Insights and updates
from MinuteBox

The Canadian government tabled a motion in the House of Commons on April 18, 2023, to begin deliberations on Bill C-42. The proposed legislation seeks to amend the Canada Businesses Corporations Act (CBCA) and other Acts that would improve transparency regarding individuals with significant control (ISCs) of Canadian entities governed by the CBCA.

Bill C-42 has undergone two votes in the House of Commons and will be presented to a committee for further consideration. Among the data that will be submitted to the committee is a Charter Statement issued by the Minister of Justice. The Charter Statement identifies rights and freedoms under the Canadian Charter of Rights that will be engaged by Bill C-42, and it also provides a detailed explanation of why those rights and freedoms will be engaged.

What does Bill C-42 propose?

Bill C-42 authorizes that regulators have authority to acquire certain taxpayer information and present that data to the Department of Industry. The data acquisition is intended solely to verify and validate that certain private corporations, governed by the CBCA, are living up to their responsibilities of corporate beneficial ownership registrations.

The specific contents of the legislation state that taxpayer information refers to shareholdings of individuals with significant control (ISCs) in a private corporate entity. ISCs are identified using corporate ownership structures that are reported to the Canada Revenue Agency.

How does Bill C-42 change shareholder reporting?

As proposed by Bill C-42, certain information in an ISC shareholder registry would be made public to promote greater corporate transparency and accountability. Specifically, Bill C-42 proposes changes, not limited to but including the following:

• The names, addresses for service or residential addresses, and share ownerships of ISCs be made publicly available
• Increasing information reported within an ISC Register, including an individual’s residential address, address for service and citizenship;
• Requirements that corporations submit ISC registers to Corporations Canada on an annual basis, when changes in control occur, and as stated by the laws

Additionally, Bill C-42 proposes modifying the penalties for non-compliance with the laws. If passed as tabled, Bill C-42 would enforce fines up to $200,000 and/or 6 months of criminal imprisonment for ISCs who fail to remain in compliance.

Who qualifies as an ISC?

An ISC is a shareholder with a significant controlling interest in a corporate entity. In most situations, an ISC is a shareholder with at least 25% of the voting rights for all issued corporate shares. In other cases, an ISC is anyone whose influence could exert a controlling influence over executive decisions issued by the corporation.

Canadian regulators have enacted multiple pieces of legislation at the federal and provincial levels in recent months to enforce greater ISC transparency and accountability. The purpose of each piece of legislation is to be part of a nationwide effort to crack down on white collar crimes, specifically fraud and malfeasance, that prove costly to innocent Canadian citizens.

In Ontario, for example, amendments to the Ontario Business Corporations Act (OBCA) were passed that require corporations to create ISC registers that are submitted to provincial regulators on an annual basis. In Quebec, provincial Bill 78 proposes similar legislation for ISC reporting. However, under Quebec law, ISCs are also classified as any shareholders who can elect, appoint, or remove corporate directors and executives from their positions.

Use entity management software to create ISC registers

Platforms like entity management software are one of the best resources for maintaining accurate ISC registers. These solutions have built-in shareholder register templates that simplify how your legal and compliance officers build ISC registers. The templates feature modules that help your team include any required shareholder information for individuals who fit the ISC profile.

Once you’re on the platform, access the Capital Section feature to input all authorized information about shareholders and corporate transactions in the open fields. This is where you can document names, addresses (residential and commercial), dates of birth, and jurisdictions where your ISCs operate.
All these features will help your corporate entity remain in compliance with the laws, including the new proposals in Bill C-42, should it pass final reading at the House of Commons. You can also use entity management software like MinuteBox to build a detailed compliance program, creating more organizational structure and accountability to protect your corporate entity from the significant risks and penalties of non-compliance.

Adopting new technology in a legal department can be challenging, particularly when there is resistance to change. In this blog post, we will explore strategies for overcoming resistance to change and ensuring successful adoption of new technology. Key points include connecting with successful peers, providing positive feedback and resources, and promoting a culture of learning and discovery. Here’s what we’ll cover in this post:

• Connecting with successful peers can help others understand the benefits of change
• Providing positive feedback and resources can encourage adoption
• Promoting a culture of learning and discovery can help people understand the need for change

Change is hard and people may challenge it. Adopting new technology in a legal department can be particularly challenging when there is resistance to change. However, with the right strategies in place, it’s possible to overcome resistance and ensure successful adoption of new technology.

