Insights and updates
from MinuteBox
On December 13, 2018, Bill C-86 received Royal Assent, thereby amending certain provisions of the Canada Business Corporations Act (“CBCA”).
The updated provisions include new record keeping requirements for private companies incorporated under the CBCA. As of June 13, 2019. The updates affect those with “significant control” of a company defined as:
Section 2.1(1)
- (a) an individual who has any of the following interests or rights, or any combination of them, in respect of a significant number of shares of the corporation:
- (i) the individual is the registered holder of them,
- (ii) the individual is the beneficial owner of them, or
- (iii) the individual has direct or indirect control or direction over them;
- (b) an individual who has any direct or indirect influence that, if exercised, would result in control in fact of the corporation; or
- (c) an individual to whom prescribed circumstances apply.
A “significant number of shares” is further defined as:
Section 2.1(3)
- (a) any number of shares that carry 25% or more of the voting rights attached to all of the corporation’s outstanding voting shares; or
- (b) any number of shares that is equal to 25% or more of all of the corporation’s outstanding shares measured by fair market value.
Summary
Private CBCA corporations must now maintain a register of all individuals who fit the above description, and include in the register the names, birth dates, residence (for tax purposes) and other required data.
Shareholders are now obligated to provide true and accurate information when requested by the corporation.
At least once per financial year, the corporation must review and update this information. Once the corporation is aware of any changes, it has 15 days in order to amend the register accordingly. Failure to properly update the information can result in fines of up to $5,000. However, directors or shareholders knowingly providing false information can result in fines of up to $200,000 and/or six months of imprisonment.
The CBCA requirements ensure that corporations (or the law firms that manage the records for those corporations) must undertake a greater number of tasks each year to ensure the corporate records’ compliance.
The process of updating minute book records will be daunting and tedious, especially if the information is stored in physical minute books binders. Document generation tools and clearly organized cloud-based data and databases can make compliance with the new requirements more manageable.
While the new requirements apply only to privately held CBCA corporations, it is certainly possible that the provincial legislatures will debate and perhaps adopt similar requirements.
At MinuteBox, we have already begun internally testing some new features (to be released in 2019) built specifically to support lawyers and clerks through this process.
This piece is a list of suggestions and helpful solutions in order to help us, as a legal community, get through the tumultuous times, and ensure we are in the best possible position when this is all over (it will happen… I swear!).
Here we are. The vast majority of lawyers are working from home, trying to find a sense of normalcy in a world that changes by the hour (sometimes less). I always knew the legal industry would undergo a cataclysmic change, but never in my wildest thoughts did I envision a global pandemic would be the catalyst.
Let’s get one thing clear. There is no single-source rule book for how we, as a profession, undertake our role in the current circumstances. These are uncharted waters and we are all navigating them for the first time. Good luck!
But I firmly believe lawyers are smart and resourceful. They will find ways to provide services to clients and ensure the job gets done.
Even at times when we feel helpless as professionals, there are steps lawyers and law firms can take to ensure our industry makes it through this crisis:
Communicate with your clients: Ensure they are well accommodated. A simple phone call goes a long way to build goodwill. In times of uncertainty, “Hi, how are you?” shows concern and empathy. Find out what kind of support they need and offer your services, if you can.
Communicate with other lawyers: One big (normal) fear we may have is that other lawyers are farther along in their management of this crisis than we are. This can lead to uncertainty, anxiety, paranoia and doubt. Rest assured, every lawyer is feeling the stress and everyone is, to at least some degree, underprepared for a situation like this. Speaking with colleagues will not only help settle your thoughts, but may also introduce you to some novel solutions they have uncovered which can help your practice as well.
Explore what doesn’t work: What PAIN POINTS are you specifically feeling now when it comes to your ability to practice? What is not working and what needs fixing. What really grinds your gears when it comes to your practice? These might not be identified immediately, but over the coming weeks, begin to explore which processes are important and which are dead weight.
Take stock of your processes: Do a little process mapping. How were things done before the current health crisis? How are they done now? What can be improved and what was waste? Process mapping for different parts of your practice can help zero-in on areas that can be improved.
