Article by Jeffrey S. Graham, Stephen J. Redican and Jenna Grant of Borden Ladner Gervais LLP
BACKGROUND
The Office of the Superintendent of Financial Institutions (“OSFI”) has released a final version of revised Guideline B-6 – Liquidity Principles (“Guideline”). The Guideline has been updated to incorporate the principles set out in the Basel Committee on Banking Supervision (“BCBS”), Principles for Sound Liquidity Risk Management and Supervision (2008) (BCBS “Principles”).
In early 2009, OSFI had released an advisory stating its expectations concerning the adoption by banks and other deposit taking institutions’ (“DTIs”) of the updated BCBS Principles. At that time, OSFI noted its expectation that, in addition to meeting the minimum standards of the existing Guideline, DTIs should also comply with the BCBS principles.
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By Blair W. Keefe, Peter A. Aziz and Eli Monas of Torys LLP
The Canadian federal government recently published three regulations that will impose additional requirements and restrictions on the use of credit card cheques, on cheque hold periods and on the provision of new optional products or services.
Proposed amendments to the Credit Business Practices Regulations would require federally regulated financial institutions (FRFIs) to obtain the express consent of borrowers before distributing credit card cheques. The Access to Funds Regulations will reduce the maximum cheque hold period for consumers and small and medium-sized enterprises. In addition, the Negative Option Billing Regulations will require FRFIs to obtain consumers’ express consent before providing a new optional product or service.
The Credit Business Practices Regulations were published in the Canada Gazette on March 10, 2012, for a 30-day comment period and will come into force on the date on which they are registered. The other two regulations were published on March 14, 2012, in final form and will come into force on August 1, 2012. The Financial Consumer Agency of Canada (FCAC) will oversee compliance with each regulation.
The details of these regulations are discussed below.
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by Stevan Novoselac & John Sorensen
In our article, “The CRA is not a Bank – Director’s Liability in an Age of Economic Uncertainty”,1 we strongly warned corporate directors to make sure that source deductions, GST/HST, employee EI premiums and employee CPP contributions are remitted to the Crown and not used as operating funds, regardless of whether the corporation has cash flow problems. This is because a corporation’s failure to remit these amounts makes directors personally liable for the default, if:
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John Eric Pollabauer posted this question to the Canadian Commercial Lenders group on LinkedIn:
“What is the current status regarding commercial lending practices in Canada as we are heading into the month of October, 2011? Is it business as usual or ???”
For myself [EG], account managers from two financial institutions tell me that at the same time as they are being pushed to produce, credit is being very difficult on each deal. The result is a lot of resulting stress and unhappiness.
I believe it helps everyone when we share our experiences with others. Please enter your comments below. I will then publish them for you, but omit your name and institution, unless you wish otherwise.
By Mike Todd of Gowling Lafleur Henderson LLP
Lenders should be aware that one of the waivers found in most standard form guarantees of certain statutory rights is not effective under the British Columbia Personal Property Security Act (“BCPPSA”).
This was the result in the recent BC Supreme Court decision HSBC Bank Canada v. Kupritz. The facts of that case are unremarkable. A trucking company went out of business leaving an unpaid debt to the bank of approximately $1 million. The bank was unable to recover that amount from the company’s assets and therefore sued the two principals of the company on their unlimited guarantees. One of the principals defended the claim on the basis that the bank had breached its obligations to him under the BCPPSA by failing to secure the company’s assets, improvidently realizing on the collateral seized, failing to provide notice of the impending sale of the collateral and failing to provide an accounting.
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By Lisa Brost and Jeffrey Levine of McMillan LLP
Generally speaking, banks’ customers have no immediate right to the proceeds of the cheques that they deposit. Under the terms of most banking services agreements, banks can place holds on cheques deposited by their clients for a reasonable period of time. Further, even if a hold is not put on a cheque, any advance of credit by a bank on deposit of a cheque is usually provisional in nature. The cheque may still be returned, or dishonoured, by the bank on which the cheque is drawn, leaving the bank that provided provisional credit in respect of the cheque with recourse to recover such amount from its client.
These guiding principles of the cheque payment process were recently considered by the Ontario Superior Court of Justice in Re*Collections Inc v The Toronto-Dominion Bank.1 The plaintiffs in this action moved to certify a class action against three of Canada’s six major banks (the “Banks”). In the proposed class action, the plaintiffs sought to recover profits that the Banks allegedly earned at their customers’ expense through use of the proceeds of held cheques between the time that cheques were deposited by their customers and the time that the proceeds of the cheques were made available to the customers.
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By Grant W. C. Tisdall & Christopher C. Van Barr of Gowling Lafleur Henderson LLP
Will Canada Become a Haven for Non-Practicing Entities to Litigate Their Claims?
This list of top ten issues will canvass the law of business method patents in Canada and will consider the impact of the recent Amazon case on your business.
1. Understand that Canada is open to business (method patents).
With its thorough and, at times, bracing decision in Amazon, the Federal Court of Canada affirmed that business methods are patentable subject matter in Canada. In its decision, the Court overturned the Patent Appeal Board’s decision to refuse the Amazon application and virtually chastised the Board for entering “into policy-making which stands to fundamentally affect the Canadian patent regime.” The Court noted that “the Patent Act is not static; it must be applied in ways that recognize changes in technology such as the move from the industrial age to the electronic one of today.”
