Corporate Governance

Overview

Corporate directors have lost their immunity to prosecution, and rules and requirements governing their actions are becoming increasingly stringent.

Drawing on their many years of experience, extensive documentation, and conclusive data, Lavery’s lawyers can help you ensure sound corporate governance, transparency, integrity, and accountability.

Services

  • Audit and assessment of your current practices
  • Formulation and implementation of required changes
  • Training of directors
  • Compliance with laws, rules, and guidelines
  • Preparation of the necessary opinions and reports
  1. Ten things you should know about the amendments to Quebec’s Charter of the French language

    Quebec recently enacted Bill 96, entitled An Act respecting French, the official and common language of Québec, which aims to overhaul the Charter of the French language. Here are 10 key changes in this law that will impose significant obligations on businesses: As of June 1, 2025, businesses employing more than 25 people (currently the threshold is 50 people) for at least six months will be required to comply with various “francization”1 obligations. Businesses with between 25 and 99 employees may also be ordered by the Office québécois de la langue française (the OQLF)2 to form a francization committee. In addition, at the request of the OQLF, businesses may have to provide a francization program for review within three months. As of June 1, 2025, only trademarks registered in a language other than French (and for which no French version has been filed or registered) will be accepted as an exception to the general principle that trademarks must be translated into French. Unregistered trademarks that are not in French must be accompanied by their French equivalent. The rule is the same for products as well as their labelling and packaging; any writing must be in French. The French text may be accompanied by a translation or translations, but no text in another language may be given greater prominence than the text in French or be made available on more favourable terms. However, as of June 1, 2025, generic or descriptive terms included in a trademark registered in a language other than French (for which no French version has been registered) must be translated into French. In addition, as of June 1, 2025, on public signs and posters visible from outside the premises, (i) French must be markedly predominant (rather than being sufficiently present) and (ii) the display of trademarks that are not in French (for which no French version has been registered) will be limited to registered trademarks. As of June 1, 2022, businesses that offer goods or services to consumers must respect their right to be informed and served in French. In the event of breaches of this obligation, consumers have the right to file a complaint with the OQLF or to request an injunction unless the business has fewer than five employees. In addition, any legal person or company that provides services to the civil administration3 will be required to provide these services in French, including when the services are intended for the public. As of June 1, 2022, subject to certain criteria provided for in the bill, employers are required to draw up the following written documents in French: individual employment contracts4 and communications addressed to a worker or to an association of workers, including communications following the end of the employment relationship with an employee. In addition, other documents such as job application forms, documents relating to working conditions and training documents must be made available in French.5 As of June 1, 2022, employers who wish to require employees to have a certain level of proficiency in a language other than French in order to obtain a position must demonstrate that this requirement is necessary for the performance of the duties related to the position, that it is impossible to proceed using internal resources and that they have made efforts to limit the number of positions in their company requiring knowledge of a language other than French as much as possible. As of June 1, 2023, parties wishing to enter into a consumer contract in a language other than French, or, subject to various exceptions,6 a contract of adhesion that is not a consumer contract, must have received a French version of the contract before agreeing to it. Otherwise, a party can demand that the contract be cancelled without it being necessary to prove harm. As of June 1, 2023, the civil administration will be prohibited from entering into a contract with or granting a subsidy to a business that employs 25 or more people and that does not comply with the following obligations on the use of the French language: obtaining a certificate of registration, sending the OQLF an analysis of the language situation in the business within the time prescribed, or obtaining an attestation of implementation of a francization program or a francization certificate, depending on the case. As of June 1, 2023, all contracts and agreements entered into by the civil administration, as well as all written documents sent to an agency of the civil administration by a legal person or by a business to obtain a permit, an authorization or a subsidy or other form of financial assistance must be drawn up exclusively in French. As of September 1, 2022, a certified French translation must be attached to motions and other pleadings drawn up in English that emanate from a business or legal person that is a party to a pleading in Quebec. The legal person will bear the translation costs. The application of the provisions imposing this obligation has, however, been suspended for the time being by the Superior Court.7 As of September 1, 2022, registrations in the Register of Personal and Movable Real Rights and in the Land Registry Office, in particular registrations of securities, deeds of sale, leases and various other rights, must be made in French. Note that declarations of co-ownership must be filed at the Land Registry Office in French as of June 1, 2022. The lawyers at Lavery know Quebec’s language laws and can help you understand the impact of Bill 96 on your business, as well as inform you of the steps to take to meet these new obligations. Please do not hesitate to contact one of the Lavery team members named in this article for assistance. “Francization” refers to a process established by the Charter of the French language to ensure the generalized use of French in businesses. The OQLF is the regulatory body responsible for enforcing the Charter of the French language. The civil administration in this law includes any public body in the broad sense of the term. An employee who signed an individual employment contract before June 1, 2022, will have until June 1, 2023, to ask their employer to provide them with a French translation if the employee so wishes. If the individual employment contract is a fixed-term employment contract that ends before June 1, 2024, the employer is not obliged to have it translated into French at the request of the employee. Employers have until June 1, 2023, to have job application forms, documents related to work conditions and training documents translated into French if these are not already available to employees in French. Among these exceptions are employment contracts, loan contracts and contracts used in “relations with persons outside Quebec.” There seems to be a contradiction in the law with regard to individual employment contracts which are contracts of adhesion and for which the obligation to provide a French translation nevertheless seems to apply. Mitchell c. Procureur général du Québec, 2022 QCCS 2983.