Take advantage of government resources: The federal and provincial governments have been providing capital for businesses and individuals. It is important to inform your clients about what’s available, but also determine if you or your firm is eligible. Find out if you are eligible for the Temporary Wage Subsidy (TWS), the Canada Emergency Wage Subsidy (CEWS), the Canada Emergency Business Account (CEBA) and the Canada Emergency Response Benefit program (CERB).
Don’t be afraid to push the envelope when it comes to novel ways to practice: Remember, above all else your duty is to provide service to your clients (in a safe, ethical and secure manner). Think outside the box and be a trailblazer!
Embrace the quiet: Lawyers are notoriously busy, always working on client deadlines (whether actual or self-imposed). Without a doubt, those times will return, guaranteed! But in the meantime, enjoy working fewer hours. Embrace a 9-5 work routine. Take an extended lunch at the kitchen table. Watch an episode of the Price is Right (it’s good for the soul!).
Take the time to be honest with yourself: Anxiety, nervousness and fear are human emotions. And although we sometimes work superhuman hours, we must find time to cope and express our emotions to ourselves and to others.
As lawyers, we are made to feel we have all the answers all the time. It’s alright to take a little bit of time to find the best approach to provide optimal service to your clients and yourself.
If you remember nothing else, remember Rule # 1: Stay healthy. The rest we can figure out together!
Absent double-monitor computers and the ability to send emails on smartphones, in many ways lawyers continue to practise the same way they have for generations. The legal industry has oft been described as the last great mature industry to modernize. However, growing pressures from clients and stiffer competition from new legal service providers are compelling law firms to slowly introduce new processes and technologies in order to internally increase work efficiency and externally create client value.
Legal technology can be divided into two tags: necessary and nuisance.
Necessary technologies, the smaller of the two categories, are tools a modern law firm needs in order to function. Photocopiers, email and the telephone are just three examples.
Alternatively, nuisance focused technologies, where the vast majority of legal technology falls under, provide solutions that are faster, better and cheaper than existing methods and processes. These solutions alleviate real nuisances, but are not required to practise law. For example, AI powered due diligence software “reads” contracts and parses out key information. However, teams of junior associates can perform the very same task, albeit at a slower rate and higher price. Nuisance alleviating technologies are value-added solutions that law firms should strongly consider implementing but are reticent to adopt.
The Legal Technology Sales Triangle
For law firms, the consideration to adopt nuisance alleviating technologies is based on three factors: the simplicity of the technology, the product or service’s ease of use, and how quickly the financial returns are realized. These considerations, taken together, form what we at MinuteBox call the “Legal Technology Sales Triangle.” The degree to which each node is considered and satisfied may help determine whether a law firm will adopt a new nuisance alleviating technology.
Simple
Make sure your nuisance alleviating technology is simple in the eyes of lawyers. While outsiders see an industry inching towards modernization, lawyers feel that they’re on a bullet train moving at top speed. Understanding lawyers’ perspectives is essential when presenting new technologies or innovations to law firms. Too much change too quickly is risky, and lawyers, as practitioners of risk aversion, will more often than not opt to remain on familiar turf.
So when pitching nuisance alleviating technologies to lawyers ask yourself the following questions:
- Is my presentation too technical?
- Will lawyers understand what I am trying to do?
- Is this a tiny step or radical step in terms of how lawyers and law firms work?
Easy-To-Use
Many lawyers have been practicing the same way for decades and are prone to reverting back to tried and true processes whenever new technologies are introduced. Familiarity with tools and techniques creates a pervasive stickiness. Even though some steps in a legal process may be redundant, lawyers still follow each step. Their individual technique works for them.
Therefore, as a starting point, any new technology must be as easy or easier to use than whatever techniques or solutions the lawyers are currently using. That means if the current process takes five steps, any new solutions must be five steps or fewer. It doesn’t matter how complex the new step; a mouse click, an extra button press, even excessive load times all repel lawyers back to their preferred techniques.
New nuisance alleviating solutions must also be out-of-the box ready. Law firms are busy and are looking for end-to-end solutions that don’t require a lot of onboarding on their part.
The one exception to the easy-to-use requirement is if each additional step yields exponential returns. For every additional button press, mouse click or lag time, the financial return must be high.
Instant Return
The sooner a firm can see financial returns from the adoption of a technology the faster that firm will adopt it. For the vast majority of law firms, strategic decisions are made by the senior leadership, often composed of very senior partners nearing retirement. There is thus a lack of incentive for some decision makers to adopt high cost technologies which only yield returns in the distant future.
