COMMERCIAL LAW

It is very difficult to protect an idea unless it is consigned in some type of medium such as paper, recording or a diskette. If you wish to disclose your idea and wish to protect it, you may consider a confidentiality or non-disclosure agreement. If your idea is an invention, you may consider a patent.

When you buy the shares of a company, you are not buying its assets but the shares held by the seller. The company's business and affairs are not affected by the sale of its shares. When you buy the assets of a business, you will start a new business with the assets and goodwill of the previous business. If you are the buyer, it is more advantageous to buy the assets. If you are buying the shares of an existing business, then the company continues its existence and is liable for all past obligations whether these were disclosed or not by the seller. As such, a thorough due diligence and verification of the financial, tax and legal affairs of the business is highly recommended. For instance, if there is a tax audit for years prior to the sale of the business, the company will be liable to pay any taxes assessed, irrespective of the share sale. Also, when you buy the shares you cannot depreciate the assets at their purchase price and this can be disadvantageous.

From the perspective of the seller, it is preferable to sell the shares of a business. Often a seller can avail himself of the capital gains exemption and pay no or almost no tax on up to $500,000.00. As such, the purchase price is usually reduced in the case of a share sale instead of an asset sale.

In commercial leasing matters, the lease is the law between the parties. There are generally no limitations or legal requirements as to what a lease may or may not contain and the parties can stipulate what they want providing it is not contrary to the law. The law is only used if the lease is silent on an issue.

A shareholder agreement is an agreement entered into by two or more of the shareholders of a company that may address matters relating to the sale and transfer of the shares, the administration of the company, the exercising of voting rights, the election of directors and many other aspects. A shareholder agreement is a bit like a marriage contract or a partnership agreement. A shareholder agreement is called unanimous if it is entered into by all the shareholders of a company in which case it is binding on any future purchaser of the shares providing the share certificates clearly indicate this fact.

The best way to secure yourself is to have a written contract that clearly sets out the terms and conditions of the sale. You may also include a provision that stipulates that you will remain the owner of the property until such time as you are paid in full. This stipulation is subject to certain requirements to be opposable to third parties, such as registration within a certain time and the goods sold remaining in the possession of the purchaser.

Although a verbal agreement is legal the problem is proving the agreement as well as the terms and conditions agreed to by the parties. In commercial matters you may prove the agreement by testimony and witnesses irrespective of the amount of the agreement. In non-commercial matters you cannot prove an agreement by verbal testimony or witnesses if the value exceeds $1,500.00. This limitation also applies if a merchant wishes to prove an agreement with a non-merchant. In specific cases, legislation like the Consumer Protection Act may require that an agreement be in writing and contain specific provisions failing which it will not be enforceable.

A corporation is a legal entity that has its own assets and liabilities which are separate from those of its shareholders. In law a corporation is a person. A partnership on the other hand is not a legal entity. Generally the partners are liable for the debts and obligations of the partnership.

If you are looking to import or distribute products it may be advantageous for you to enter into a distribution agreement with the manufacturer. This agreement will provide things like a territorial exclusivity, maximum prices and warranty obligations that are important for you to address. If the product is new or not presently sold or distributed in your territory, it is to your advantage to obtain exclusivity for the territory and provide for an automatic renewal of the agreement if minimum targets are reached. This way you can secure any investments in the product or goodwill that is created by your future efforts in creating a demand for the product.