Read the full article – Top Ten Tips for Dealing with Business Method Patents in Canada
By Henry Chong of Gowling Lafleur Henderson LLP
The Canada Revenue Agency (CRA) recently introduced new forms NR301, NR302, and NR303 (collectively the ‘‘NRs’’), which can be completed by a nonresident person, or by a partnership or hybrid entity with nonresident owners, seeking to obtain the benefits of reduced withholding rates on passive income under an income tax treaty. The new forms are part of a change in the CRA’s policy for administering Canada’s nonresident withholding tax regime following the Fifth Protocol to the Canada-U.S. Income Tax Treaty. The new NRs are similar in form to the W-8s in the United States. However, unlike the W-8s, which are part of a regulatory framework for the withholding of taxes in the United States, the NRs were not created by statute or regulation and were not accompanied by any changes to the withholding tax obligations under the Income Tax Act (Canada) (the ‘‘Act’’)1 or regulations. Thus, the purpose of the forms is unclear. They do not appear to have any legal effect other than as a convenient method for setting out and providing the information required to obtain reduced treaty rates under Canada’s withholding tax regime. Whether they evolve into something more may only become apparent with time.
Read the full article: Canada Introduces New Forms to Be Used to Obtain Treaty Benefits, Including by Partnerships and Hybrid Entities
Here are a few characteristics of the ideal banking account manager for a business, based on feedback from the businesses I work with:
- Returns your calls promptly
- Answers your questions with clarity and authority
- Always has time to consult with you about your needs and performance
- Suggests techniques for innovative loan structuring
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By Marc Weisman of Torkin Manes LLP
Partnerships in and of themselves are not required to file tax returns because they are not taxpayers or taxable entities. A partnership’s income is taxable in the hands of the partners, who are required to file tax returns. However, Income Tax Regulation 229 requires all partnerships to file an annual “information return” (Canada Revenue Agency (“CRA”) Form T5013). Until January 1, 2011, by CRA administrative policy, partnerships with fewer than six partners did not have to file partnership information returns unless one of the partners was another partnership.
Accountants and other advisors to partnerships should note the changes to filing requirements for partnership information returns that came into effect on January 1, 2011 for partnerships with fiscal periods ending on or after January 1, 2011.
The new administrative policies require partnerships that carry on business in Canada, or Canadian partnerships with Canadian or foreign operations/investments, to file partnership information returns annually if:
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By Eric Koh of Gowling Lafleur Henderson LLP
On July 22, 2011, the Supreme Court of Canada (“SCC”) concurrently released two decisions relating to the taxation of interest income of an Indian from a financial institution located on an Indian reserve. The majority decisions in Bastien Estate v. Canada (“Bastien”)1 and Dube v. Canada (“Dube”) 2 establish and develop an analytical framework for determining whether personal property, both tangible and intangible, is situated on a reserve and exempt from taxation by virtue of section 87 of the Indian Act (the “Exemption”). More importantly, the respective decisions set new precedents in a couple of important areas.
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By Andrew Biderman of Aird and Berlis LLP
Introduction
In-transit inventory represents a significant, and growing, proportion of inventory for many borrowers, who often look to their lenders to advance against such inventory. 1
As part of the lender’s security package, the lender will have a security interest over the borrower’s in-transit inventory. However, before the lender can consider including the inventory in the borrowing base, the lender needs to ensure that the borrower actually has title to the inventory. Further, unlike the typical situation where the inventory is located at the borrower’s premises (where the lender will have access pursuant to the loan agreement/ security documents and/or a landlord waiver), the lender does not have any control over what the borrower’s carriers will do with the inventory.
After a brief discussion of some of the issues involved in confirming ownership of the inventory, this article will examine a few of the different strategies available to give the lender the comfort necessary to include at least a portion of the in-transit inventory in the borrowing base.
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by Kevin P. McElcheran of McCarthy Tétrault LLP
[Ed.: Concerning Indalex Limited (Re), 2011 ONCA 265]
This week, the Ontario Court of Appeal surprised many by deciding that in the context of the CCAA proceedings of Indalex, pension plan deficiency claims can have priority over security held by secured DIP lenders. The Court granted priority for the entire wind-up deficiency of two pension plans over the DIP lender’s security. If not reversed on appeal, the ruling creates a potential worst case scenario for secured lenders in Ontario and could affect availability of credit for all employers who provide defined benefit pension plans for their employees.
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By Michael Polychuk of Gowling Lafleur Henderson LLP
In January 2011, the Tax Court of Canada (the “TCC”) released two judgments, Prue v. M.N.R (“Prue”) and Smith v. M.N.R (“Smith”) in which it found that the individuals were operating as independent contractors rather than employees. The court examined the intention of the parties, since in both cases the appellants believed that their status had changed from independent contractor to employee over the course of the relationship.
The key question in determining whether an individual is an employee or independent contractor is whether or not the individual was engaged to provide services as a person in business on his or her own account as set out in Wiebe Door Services Ltd. v. M.N.R. (“Wiebe Door”). That case also provided a list of factors that may apply such as: the level of control, the ownership of the equipment, the degree of financial risk and the opportunity for profit. In 2001, the Supreme Court of Canada stated in 671122 Ontario Ltd. v. Sagaz Industries Canada Inc., that
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