One strategy for overcoming resistance to change is connecting people with successful peers. As Karen Anderson, Corporate Services Manager at Blakes Cassels & Graydon LLP, explains, “rather than me just saying, oh, no you just have to do this because this is what we’re doing. I would prefer to connect them with the folks that have been more successful, and so they can work together and say, talk to this person because they’re having the same issue, or they had the same issue.” By connecting people with others who have been successful with the change, they can learn from each other and understand the benefits of the new technology.

Watch the full interview, Overcoming Resistance to Change in Legal Departments

Another strategy is providing positive feedback and resources. Karen highlights that, “we’ve also just started sending emails amongst the groups with little tips, Hey, did you know you could do this? And sometimes people will know you can do that, but just a little off. Other times people will say hey, I never knew I could do this in this product in MinuteBox. Just sharing it and then people can keep all these emails for quick reference and it’s really helpful and encouraging.”

Promoting a culture of learning and discovery can also help overcome resistance to change. As Karen states, “I think having peer support is really helpful rather. People don’t just wanna be told we’re changing and this is what you’re doing.” By promoting a culture of learning and discovery, people can understand the need for change and make the transition smoother.

In conclusion, change is hard and resistance to change is a common challenge when adopting new technology in a legal department. However, by connecting with successful peers, providing positive feedback and resources, and promoting a culture of learning and discovery, it’s possible to overcome resistance and ensure successful adoption of new technology.

In early March 2023, the US Department of Justice quietly updated its Evaluation of Corporate Compliance Programs (ECCP). The new updates amend previous announcements revealed in the fall of 2022 by Deputy Attorney General Lisa Monaco.

The ECCP guidance outlines how prosecutors evaluate a business entity’s adherence to a corporate compliance program. Corporate counsel representing the interests of large business entities, and their corresponding subsidiaries, can use the ECCP guidance to strengthen the standards of their own corporate compliance policies for their respective organizations.

What are the new ECCP guidelines?

The purpose of the ECCP is to help DOJ prosecutors enforce standardized corporate compliance policies among business entities across the United States. The guidelines help prosecutors determine the effectiveness of an entity’s corporate compliance program, and evaluate how adequately the program is applied.

Strict policies related to compensation and compliance

The most notable updates to the ECCP guidance are in regards to executive compensation and consequence management policies. According to an analysis submitted by Ankura Consulting Group to Lexology, there are four new guidelines related to compensation that prosecutors will consider when evaluating an entity’s corporate compliance policies.

1. How effectively is an entity tracking disciplinary action data for malfeasance?
2. Is compensation ever used as an incentive for adherence to corporate compliance?
3. Are compensation packages recouped as a consequence for compliance violations?
4. Does compliance influence career planning and promotion evaluations?

Corporate communication compliance for all communication channels

The second biggest change to the ECCP guidance relates to how executives and employees of a business entity issue communications. Most businesses have HR policies that offer broad guidance on what is and is not permissible to communicate, which the DOJ reviews if an entity is ever subjected to audits or criminal investigations.

Under the new ECCP guidance, those reviews will now include evaluating corporate policies on communicating via personal messaging applications. The ECCP emphasizes that any and all communications regarding corporate business must be part of a compliance risk management program, including communications issued outside of official company channels.

Entity management software helps enforce compliance

Compensation and communications are two important aspects of a corporate compliance policy. Enforcing the standards of the policy is an important part of the job of any in-house corporate counselor. The question for in-house counsel becomes: what is the best approach to enforce corporate compliance?

Entity management software is one of the best resources for business entities to adhere to their corporate compliance policies. Entity management software is a modernized approach to minute book management, enabling counsel to add new records to corporate documentation in a matter of seconds.

Suppose a round of bonuses is to be issued to various corporate managers and directors. Using entity management software, counsel can provide detailed accounts of the value of the compensation, when it was distributed, how it was distributed, and even into which account it was administered.

All those records are protected in secure cloud storage backed by biometric and hardware key authentication, ensuring all information remains secure and confidential. If federal or state auditors have questions about the compensation packages, your legal team can simply pull up the records in the account and provide a transparent summary of how compensation was issued. This is one of the many perks of secure cloud storage of business entity information.

Expect stricter enforcement of corporate compliance in 2023

The move by the ECCP to provide more guidance around corporate compliance shouldn’t come as a surprise. In recent months, several high profile businesses have been exposed for failing to uphold proper corporate compliance policies that are resulting in significant personal, financial, and criminal penalties.

In November 2022, the collapse of cryptocurrency exchange FTX highlighted the consequences of companies that lack proper organizational structure. Former FTX CEO Sam Bankman-Fried faces multiple charges related to fraud that could result in years of imprisonment for the 31-year-old former executive.