While some new technologies can positively impact a firm’s financial position in the long term, the immediate value in the eyes of the decision makers is limited. Instead, senior decision makers will be more inclined to invest in technologies that may be less impactful but have immediate financial returns.
The Legal Technology Sales Triangle is by no means a comprehensive tool when it comes to selling nuisance alleviating technologies to law firms. Yet it adds a sense of perspective for how most firms operate and the considerations they weigh when deciding to adopt impactful technologies.
The legal industry is rapidly adopting cloud-based technology, and for good reason. From increased efficiency and productivity to enhanced accessibility and scalability, the benefits of cloud-based technology are numerous. In this blog post, we’ll explore the advantages of cloud-based technology in the legal industry, as discussed by Tiffany Pereira, Director of Customer Success at MinuteBox.
In this post, we’ll cover how cloud-based technology:
- Streamlines routine tasks and centralizes disparate systems
- Boosts productivity and efficiency
- Eliminates the need to maintain expensive and insecure server structures
- Allows for instant adoption of new features and functionalities
- Can have scheduled downtime windows
The move to the cloud has been accelerated by the pandemic, and it’s clear to see why. Cloud-based technologies like MinuteBox are becoming increasingly popular tools across all law firms. Investing in a serverless architecture is an effective way to streamline processes, save on costs, increase scalability, and enhance accessibility.
Watch the full interview, The Advantages of Cloud-Based Technology in the Legal Industry
Tiffany explains that practice management systems and entity management systems can help to streamline routine tasks and centralize seemingly disparate systems. This results in a boost in productivity and efficiency, allowing for more time to be allocated to clients. Additionally, there is no need to maintain an expensive and insecure server structure, and the adoption of new features and functionalities is instant.
Another advantage of cloud-based technology is the lack of scheduled downtime windows. Tiffany explains that this can be a huge value add for a firm, as it eliminates the frustration of not being able to access the system during certain times.
Overall, it’s clear that the benefits of cloud-based technology in the legal industry are numerous. From increased efficiency and productivity to enhanced accessibility and scalability, the advantages of cloud-based technology are undeniable. As Tiffany concludes, “being able to say, we can push out that change and there is no downtime, it’s not gonna affect any user, is a huge value add for any firm.”
The Corporate Transparency Act (CTA) was enacted on January 1, 2024. The authors of the CTA decreed a mandate that requires all qualifying business entities to submit beneficial ownership information (BOI) reports to the Department of Treasury’s Financial Crimes Enforcement Network (FinCEN).
Two months later, on March 1, 2024, a US District Judge in Alabama ruled on a case brought before the court by the National Small Business Association (NSBA), an organization representing over 65,000 small business entities across the United States. The judge ruled that the CTA is “unconstitutional” and that lawmakers overstepped their bounds.
What is the purpose of the Corporate Transparency Act?
The CTA is part of a broader government effort to crack down on white-collar crime. US federal agencies and financial institutions annually identify unlawful transferrences of capital through money laundering or corporate sponsorship of international terrorism — actions that, in the government’s opinion, undermine national security.
As a result, the CTA gives FinCEN greater authority and oversight of suspected culprits of these crimes. Qualifying business entities must provide detailed BOI reports to FinCEN, which will store those records in secure databases and use them to monitor suspicious financial activities.
What were the details of the Alabama case?
The NSBA challenged the legal authority of the CTA and took the government to court seeking a summary judgment. Federal District Judge Liles C. Burke in Alabama issued a 53-page opinion about the case, which a Forbes contributing writer dissects in detail.
At the heart of the lawsuit is the fact that legal entities in the United States register with individual states where they choose to operate. The incorporation of those entities is a matter for the states to decide, along with the ability to prosecute those businesses for suspected financial crimes.
The NSBA argued that the CTA gives the federal government’s national security and foreign affairs matters the right to interfere with how individual states regulate businesses. Additionally, they argued that limited liability corporations (LLCs) may engage in interstate commerce, but not all entities pursue these opportunities.
The CTA requires all entities — even those that never cross state jurisdictions — to abide by the federal government’s mandate. Judge Burke ruled these grounds warranted an unconstitutional ruling of the CTA, though the federal government launched an appeal to the Eleventh Circuit.
