Today the BCREA put a news release that commercial property movement is on the rise. I have to admit, it put a little jump in my step. I do not pretend to be an economist or fully understand how and why our economy rises and falls, but I do try to stay on top of things and listen to people who profess to have this knowledge. I can't know everything, but at least I try to find out who knows what I don't.
Among other things, I represent banks and lenders who provide loans to businesses - commercial lending. So naturally, when I hear that commercial property movement is on the rise, my pocket book is getting ready to expand and that makes me happy.
But this news could be far more important than my practice.
A few months ago, I had the privilege of hearing a chief economist of a leading Chartered Bank speak about the economy. The buzz at the time was Greece and its looming debt, and Europe in general. Among all the new information and statistics that were tossed out by the presenter, a few simple poignant tidbits stayed with me.
The business community has suffered along with all the individuals in Canada and the US. When the mortgage crisis in the US reared its ugly head, we felt the crunch. Borrowers got nervous. People were afraid to buy houses. What most of us non-business owners didn't realize, was that the business owners were nervous too. So, instead of leveraging their assets to raise more capital to expand, they sat on their inventory and current assets. They were, in essence, afraid to grow. We need businesses to grow.
The chief economist, suggested that that until our business community is willing to share the risk, our economy will be stalled. Spending by you and me, is simply not enough to really invigorate the economy, it just helps prevent it from slipping further.
So, the reason of my jump in my step this morning, is that maybe, just maybe, the rise of commercial property movement and ergo, lending, is the beginning of a trend and a true indicator that our economy is really on the mend.
If your lawyer is not helping you, ask yourself why not.
Tuesday, February 28, 2012
Thursday, February 16, 2012
Shareholder Agreements and Estate Planning
Why do you bother writing a will? Why do bother preparing a power of attorney? You do these things because your parents told you to. You do these things to protect the people you care about. If your parents were business partners, they would have told you to prepare a shareholder agreement too. Not only does it protect you from your business partner, but it can protect you from your business partner's family. Most business partners don't really want to suddenly have to include their partner's spouse or executor in the business's affairs. Why wouldn't you want to be protected?
In the ideal world, business partners would always let cooler heads prevail, take the high moral road, and pay out the unhappy partner whatever they asked for and, of course, they would only ask for what is fair.
But life is not ideal and business partners have disputes. The divorce rate still lingers just under 40% (and doesn't include common law break ups). I don't think anyone is tracking business separations, but my litigating lawyer colleagues don't seem to be starving for work and I certainly have referred out more than a few disputes that went on to cost big bucks to resolve.
A shareholder agreement is usually far less expensive than a prenuptial or marriage agreement. Depending on where you are, they can be as cheap as $1200 after taxes. Naturally, if you keep changing your mind and or require substantial custom drafting, the price will go up.
Some basics you should know: do a web search on "buy/sell agreements" and you will learn far more than what I am posting here, but generally here are few things to get you thinking:
1 - When is this documents necessary (what are the triggering events) - death, divorce, bankruptcy, retirement, criminal convictions, disability, desire, or a take-over from a third party.
2 - What happens when the terms are triggered - first right to buy someone out? mandatory pay out from insurance? mandatory sale or purchase?
3 - How will the remaining party(s) pay for the buy out of the departing one - insurance, equity in the company? loans?
4 - How do you value the shares of the outgoing party - fair market valuation, most recent financial statements, a predetermined formula, book value, capitalization of earnings, or other?
A good agreement should be one that you and your partners have carefully considered with sound legal and accounting advice. "Do unto others as they would do unto you" rings stronger than ever in a good shareholder agreement.
What's holding you back from getting yours finalized?
If your lawyer is not helping you, ask yourself why not.
In the ideal world, business partners would always let cooler heads prevail, take the high moral road, and pay out the unhappy partner whatever they asked for and, of course, they would only ask for what is fair.
But life is not ideal and business partners have disputes. The divorce rate still lingers just under 40% (and doesn't include common law break ups). I don't think anyone is tracking business separations, but my litigating lawyer colleagues don't seem to be starving for work and I certainly have referred out more than a few disputes that went on to cost big bucks to resolve.
A shareholder agreement is usually far less expensive than a prenuptial or marriage agreement. Depending on where you are, they can be as cheap as $1200 after taxes. Naturally, if you keep changing your mind and or require substantial custom drafting, the price will go up.
Some basics you should know: do a web search on "buy/sell agreements" and you will learn far more than what I am posting here, but generally here are few things to get you thinking:
1 - When is this documents necessary (what are the triggering events) - death, divorce, bankruptcy, retirement, criminal convictions, disability, desire, or a take-over from a third party.
2 - What happens when the terms are triggered - first right to buy someone out? mandatory pay out from insurance? mandatory sale or purchase?
3 - How will the remaining party(s) pay for the buy out of the departing one - insurance, equity in the company? loans?