SBF’s misappropriation of customer funds to finance his trading firm, Alameda Research, lies at the heart of charges brought against him. Regulators have identified a lapse in organizational oversight at FTX, including the fact there was no CFO in place to properly manage the flow of cash in and out of the company.
More recently, the collapse and insolvency of Silicon Valley Bank risks exposing another case of financial mismanagement. In the aftermath of federal regulators seizing control of the company, they determined that SVB lacked a Chief Risk Officer to oversee risk management policies. Authorities believe that a Chief Risk Officer would have objected and prevented questionable moves by the CEO and CFO to sell millions of dollars in stock only weeks before the collapse. Those former executives are now being investigated for violating insider trading policies.

The legal industry is constantly evolving, and the use of technology by paraprofessionals is no exception. The pandemic has brought about new challenges and changes in the way law firms operate, including an increased reliance on remote work and virtual connections. In this interview, Tiffany Pereira, an expert in legal technology, shares her insights on how technology is being used by paraprofessionals and how it is evolving in response to these changes. From the rise of the self-service delivery model to the importance of ease of delivery in technology products, this post explores the ways in which technology is being utilized by paraprofessionals to better serve their clients and improve their workflow.

What we’ll cover in this blog post:

1. The rise of the self-service delivery model
2. The values of ease of delivery in the product
3. The use of recordings and a knowledge base
4. The shift towards a self-service delivery model

The use of technology by paraprofessionals is evolving in response to the changes brought about by the pandemic. As Tiffany Pereira notes, “with some of the lockdowns it forced some law firms, of course, to temporarily close their offices and really rely on those virtual connections, whether through Zoom or through phone. And clients turn to their devices instead of stopping by the firm’s office to read or sign documents or have those connections.”

This shift to remote work has led to an increase in the use of the self-service delivery model. As Pereira explains, “What can we look at if we have a question? What are our options? Are there resources? Is there a knowledge base? Are there webinars like this? Are there articles that we can utilize? How can we learn without sitting in a boardroom together?”

Watch the full interview, Evolving Technology for Paraprofessionals

Additionally, ease of delivery in the product has become more important. Pereira states, “So what we also saw was a lot of cancellations for training sessions, and that wasa bit of a shift from what we were used to. But then relying on recordings, relying on how I can get the most information and having basically a knowledge base or one-stop shop to everything I need to know about this product.”

To adapt to these changes, firms are utilizing recordings and knowledge bases to provide training and resources for paraprofessionals. This allows them to learn and access information at their own pace and convenience, rather than relying on traditional in-person training sessions.

Overall, the pandemic has accelerated the shift towards a self-service delivery model for technology used by paraprofessionals. This allows them to access the resources they need to effectively use the technology and provide service to clients in a more flexible and efficient manner.

In the legal profession, the battle for talent is a constant struggle for firms. With the shift to a hybrid model and more opportunities for flexible work, firms are facing new challenges in recruiting and retaining top talent. In this interview, Karen Tuschak and Tiffany Pereira share their insights on the battle for talent and the changes they are seeing in the legal profession.

• The battle for talent is a constant struggle for firms in the legal profession
• Firms are facing new challenges in recruiting and retaining top talent with the shift to a hybrid model and more opportunities for flexible work
• Firms need to focus on treating paraprofessionals fairly, offering them opportunities for professional development, and providing a good work-life balance
• Paraprofessionals can be a valuable asset to a firm by becoming a client retention tool and by being involved in marketing and client retention
• Retaining existing talent is just as important as recruiting new talent
• Firms that understand this and act on it will be better positioned to succeed in the legal profession

Karen Tuschak, a legal professional and owner of Spider Silk Solutions, highlights the importance of treating paraprofessionals fairly and offering them opportunities for professional development. Karen notes, “Firms that really get it are starting to look at the paraprofessionals as a group of themselves and are starting to offer them things outside of just fitting them in with the associates or with the legal assistants.” She also notes that paraprofessionals can be a valuable asset to a firm by becoming a client retention tool and by being involved in marketing and client retention.

Tiffany Pereira, Director of Customer Success at MinuteBox, agrees that retaining talent is just as important as recruiting new talent. Tiffany says, “It’s about retaining that talent that’s in the door. And I’ve seen it in my career and just from chatting with amazing individuals that there’s so much talent out there and sometimes we forget about the ones that have been here for years.”

In addition to treating paraprofessionals fairly and offering them opportunities for professional development, firms should also focus on providing a good work-life balance for their employees. The pandemic has highlighted the importance of work-life balance and many employees have realized that they can be productive while working from home. As a result, firms that can offer a flexible schedule and a hybrid model will be more attractive to top talent. By providing a good work-life balance, firms can attract and retain top talent, which will ultimately benefit the firm in the long-term.

