Celebrating a Milestone: Rahul Gupta Called to the Bar

Celebrating a Milestone: Rahul Gupta Called to the Bar

Yesterday, Dipchand LLP had the pleasure of celebrating a significant milestone for one of our own—Rahul Gupta was called to the bar. As our newest corporate associate, Rahul brings a fresh perspective and a wealth of knowledge to our firm. To mark this special occasion, we sat down with Rahul to discuss his journey into corporate law, his aspirations, and the unique insights he brings to our team.


Journey to Corporate Law

Q: What led you to pursue a career in corporate law? Can you share a bit about your journey to becoming a lawyer and specializing in this field?

A: I have always been interested in how money is invested and how that can impact our daily lives. The coffee shop near your house is not just a coffee shop but is an investment that those business owner(s) made to realize a profit. At the same time, I also wanted to explore the social sciences and how I can have an impact.

Law emerged as the perfect fit. So, I positioned myself in the best possible way to be able to go to law school. I studied political science at the University of Toronto Mississauga and then I did a Masters of Arts in the same subject at the University of Toronto – St. George. I ultimately was accepted as part of the inaugural cohort at the Lincoln Alexander School of Law at Toronto Metropolitan University where, throughout, I tried to gain as much transactional experience as I could.

Joining Dipchand LLP

Q: What attracted you to join our law firm, particularly in the context of corporate law? How do you envision contributing to our firm’s corporate practice?

A: I actually first reached out to Dipchand LLP when I had just finished my second year of law school. What drew me to the firm was the ability to work in a close-knit team environment while being with fun people. I also was very much interested in the autonomy that is given to associates to develop business, which is how I plan on adding value to the firm’s corporate team. Specifically, I would love to expand the relationships we have with brokers and potentially expand our service offerings.

Expectations and Aspirations

Q: As you begin your career as a corporate lawyer, what aspects of the profession are you most excited about?

A: So many things! I have realized I love sharing the knowledge I have gained with students and even those ahead of me on best practices. I also love drafting, so being able to prepare documents in plain English excites me.

Q: Are there specific types of corporate transactions or legal matters that you are eager to work on?

A: Right now, I’m really enjoying share-based transactions. But one day, it would be cool to work on venture deals.

Professional Growth

Q: How do you plan to continue developing your expertise in corporate law now that you’ve been called to the bar?

A: I look forward to writing blogs for the firm’s website because it allows me to think of unique angles to think of transactions with. At the same time, keeping up-to-date with major transactions across the world helps me understand market trends.

Q: Are there any particular skills or knowledge areas you aim to enhance as you progress in your career?

A: All of them! But, learning how to lead deals is the next step for me and then being able to delegate tasks. I also want to find a way to balance doing the actual work, business development, and professional development.

Advice for Aspiring Corporate Lawyers

Q: What advice would you give to law students or aspiring corporate lawyers who are looking to follow a similar career path?

A: If you are truly interested in something, try to get involved as soon as you can. This can be something as simple as reading business news/major transactions, networking with lawyers in the areas of law you’re interested in, or gaining experience however you can. But, it’s important to remember that, no matter how cool our jobs as lawyers are, we are all human! Take care of yourself, don’t take anything personally, and you’ll do great.

Personal Insights

Q: Outside of your legal career, what are your interests or hobbies that you believe contribute to your success as a corporate lawyer?

A: As part of a new year resolution, I started reading which helps me gain stamina for when I have to go through “mega-agreements.” I also try to workout everyday which helps me stay calm when things go sideways.

Closing

Q: Is there anything else you’d like to share with our clients and followers as you embark on your journey as a corporate lawyer?

A: I’m very excited to work with the folks at Dipchand LLP! It’s amazing to see how aligned we all are in so many different areas in life which makes for an effective team.


Stay tuned for more insights and updates as Rahul embarks on his journey with us. We are thrilled to have him on board and look forward to the great contributions he will make to our corporate practice.

