being forced to pay anti-dumping duties if it is found that there has been massive importations. 

3. Broadening the criteria for circumvention investigations

In their complaints, Canadian domestic producers will no longer have to demonstrate that the imposition of anti-dumping or countervailing duties “is the principal cause” of the change in the pattern of trade, but only whether it “wascaused” or one of the possible causes. Complainants will now only have to provide “a reasonable indication that circumvention is occurring”. The law thus somewhat relaxes one of the key criteria for initiating anti-circumvention investigations, but it remains quite complex to demonstrate that the assembly or even slight modification of goods through minimal processes in a third country is likely to be caused by the imposition of anti-dumping or countervailing duties. No anti-circumvention investigations have been initiated in Canada to date, but this type of action may become more prominent in the coming years.

4. Expanding the test for interpreting mass imports

When the Tribunal conducts an inquiry at the provisional stage, it will be obliged to analyze potential massive importations. This new requirement is intended to require the Tribunal to systematically analyze cases of possible massive importations. Following the filing of a complaint, the Tribunal will now have to proceed with a systematic investigation of all the causes of injury listed in the Act, including those related to massive importations of foreign products. 

The legislation also changes the criteria for the imposition of retroactive duties in cases of massive imports, which will provide greater protection to domestic producers in the 90 days prior to the initiation of an investigation. 

5. Mandatory expiry reviews of orders

In the absence of an expiry review, an anti-dumping order is generally deemed to expire after 5 years from the date of the findings. During these years, a domestic industry may sometimes have undergone organizational, operational, or other changes that prevented it from requesting an extension of the order from the Tribunal in the prescribed time and form. Now, the Tribunal will automatically initiate the expiry review, without the domestic industry having to institute any proceedings, and may terminate a review if it finds that the domestic producers are unlikely to support the renewal of the order.

This type of measure not only institutionalizes expiry reviews, but also favours domestic producers that are small or do not have sufficient time or resources to mobilize before the Tribunal to raise their concerns. In addition, it may increase the likelihood that certain orders or findings made by the Tribunal will be extended by the Tribunal for a further five years.

Conclusion

In conclusion, it should be noted that the legislative changes do not apply to proceedings commenced before June 23, 2022.

It will be interesting to observe to what extent SMEs and union associations will be concerned by these changes, which are still quite limited and specific.

If you, your association or your company have any questions regarding trade remedies in Canada, do not hesitate to contact one of our legal advisors.   DS Avocats has an experienced team of lawyers with expertise in trade remedies and advocacy. We also provide comprehensive expertise in customs issues.

What are the impacts of the sanctions on Russia for Canadian companies?

In response to the seriousness of Russia’s violation of Ukraine’s territorial integrity, as well as the serious human rights violations that have been committed, Canada has amended the Special Economic Measures (Russia) Regulations (SEMR) on several occasions to expand the scope of economic sanctions against Russia. Since February 2022, the number and scope of these economic sanctions have increased significantly.

If you or your company has business ties with someone on Canada’s Russia Sanctions List, keep in mind that Canada’s economic sanctions could apply to you as well.

As of June 3 2022, more than 970 Russian individuals and entities are now included on the Canadian Designated Persons and Entities List, which can be found in Schedules 1 through 4 of the SEMR. The economic sanctions are applied in three main areas:

  1. Prohibitions on direct or indirect commercial operations and transactions involving goods or services owned or controlled by persons designated in Schedules 1 through 3 of the SEMR;
  2. Seizure and detention of property or assets belonging to or under the control of the designated persons;
  3. The regime of offences and penalties.

1. The following activities are primarily prohibited:

  • Making goods, whether tangible or intangible (whether real or personal), wherever they may be, available to designated persons, including goods set out in Schedule 4 and goods on the Export Control List;
  • Transacting any property, wherever located, belonging to a person designated in Schedules 1 through 3 of the SEMR;
  • Providing a financial, technical or other service related to merchandise owned by or for the benefit of a person named in Schedules 1 through 3 of the SEMR.
  • On May 18 2022, the Canadian government amended the SEMR to prohibit the export and import of all luxury goods to and from Russia. These amendments will come into force on July 17 2022. 

It is the responsibility of Canadian entities, particularly those in the technology, financial services (banking, insurance, trusts, securities) sectors, to verify on an ongoing basis the existence of assets in their possession or control that belong to any designated person. That would include any type of property and includes money, funds, currency, digital assets, and virtual currency.

However, certain exemptions are provided. Activities payable under a contract entered into prior to the listing of such designated persons that were performed prior to the listing of the designated person in Canada are not prohibited, nor are payments payable under a contract entered in force prior the listing made by designated persons to a Canadian entity that is not listed as a designated person . Finally, specific exemptions may also apply to certain goods, for example, communication devices, software, generally available to the public.

2. Seizure and detention of property or assets belonging to or under the control of the designated persons

The prohibitions listed above apply to any transaction that may involve property or entities (i) owned, (ii) held or (iii) controlled directly or indirectly by, at the direction of, or on behalf of the designated persons. The concepts of possession, custody and control must be considered.

The Special Economic Measures Act, which empowers the economic sanctions regime against Russia, provides Canadian customs officers with the authority to search, seize and detain for the benefit of the state any offending property or assets that may violate any of the prohibitions listed above.

3. Offences and penalties

Under the Act, itis a criminal offence to knowingly contravene these prohibitions or to facilitate, assist or abet such transactions, punishable by a fine of $25,000   or imprisonment for up to five years. The proceeds of any related financial transaction may also be considered criminal in origin, which is a separate offence . However, no prosecution or civil proceedings may be brought against persons who inform Canadian authorities in good faith that they may have engaged in transactions in connection with any designated person.

Accordingly, it is suggested that companies that may be involved with designated persons and entities, and any Canadian intermediary, should:

  • Monitor their financial transactions for any reasonable grounds to suspect that they are related to a violation of the SEMR or a money laundering offense;
  • Maintain an effective risk-based approach to assessing the riskiness of clients who may be acting as an intermediary, owned or controlled by a designated person;
  • Implement preventive measures to know their customers thoroughly.

If you or your company have any questions regarding imports/exports to or from Russia or any other trade or customs concerns, please do not hesitate to contact one of our legal advisors.  

DS Lawyers LLP has an experienced trade defense team and provides comprehensive expertise on compliance issues and customs controls.