Watch the full interview, The Battle for Talent in the Legal Profession here

In conclusion, the battle for talent in the legal profession is becoming increasingly challenging with the shift to a hybrid model and more opportunities for flexible work. Firms need to focus on treating paraprofessionals fairly, offering them opportunities for professional development, and providing a good work-life balance. Additionally, retaining existing talent is just as important as recruiting new talent. Firms that understand this and act on it will be better positioned to succeed in the legal profession.

On the weekend of March 11, 2023, a sense of deja-vu settled over much of North America. It was an unsettling series of financial setbacks that dangerously paralleled the 2008 financial crisis. What was the trigger of these unnerving reminders from the ‘08 global financial disaster? It was the collapse and insolvency of Silicon Valley Bank.

The SVB collapse triggered a wave of panic as investors rushed to pull their assets out of risky portfolios. The biggest loser in this latest bank run was Signature Bank, a massive entity with deep ties to real estate and legal industries. Seized by US regulators mere hours following the collapse of SVB, the Signature Bank collapse marked the third-largest bank failure in US history.

US Treasury Secretary Janet Yellen announced on March 12, 2023, that all SVB and Signature Bank customers will be “made whole” in an attempt to calm the brewing storm in the financial sector. Her efforts appear to have done the job, as markets rallied on March 13, 2023, a sign that her reassurances injected much-needed positive energy across the country. The worst damage appears to be limited to the US, as Canadian officials assured residents that the SVB fallout on the northern side of the border would be very low.

How did Silicon Valley Bank collapse?

Mark T. Williams, a former examiner for the US Federal Reserve, describes the SVB collapse as “a colossal failure in asset-liability risk management.” Other venture capitalists laid the blame on decisions by the SVB CEO and CFO to liquidate assets that had lost significant value as a result of rising interest rates.

SVB Financial Group, the parent company of SVB, reported selling $21 billion of bonds on March 8, 2023. The bonds had lost significant value against rising interest rates, and the sale resulted in an after-tax loss for the company of $1.8 billion for the quarter.

This reckless decision followed an earlier maneuver by SVB Financial Group CEO Greg Becker to sell off personal SVB stock valued at $3.6 million. SVB Financial Group CFO Dan Beck also made questionable sales of shares prior to the outright collapse of the bank. Collectively, these actions triggered a wave of panic that forced the institution into insolvency.

SVB had no Chief Risk Officer since April 2022

According to the company’s own records, there has been no Chief Risk Officer overseeing risk management issues at SVB since April 2022. Those same records show that the number of meetings chaired by the company’s risk committee more than doubled in the past year.

As the company divested assets from its stock portfolio in a blatant effort to rebuild capital, SVB customers rushed to withdraw $42 billion of cash in less than 48 hours. All these actions: the losses from the sale of stocks, the client loans devalued by higher interest rates, a lack of diversified banking customers (SVB primarily tailored to Silicon Valley tech startup firms)—created a chain reaction that led to the collapse of the bank.

A Chief Risk Officer and a properly functioning risk committee might have relayed the risk management concerns of poor fiscal decisions to the company’s CEO and CFO. Presumably, those stark warnings would have prevented those decisions from being made, which might have avoided the outright bank collapse.

SVB collapse comes on the heels of the FTX collapse

The SVB collapse is another reminder of the pitfalls of overinvesting in nascent industries. The SVB collapse comes only months following the collapse and disgrace of FTX, a cryptocurrency firm that engaged in a series of alleged cases of fraud.

While the end results are identical, there is a key difference between the two cases. The SVB collapse appears to have been the result of poor risk management policies and extremely short-sighted decisions on disbursing assets and liabilities. The FTX case involves criminal charges that have led FTX founder and former CEO Sam Bankman-Fried into criminal indictments that risk significant jail time.

Use entity management software and don’t be like SVB

Since the lack of a Chief Risk Officer in the SVB executive hierarchy played a major role in the bank’s collapse, the case serves as a sharp reminder for other business entities. It’s important that you have proper managers, established organizational charts, and clear corporate compliance policies in place to avoid making these same mistakes.

Entity management software is one of the best resources to help implement corporate compliance policies. You can build a detailed org. chart within the platform, creating an organizational hierarchy and chain of command to manage all important business decisions.

If there are any decisions with potential legal consequences, your team can review the org. chart and use the platform to create diligent minute book records documenting how those issues are managed. Additionally, you can send any documents that require signatory approval – for items such as the sale of company stock – to the appropriate executive. You can include the transfer, signature, and filing of those documents in your minute book. This will help ensure your entity manages all decisions with appropriate, and logical strategies.