Celebrating a Milestone: Rahul Gupta Called to the Bar

Protecting Investments: Lessons From a Noteworthy Restrictive Covenant Ruling

Gregory M. Prekupec, Farai Munyurwa

The recent decision in Dr. C. Sims Dentistry Professional Corporation v. Cooke, 2024 ONCA 388, provides critical insights into the enforceability of restrictive covenants within business purchase and sale agreements. The case highlights several important principles that not only clarify the legal framework but also has significant implications for buyers and sellers.

The Facts

In July 2017, Dr. Sims purchased all the shares of Dr. Cooke’s dental practice for $1.1 million. The agreement contained a non-competition clause prohibiting Dr. Cooke from directly or indirectly practicing dentistry within a 15 km radius of the acquired practice for a period of five years. Further to that clause, Dr. Cooke was to remain employed by the dental practice for a period of two years or until employment was terminated with sufficient notice. Two and a half years later, Dr. Sims gave a notice of termination to Dr. Cooke and he stopped working in the practice at that time. Months later, Dr. Cooke expressed his intention to practice dentistry at a practice 3.3 km away from the recently acquired practice, asserting that the non-competition clause was unenforceable. Dr. Sim’s rejected this assertion and brought legal proceedings against Dr. Cooke which were decided in Dr. Sim’s favor. Dr. Cooke appealed this decision citing that the trial judge erred in concluding that the clause in the agreement was reasonable.

Findings and Key Takeaways

The Ontario Court of Appeal dismissed the appeal and awarded costs to the respondent citing that the trial judge had not erred in concluding that the clause was reasonable in terms of duration and geographic scope. This decision reinforces the Courts long standing position that it will not interfere and invalidate restrictive covenants in cases where both parties willing and freely enter into a contract agreement with adequate legal representation and equal bargaining power. This reinforces the autonomy of parties in crafting agreements that protect their interests.

In terms of geographic scope and duration, the Court’s decision sets a benchmark for future transactions by establishing that such covenants are reasonable in this context. This is especially important in industries where client relationships and trust take years to build and the activities of a seller post-sale can affect the value of the acquired practice.

This case will set a precedent that will guide future cases on the enforceability of restrictive covenants. By focusing on reasonableness, the Court offers a reference point in future cases deciding similar issues.

Overall, this decision underscores the importance of drafting, clear, reasonable covenants to protect business investments by reiterating that restrictive covenants will be enforced, given that they are indeed reasonable and mutually agreed upon.

We understand the pivotal role that well-drafted restrictive covenants play in protecting business investments. For more information on the enforceability of restrictive covenants or to discuss the implications of recent legal decisions, contact Gregory Prekupec at [email protected].

Celebrating a Milestone: Rahul Gupta Called to the Bar

Navigating the New Ontario Securities Commission Test Lab Registration Exemptions

Gregory Prekupec,  Rahul Gupta

  1. The Importance of the Ontario Securities Commission TestLab

The Ontario Securities Commission (the “OSC”) is continuously looking for innovative ways to reduce the regulatory burden for businesses to raise capital and accelerate innovation. One way this is accomplished is through the OSC TestLab; a platform for the OSC to experiment with new initiatives that aid early-stage capital raising.

Recently, the OSC announced 4 new test policies to help achieve this end:

A. the early-stage business registration exemption (Ontario Instrument 32-509 Early-Stage Business Registration Exemption (Interim Class Order)),
B. the angel investor group registration exemption (Ontario Instrument 32-508 Not-For-Profit Angel Investor Group Registration Exemption (Interim Class Order)),
C. the self-certified investor prospectus exemption (Ontario Instrument 45-509 Report of Distributions under the Self-Certified Investor Prospectus Exemption (Interim Class Order)), and
D. simplified distribution reporting (Form 32-509F2/45-509F1 Alternative Report of Exempt Distribution)

Early-Stage Business Registration Exemption

Prior to this policy, businesses looking to raise capital may have become “in the business of trading” securities which would require them to register as a dealer. The OSC expanded the list of available exemptions to allow for capital raising for up to $3M and certain marketing activities. This exemption applies when: (i) where the business is working through a registered dealer or (ii) where the business is working with an intermediary who is exempt from registration.