4 - How do you value the shares of the outgoing party - fair market valuation, most recent financial statements, a predetermined formula, book value, capitalization of earnings, or other?
A good agreement should be one that you and your partners have carefully considered with sound legal and accounting advice. "Do unto others as they would do unto you" rings stronger than ever in a good shareholder agreement.
What's holding you back from getting yours finalized?
If your lawyer is not helping you, ask yourself why not.
Friday, February 3, 2012
Planning for Incapacity
Last month or so I commented on why our Power of Attorneys (PAs) got longer and more expensive. The flip side, is that our Health Representation Agreements (Rep Agreement) might be getting less expensive, but not necessarily much shorter. They are both more and more looking like parallel documents with similar functions and it is getting hard to justify why the price is so different for a short form Rep Agreement to a long form PA. Of course, the long form Rep Agreement is still pricey - but it is a very hefty document.
Both are sophisticated documents but can be summed up pretty neatly. A PA is for your stuff and your money and a Rep Agreement is for you health and body.
Both documents give another person authority to deal with the respective subject matter. Both can be restricted or broad and open-ended. The local health authorities are now well versed in these documents and will sometimes recommend or request that certain patients seek advice on these matters. The banks and credit unions have long been versed in PAs and for a while, had their own form of document. I see less of those now and do not think many financial institutions are using their own version of power of attorneys anymore.
These are important tools for you to be familiar with and talk about with your lawyer.
Lastly, understanding capacity is crucial to my practice, especially with my aging clients. If the bank or health authorities are recommending that you get advice on Rep Agreements (sometimes called, "Section 7 Agreements" or "Section 9 Agreements"), chances are that capacity is already becoming an issue.
What becomes most difficult for me is when the "client" waits a little too long to realize they need one of these. This is when person is perhaps just starting to lose capacity and facing early stages of dementia. Sometimes, the client does not know what they need, but their son or daughter does and is trying to convince them to go ahead. My duty is always to the donor, or person giving up the powers, whether for health or finances. Although I may look to a doctor to give an opinion of capacity of the donor, the responsibility rests with me.
Dementia is fluid and rarely, just it happen on one day, that a person wakes up and does not have capacity. I understand there are "good days" and there are "bad days". I have to be able to get instructions from the donor and I do not want to see them on a bad day. I always recommend to the person who is starting to handle their affairs to cancel the appointment if it is a bad day and we will re-schedule. I can find other things to do during a missed appointment. But once I've seen the incapacitated donor, it will be very hard to convince me that he or she has capacity the next time I see him or her.
For one of my clients, I had a standing Tuesday morning appointment for 10 am. The driver (child of the client) had Tuesday mornings off, but the client had good and bad days. It took a few weeks, but eventually the appointment was kept and the documents were signed.
That $200 power of attorney (as it then was!) just saved the children more than $3,500 for a Committe application. (I will chat about Committees another day.)
If your lawyer is not helping you, ask yourself why not.
Both are sophisticated documents but can be summed up pretty neatly. A PA is for your stuff and your money and a Rep Agreement is for you health and body.
Both documents give another person authority to deal with the respective subject matter. Both can be restricted or broad and open-ended. The local health authorities are now well versed in these documents and will sometimes recommend or request that certain patients seek advice on these matters. The banks and credit unions have long been versed in PAs and for a while, had their own form of document. I see less of those now and do not think many financial institutions are using their own version of power of attorneys anymore.
These are important tools for you to be familiar with and talk about with your lawyer.
Lastly, understanding capacity is crucial to my practice, especially with my aging clients. If the bank or health authorities are recommending that you get advice on Rep Agreements (sometimes called, "Section 7 Agreements" or "Section 9 Agreements"), chances are that capacity is already becoming an issue.
What becomes most difficult for me is when the "client" waits a little too long to realize they need one of these. This is when person is perhaps just starting to lose capacity and facing early stages of dementia. Sometimes, the client does not know what they need, but their son or daughter does and is trying to convince them to go ahead. My duty is always to the donor, or person giving up the powers, whether for health or finances. Although I may look to a doctor to give an opinion of capacity of the donor, the responsibility rests with me.
Dementia is fluid and rarely, just it happen on one day, that a person wakes up and does not have capacity. I understand there are "good days" and there are "bad days". I have to be able to get instructions from the donor and I do not want to see them on a bad day. I always recommend to the person who is starting to handle their affairs to cancel the appointment if it is a bad day and we will re-schedule. I can find other things to do during a missed appointment. But once I've seen the incapacitated donor, it will be very hard to convince me that he or she has capacity the next time I see him or her.
For one of my clients, I had a standing Tuesday morning appointment for 10 am. The driver (child of the client) had Tuesday mornings off, but the client had good and bad days. It took a few weeks, but eventually the appointment was kept and the documents were signed.
That $200 power of attorney (as it then was!) just saved the children more than $3,500 for a Committe application. (I will chat about Committees another day.)
If your lawyer is not helping you, ask yourself why not.
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