Who is a beneficial owner under the CTA?
Within the CTA is specific language that defines a beneficial owner. According to the CTA, a beneficial owner is anyone who — directly or indirectly — maintains a 25% ownership interest in a corporate entity. Additionally, a beneficial owner is anyone who — again, directly or indirectly — maintains substantial control over business operations through voting rights.
Shareholders who fit the profile of a beneficial owner must provide their personal information — name, address, and a government-issued identification number — to the entity management department. That data is then processed and submitted to FinCEN as a BOI report.
Are some entities exempt from BOI reporting requirements?
The CTA allows authorities to gather beneficial ownership information from thousands of legal entities. However, FinCEN has detailed 23 types of legal entities that are exempt from the BOI reporting requirements.
Most exemptions revolve around the financial sector in the form of banks, credit unions, venture capital firms, depository institutions, or money services businesses. Government authorities, public utilities, and securities exchanges are also exempt from reporting BOI data to FinCEN.
What does the Alabama case ruling mean for BOI reporting?
So, what does the NSBA case against the Treasury Department mean for the future of BOI reporting requirements? There are two key takeaways from the case.
Firstly, Judge Burke clearly stated in his ruling that the injunction against the CTA only applies to businesses enrolled in the NSBA before March 1, 2024. Businesses that are registered members of the NSBA have a temporary pause on compliance with the CTA while the case is under appeal at the Eleventh Circuit.
For most businesses, the ruling has no impact whatsoever. FinCEN requires BOI reports from entities registered on or after January 1, 2024, within 90 days of receiving their articles of incorporation. Any entities registered before January 1, 2024, have until January 1, 2025, to submit their BOI reports to FinCEN.
How to prepare your BOI reports for FinCEN
While many entities still have several months to submit their BOI reports to remain in compliance with the CTA, it’s best to start gathering that information now. It’s much more effective for your entity management team to have all the information they need well in advance of the deadline to avoid last-minute scrambles and gaps in required data.
Intuitive entity management software can assist your legal and compliance departments with these tasks. Platforms like MinuteBox include pre-built templates and guided widgets that help your teams build detailed reports. The technology saves valuable working time and makes the process of gathering, filing, and securing entity management data quick and painless.
Additionally, you can use the platform’s Corporate Transparency Register to comply with all obligations under the CTA. Here, you can build detailed shareholder ledgers and create a comprehensive list of all beneficial owners with significant controlling interest in the company.
Once the data is in the platform, you can easily create detailed minute book records of all beneficial owners. Since the information is stored in your platform, filing and submitting the BOI reports to FinCEN is a breeze.
Prepare your legal entity for the next step of beneficial ownership reporting. Join the MinuteBox revolution today, and stay ahead of the game while maintaining compliance.
As the role of the paraprofessional continues to evolve, firms are recognizing the value that paraprofessionals bring to the table. Paraprofessionals are no longer seen as just support staff, but are becoming integral members of the team and are playing an increasingly important role in client relationship management. In this blog post, we will explore how the role of the paraprofessional is changing and how firms are supporting their teams in more client engagement.
In this post, we’ll look at:
- The role of the paraprofessional is changing and becoming more important
- Paraprofessionals are playing an increasing role in client relationship management
- Firms are recognizing the value that paraprofessionals bring to the table
- Firms are supporting their teams in more client engagement
Paraprofessionals are becoming the main point of contact for clients and are often the first point of contact for new mandates. They are also playing a crucial role in setting up fixed-fee mandates and cost-efficient solutions for clients. This shift in the role of paraprofessionals is changing the business model for firms and is becoming an important factor in the battle for talent.
Watch the full interview, Collaboration and Communication: Best Practices for Legal Technology Partnerships
Firms are supporting their teams in more client engagement by providing professional development programs specifically designed for paraprofessionals. This not only helps to attract and retain top talent but also helps to create a better work-life balance for employees. By providing stretch opportunities and development opportunities, firms can retain the valuable talent that they already have in the door.
In conclusion, the role of the paraprofessional is changing and becoming more important as firms recognize the value that they bring to the table. Firms are supporting their teams in more client engagement and are providing professional development programs specifically designed for paraprofessionals. By providing stretch opportunities and development opportunities, firms can retain the valuable talent that they already have in the door and attract top talent in the future.