Angel Investor Group Registration Exemption

Not-for-profit angel investor groups provide capital, education, and other vital support to early-stage businesses. Similar to the above, angel investors may also become “in the business of trading” securities which would require registration. The OSC now temporarily allows angel investors to use the new dealer registration exemption.

Self-Certified Investor Prospectus Exemption

Previously, exempt issuers which distribute securities were required to file Form 45-106F1 within 10 days of any distribution. This new test policy exempts issuers from this filing requirement to reduce the regulatory load.

Simplified Distribution Reporting

The OSC has released a simplified e-form for quarterly distribution reporting which does not carry an associated fee for companies that are using any of these new test policies.

  1. Potential Opportunities to Propel Your Business

New businesses play a crucial role in advancing Ontario’s innovative and competitive edge. The test policies that the OSC released are intended to allow early-stage businesses to raise capital with less regulatory burden. The temporary nature of these policies will allow the OSC to analyze their efficacy to take a balanced approach for implementing long-term solutions.

We recognize the critical role securing the right capital providers plays in business growth. For more information about the capital raising process or any of the new policies, contact practice partner Gregory Prekupec at [email protected].

Celebrating a Milestone: Rahul Gupta Called to the Bar

Navigating Business Partnerships: Insights from the Cameo Knitting vs. Kodiak Legal Dispute

Avram Musafija, Gregory Prekupec 

Background of the Cameo Knitting vs. Kodiak Legal Dispute
In a recent and noteworthy legal dispute, 4207602 Canada Inc., operating as Cameo Knitting, found itself entangled in a legal battle with Kodiak Group Holdings Co. This legal tussle, adjudicated by the Superior Court of Quebec, arose from Kodiak’s unilateral decision to terminate its longstanding partnership with Cameo Knitting—a distributor of socks and other apparel featuring Kodiak’s trademarks across North America.

Causes Behind the Sudden Dissolution of the Partnership
The sudden dissolution of this two-decade-long collaboration stemmed from various factors, including conflicts over royalty payments, the terms of their renewal agreement, and allegations of Kodiak negotiating in bad faith. Cameo Knitting’s strategic move to withhold royalty payments, safeguarding these funds in trust during renewal negotiations, highlights the intricacies of maintaining long-term business partnerships. Exacerbating the situation were disagreements over renewal terms, claims of Kodiak’s bad faith negotiations, and significant shifts in business strategies—most notably, the cessation of Kodiak boot distributions through major retailers like Costco and Walmart, resulting in substantial business losses for Cameo Knitting.

The Impact of Kodiak’s Actions on the Partnership and Business Strategy
Despite the extended duration of their partnership, Kodiak’s actions unequivocally conveyed that “business is still business,” emphasizing that even longstanding associations are susceptible to breakdowns, irrespective of accumulated goodwill.

Legal Proceedings: The Quebec Superior Court’s Provisional Injunction
The Quebec Superior Court’s provisional injunction in favour of Cameo Knitting, halting Kodiak’s termination notice, underscores the delicate balance courts must strike between enforcing contractual obligations and recognizing the fluid nature of business dynamics.

Lessons for Businesses in Contract Renewals and Dispute Resolution
This interim decision spotlights the critical importance of clear communication and maintaining good faith in negotiations, while also acknowledging the potential harm that abrupt terminations can inflict on a company’s operations and reputation. This case serves as a cautionary tale for businesses navigating the complex terrain of contract renewals and disputes, underscoring the need for foresight and fairness in commercial dealings.

Relevance of the Cameo Knitting Case for Businesses Across Jurisdictions
Although this legal precedent may not directly apply in Ontario, its lessons hold significant relevance for business owners across various jurisdictions. The emphasis on meticulous contract drafting, the imperative of sustaining good faith throughout negotiations, and the nuanced judicial considerations involved in resolving commercial disputes should not be underestimated.