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  2. Bill C-18 (Online News Act): Canada looking to create a level playing field for news media

    Earlier this month, Canadian Heritage Minister Pablo Rodriguez introduced Bill C-18 (Online News Act) in Parliament. This bill, which was largely inspired by similar legislation in Australia, aims to reduce bargaining imbalances between online platforms and Canadian news outlets in terms of how these “digital news intermediaries” allow news content to be accessed and shared on their platforms. If passed, the Online News Act would, among other things, require these digital platforms such as Google and Facebook to enter into fair commercial agreements with news organizations for the use and dissemination of news related content on their platforms. Bill C-18, which was introduced on April 5, 2022, has a very broad scope, and covers all Canadian journalistic organizations, regardless of the type of media (online, print, etc.), if they meet certain eligibility criteria. With respect to the “digital news intermediaries” on which the journalistic content is shared, Bill C-18 specifically targets online communication platforms such as search engines or social media networks through which news content is made available to Canadian users and which, due to their size, have a significant bargaining imbalance with news media organizations. The bill proposes certain criteria by which this situation of bargaining imbalance can be determined, including the size of the digital platform, whether the platform operates in a market that provides a strategic advantage over news organizations and whether the platform occupies a prominent position within its market. These are clearly very subjective criteria which make it difficult to precisely identify these “digital news intermediaries.” Bill C-18 also currently provides that the intermediaries themselves will be required to notify the Canadian Radio-television and Telecommunications Commission (“CRTC”) of the fact that the Act applies to them. The mandatory negotiation process is really the heart of Bill C-18. If passed in its current form, digital platform operators will be required to negotiate in good faith with Canadian media organizations to reach fair revenue sharing agreements. If the parties fail to reach an agreement at the end of the negotiation and mediation process provided for in the legislation, a panel of three arbitrators may be called upon to select the final offer made by one of the parties. For the purposes of enforceability, the arbitration panel’s decision is then deemed, to constitute an agreement entered into by the parties. Finally, Bill C-18 provides digital platforms the possibility of applying to the CRTC for an exemption from mandatory arbitration provided that their revenue sharing agreements meet the following criteria: Provide fair compensation to the news businesses for news content that is made available on their platforms; Ensure that an appropriate portion of the compensation would be used by the news businesses to support the production of local, regional and national news content; Do not allow corporate influence to undermine the freedom of expression and journalistic independence enjoyed by news outlets; Contribute to the sustainability of Canada’s digital news marketplace; Ensure support for independent local news businesses, and ensure that a significant portion of independent local news businesses benefit from the deals; and Reflect the diversity of the Canadian news marketplace, including diversity with respect to language, racialized groups, Indigenous communities, local news and business models. A bill of this scope will certainly be studied very closely by the members of Parliament, and it would not be surprising if significant amendments were made during this process. We believe that some clarifications would be welcome, particularly as to the precise identity of businesses that will be considered “digital information intermediaries” for the purposes of the Online News Act.

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  3. Why draw up a shareholders’ agreement?

