Archive for November, 2007

Private Matters

Friday, November 23rd, 2007

I guess if I had titled this something more like “Privacy Law Issues” it wouldn’t have sounded as “mysterious” as “Private Matters”.  But, too late, you’re already reading this, so you might as well read a bit more to find out what the heck I’m talking about today.

I’m sure some of you caught the little (ahem) faux pas performed by the British government this past week.  For those who didn’t catch it, it seems that a few weeks ago a civil servant sent two CDs to London.  The problem is that the CDs never made it to London and they contain lists of millions of citizens who receive the U.K. equivalent of our “baby bonus” cheques.  The information includes all sorts of personal information including bank account information.  To say the least, the British people “are not amused”.

If you combine the U.K. situation with the announcement by the Canadian federal government a few days ago that new legislation is coming to make “identity theft” a crime in its own right (rather than having to try and fit it into other types of crime), you quickly realize that privacy matters are becoming a very serious issue.  It is not that these are new issues – for example, the current federal legislation known affectionately as “PIPEDA” has been around since 2000 – but they recently seem to be forming a more significant part of our collective consciousness.  And that means that it is becoming more of a concern for your employees, your customers and, most of all, for your business.

The key to my success so far has been, beyond my handsome good looks (well, somebody has to say it after all – and nobody but me is willing to do so), has been the knowledge that I cannot be “all knowing”.  I have focused my practice to an area that I can deal with competently and efficiently.  Other specialized areas, such as privacy law, are something best dealt with by those who focus only in those areas.  But, it doesn’t mean that you or I cannot learn the basic obligations put upon us nowadays by privacy laws.

In that vein, I want to commend you to thinking about an upcoming seminar.  I send all of my privacy law issues to PrivaTech Consulting.  The principal of the company is Fazila Nurani, a former colleague of mine, who is a lawyer and a privacy consultant.  She is giving a half-day seminar on January 23, 2008 that I think would be something important to attend.  You can view the seminar’s brochure online here.

Now I’m sure you’re sitting there going “yeah, yeah, really important, you’re just giving a shameless plug for your friend.”  Nope.  Not the case.  How can I say that I think it’s important for your business?  Because I know that it’s important for MY business.  So, if you go, you’ll see me there.  I’ll be the good looking one!

CALC

Criminal Interest Rates – Revisited

Thursday, November 15th, 2007

My post on May 3 talked about criminal rates of interest and included mention of the case of Markson v. MBNA Bank.  The bank sought leave to appeal to the Supreme Court from the decision of the Ontario Court of Appeal which permitted a class action to go ahead.  The Supreme Court of Canada denied leave to appeal today which puts an end to whether the class action will proceed – it will.  It will be of interest to see the result.  This is, however, also a good opportunity to briefly revisit how this case is of interest for your small business.

In Markson, the plaintiff borrowed money from MBNA and immediately paid it back.  MBNA charges a $7.50 fee or 1% interest, whichever is greater, for the time that the money is outstanding.  So, if I borrow $10 and pay it back right away, and get hit with a $7.50 fee, then I have paid, in effect, 75% interest.  When you then take this amount and make it an annual amount, I have then paid 27,375% interest.  Either way, it’s above the criminal rate set at 60% by section 347 of the Criminal Code and that’s where the dispute lies in Markson – whether the fixed fee exceeds the criminal rate of interest where the funds are borrowed for only a short period of time. 

This case is of interest for small businesses because of the fact that “interest” is not always what it appears to be.  For example, administrative fees, late fees, etc. may all be considered interest in the right circumstances.  So, if you do agree to extend credit to your customers, the actual rate of interest may be more than the rate you put on the invoice since these other fees may also be included as “interest” by a court.  In addition, businesses have to be careful regarding compounding and timing issues.  Compounded interest (charging interest upon outstanding principal and accrued interest) will increase the effective rate of interest as opposed to “simple interest” (interest only upon unpaid principal).  In addition, interest calculated on anything less than an annual basis will also increase the effective rate.

Fortunately, it can take a fair amount of compounding and calculating to reach the 60% mark, but businesses should still be wary just the same.

CALC

Buying A Business

Monday, November 12th, 2007

I sat down and read with interest today’s issue of the National Post.  As I have written in the past, I wondered whether the weekly section on Small Business would have sufficient content to continue on a weekly basis and, for the past couple of weeks, I started to get concerned that it would not survive.  However, this week there are a sufficient number of stories to prevent me from declaring an early death to the project.  That said, a minor concern arose from the articles on page FP11 that deal with the purchase of a business.  The concern is that the editors needed to fill space so they just took articles off the newswire from the U.S. without consideration if the information is correct.  While the information is correct for the U.S., it’s not correct for Canada (at least for Ontario).

The article “Do Your Due Diligence” talks at the end about the concept of closing the purchase of a business “in escrow”.  That is not how it occurs in Ontario.  Rather, if you purchase the shares of a business, the job of your lawyer is to conduct searches and to perform other tasks (such as obtaining indemnifications or handling holdbacks of purchase funds) to ensure that there are no other creditors who will come out of the woodwork a year or two later and claim payment against the business.  Similarly, if you go with an asset purchase, then there is a requirement that the seller provide the purchaser with a list of creditors which is then filed in court in accordance with the Bulk Sales Act.  If that is done, then the purchaser is protected from subsequent claims by that the sale is voidable because the creditor’s interest in the assets was not protected.

To make a long story short, while the articles I see from time to time in the National Post or other papers can be helpful, they can create just as much confusion, so you should check to see where the article came from.  In this instance, it was an article from the McClatchy Tribune which, as it turns out, is a sort of clearing house for news articles and content.  So, take it all with a grain of salt, as the saying goes.

CALC