Key Takeaways from the Legal Dispute Between Cameo Knitting and Kodiak

  • Causes of Dissolution: The termination resulted from conflicts over royalty payments, disagreements on renewal terms, and accusations of Kodiak negotiating in bad faith.
  • Business Impact: The cessation of Kodiak boot distributions through major retailers like Costco and Walmart significantly impacted Cameo Knitting’s business, leading to substantial losses.
  • Legal Proceedings: The Quebec Superior Court granted a provisional injunction in favour of Cameo Knitting, emphasizing the delicate balance courts must maintain between enforcing contractual obligations and recognizing the dynamic nature of business.
  • Importance of Communication and Good Faith: The critical role of clear communication and maintaining good faith in negotiations is highlighted, underscoring the potential harm abrupt terminations can cause to a company’s operations and reputation.

Conclusion: Avoiding Contractual Conflicts Through Clear Agreements and Negotiations
The content of this article is meant for general information purposes and is not to be regarded as a legal opinion. Individuals are encouraged to seek legal advice pertaining to their specific circumstances. If you seek legal assistance, please reach out to Gregory M. Prekupec at [email protected].

Celebrating a Milestone: Rahul Gupta Called to the Bar

True (Delaware) North Strong: How Alberta’s Amended Business Corporations Act Stacks Up Against the Ontario and Federal Statutes

By Mercedes Simon, Gregory Prekupec

On May 31, 2022, Alberta’s Business Corporations Amendment Act, 2021 was proclaimed into force, bringing significant changes to the Alberta Business Corporations Act (“ABCA”). This came as part of a larger series of legislative changes enacted in late 2020 under the Red Tape Reduction Implementation Act, 2020 which aimed to- as the name suggests- cut the red tape in 12 pieces of legislation to keep business in the province and invite new business in by making the regulatory and administrative aspects faster and less burdensome. Unsurprisingly, this move was compared to the U.S. state of Delaware, whose General Corporation Law resulted in an explosion in business entities moving to the jurisdiction.

In part, Alberta’s bid is possible because Canadian businesses enjoy the privilege of incorporating in their jurisdiction of choice. This can often be a strategic move, as choosing a jurisdiction with less red tape, tax advantages, and other business-friendly provisions can be financially strategic.

But how does “Delaware North” stack up to similar provincial and federal legislation? The chart below provides a breakdown of the ABCA’s amendments, as compared to the Business Corporations Act of both the federal and Ontario governments (“CBCA” and “OBCA”, respectively). As can be seen, in many cases the ABCA is not pushing the envelope as much as it is removing redundancies and bringing outdated provisions more in line with other jurisdictions.

In the case of residency and registration requirements, Alberta is craving a different path, departing from the increasing move towards corporate accountability seen in Ontario and federally. Similarly, by allowing a wider range of transactions and opportunities which the corporation might take advantage of, the province now has what is undoubtedly the most investor-friendly corporate statute. While the ABCA amendments will surely be advantageous for investors, possible implications surrounding corporate accountability and liability will remain to be seen. Already, in a King’s Bench decision on September 2023, the Court rejected a defendant’s interpretation of the self-interested transactions provision (see below) to seek compensation for managerial work while also being a voting shareholder.

ABCA (Old) ABCA (New) OBCA CBCA
Shareholder/ “Transparency” Register
n/a No requirement Must have a register of “individuals with significant control” Must have a register of “individuals with significant control”
Director Residency Requirement
At least 25% must be resident Canadians No requirement – board appointments can be from any place of residence

No requirement – board appointments can be from any place of residence*

 

 

*This was amended in 2021

At least 25% must be resident Canadians

Corporate Opportunity Waivers (COWs)

 

 

Here Alberta has taken direct inspiration from Delaware, who has offered COWs since 2000. These waivers run counter to the predominate doctrine in Canada which prohibits fiduciaries (like directors and officers) from personally benefitting from opportunities which ‘belong’ to the corporation.

n/a May waive “any interest or expectancy of the corporation in or to, or in being offered an opportunity to participate” in an opportunity offered/presented by an officer, director or shareholder n/a n/a
Due Diligence Defence
Directors will not be liable for a breach of the duty of care where the director can demonstrate the relied in good faith on the financial statements of the corporation, or the opinion or report of certain people “whose profession or expertise lends credibility to a statement made by that person” Expanded to now include interim financial statements, and the list of people whose “profession or expertise lends credibility to a statement made by that person” now includes: “person” generally, as well as employees Director will not be liable for breach of duty of care, including reliance in good faith on financial or interim financial statements of the corporation, or the opinion or report of auditor, report or advice of officer/employee, report of certain people “whose profession or expertise lends credibility to a statement made by that person” Same wording as Ontario, but doesn’t specify interim financial statements, and states only “person whose profession or expertise lends credibility to a statement made by that person”
Special Consideration to Nominating Shareholder Interests
n/a A nominee director may now give special (but not exclusive) consideration to the interests of their nominating shareholder n/a n/a
Director Self-Interested Transactions
n/a Directors may vote on agreements where that director may have a material interest but such interested may benefit the corporation n/a n/a
Indemnification & Insurance
Limited to “civil, criminal and administration” proceedings Now extends to “investigate” and “other” proceedings Limited to “civil, criminal and administration” proceedings Limited to “civil, criminal and administration” proceedings
Director/officer must be a direct “party” Extends to proceedings where a director is “involved” Extends to proceedings where a director is “involved” Extends to proceedings where a director is “involved”
Director/officer must be “substantially successful on the merits” and prove they were “fairly and reasonably” entitled to indemnification Must merely prove they had not been “judged by a court […] to have committed any fault or omitted to do anything that [the director/officer] ought to have done” Must prove they had not been “judged by a court […] to have committed any fault or omitted to do anything that [the director/ officer] ought to have done” Must prove they had not been “judged by a court […] to have committed any fault or omitted to do anything that [the director/ officer] ought to have done”
Shareholder Voting by Written Resolution
Unanimity of Shareholders Shareholders representing “at least 2/3 of the shares” of the corporation Unanimity of Shareholders Unanimity of Shareholders
Calling a Shareholder Meeting

Mandatory Minimum Notice Period – 21 days

 

 

 

Maximum Notice Period – 50 days

Mandatory Minimum Notice Period – 7 days

 

 

 

Maximum Notice Period – 60 days

Mandatory Minimum Notice Period – 10 days

 

 

Maximum Notice Period – 50 days

Mandatory Minimum Notice Period – 21 days

 

 

Maximum Notice Period – 60 days

Passing Resolution to Dispense with Auditor Appointment
Unanimity of Shareholders 2/3rds of Shareholders Majority vote Unanimity of Shareholders

Revival of Dissolved Corporation

 

 

Ideally, extending the period of time to revive a corporation should give businesses time to collect and account for assets, resolve possible legal issues and recommence their business.

5 years 10 years 20 years

Not specified in the Act.*

 

 

*However, the federal government’s policy direction lays out the process to revive a corporation, as well as common grounds for refusal (one being the corporation “has been dissolved for a while”, stating 2 years as an example)

Filings
n/a Alberta now has the CORES registry allows for instantaneous filing for some filings, including limited corporation incorporations and amendments to a limited corporation’s articles n/a n/a
Some electronic filings permitted

The ABCA now includes expanded electronic filings, including:

 

 

·         Issuing security certificates

·         Financial statements can be signed electronically; and

·         Shareholders, directors and the corporation can be sent documents electronically

No similar provision, but some electronic filings permitted No similar provision, but some electronic filings permitted

Arrangements

 

 

This is a court-sanctioned and supervised procedure where a corporation may complete a range of transactions which fundamentally alter the corporation, such as mergers and acquisitions, cancellation or creation of share classes, or amalgamations. The amendments under the ABCA will likely allow for greater flexibility structuring and implementing major changes in a corporation, including any exits.

Meeting of creditors and debtholders must be held prior to court approval of a proposed plan Court may make any order “it thinks fit” in connection an arrangement Court may make any order “it thinks fit” in connection an arrangement Court may make any order “it thinks fit” in connection an arrangement
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