    Shareholders’ agreements set out shareholders’ rights and obligations in various situations that may occur during a corporation’s existence. While it is true that corporate laws generally establish a common structure for all business corporations, they don’t do so in great detail. A shareholders’ agreement is thus an invaluable tool for preventing conflicts and settling those that do arise. A shareholders’ agreement is essential to the proper functioning of a corporation and helps to solidify the commitment of its shareholders. A shareholders’ agreement also serves to: Maintain proportional shareholding between shareholders; Maintain the “private” nature of a corporation by preventing third parties from becoming shareholders without the consent of the parties; Ensure a market for the shares; Prevent a minority shareholder from being prejudiced by a majority shareholder’s decisions or actions; Settle in advance certain potentially contentious issues in the administration of a corporation; and finally Give the shareholders the power to decide on some of the corporation in question’s activities. The main provisions of a shareholders’ agreement The clauses that can be included in a shareholders’ agreement are many, and they make it possible to apprehend and prevent difficult situations. Here are some examples. Share transfers Some clauses in shareholders’ agreements govern the transfer of shares, such as: Clauses imposing an obligation to sell or an option to purchase the shares of other shareholders in specific situations (disability, personal bankruptcy, retirement at a certain age, death, voluntary withdrawal from the corporation, misappropriation of corporate funds or breach of a non-competition or non-solicitation clause). A right of first refusal clause. This type of clause aims to oblige a selling shareholder to offer their shares to co-shareholders, in proportion to their shareholding, before the selling shareholder can sell them to a third party or another co-shareholder. A drag-along clause. This type of clause is required in agreements between a majority shareholder and one or more minority shareholders. By availing themselves of a drag-along clause, minority shareholders will be entitled to demand, as a condition of the majority shareholder's right to sell their shares to a third party, that the third party also purchase the minority shareholders’ shares on the same terms as those offered for the majority shareholder's shares. A shotgun clause. This type of clause allows any shareholder to initiate a process to purchase a co-shareholder’s interest, whereby the co-shareholder must either (i) accept the offeror’s offer to purchase; or (ii) make a counter-offer to purchase on the same terms and conditions as those contained in the offeror’s offer to purchase. Terms and conditions for share purchases A shareholders’ agreement can also serve to resolve issues arising from share purchase and sale clauses, by determining: Who will purchase the shares—the corporation, the shareholders or third parties. Payment terms (cash, deferred payments, etc.). Life insurance or other insurances to guarantee payment of the shares. Share valuation A shareholders’ agreement may determine various methods of valuing shares, which may vary depending on the circumstances leading to redemption, such as: Valuation at book value. Valuation at adjusted book value. Valuation at liquidation value. Valuation at capital value. Valuation by a third-party, etc. Voting clauses Shareholders may determine a variety of voting arrangements by setting out clauses relating to: The election of directors. The need for a special majority vote in certain situations. The creation of a pooling agreement (transfer of shares to a custodian agent who undertakes to vote and administer the shares in accordance with the instructions of the shareholders who signed the shareholders’ agreement). The creation of a trust agreement (transfer of shares to a custodian agent who undertakes to vote and administer the shares at their discretion). Management clauses Through management clauses, shareholders may: Determine each shareholder’s contribution. Share revenues. Provide for the reimbursement of expenses. Allocate the duties of the shareholders. Provide for terms should one of the shareholders become disabled. • Ensure that a departing shareholder will abide by exclusivity, confidentiality and non-competition undertakings. Govern vacation times. It may be tempting to think that shareholders’ agreements contain more or less the same clauses and that it would be easy to draft one on one’s own. While the concepts are easy to grasp, there are multiple factors that make their application much more complex. Each corporation has a different business reality, and a shareholders’ agreement must be adapted to such specific reality. For example, what if one of the shareholders cannot be insured because they are older or have a serious illness? Or what if shareholders’ life insurance is worth $500,000, but the value of a share is deemed to be $200,000? Who will benefit from the extra $300,000, the corporation or the estate? It’s best to consult a lawyer and a tax specialist to understand your corporation’s needs and all the risks associated with the clauses in a shareholders’ agreement. The experts at Lavery Lawyers advise you to draw up a shareholders’ agreement from the outset, when everything is going well, and to update it should the corporation undergo major changes or new shareholders arrive.

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  4. A False Sense of Cybersecurity?

    Ransomware has wreaked so much havoc in recent years that many people forget about other cybersecurity risks. For some, not storing personal information makes them feeling immune to hackers and cyber incidents. For others, as long as their computers are working, they do not feel exposed to no malware. Unfortunately, the reality is quite different. A new trend is emerging: malware is being released to collect confidential information, including trade secrets, and then such information is being sold to third parties or released to the public.1 The Pegasus software used to spy on journalists and political opponents around the world has been widely discussed in the media, to the point that U.S. authorities decided to include it on their trade blacklist.2 However, the use of spyware is not limited to the political sphere. Recently, a California court ordered a U.S. corporation, 24[7].ai, to pay $30 million to one of its competitors, Liveperson.3 This is because 24[7].ai installed competing technology on mutual client websites where LivePerson’s technology already is installed. Liveperson alleged in its lawsuit that 24[7].ai installed spyware that gathered confidential and proprietary information and data regarding Liveperson’s technology and client relationships. In addition, the software which 24[7].ai allegedly installed removed some features of Liveperson’s technology, including the “chat” button. In doing so, 24[7].ai interfered in the relationship between Liveperson and its clients. This legal saga is ongoing, as another trial is scheduled to take place regarding trade secrets related to a Liveperson client.4 This legal dispute illustrates that cybersecurity is not only about personal information, but also about trade secrets and even the proper functioning of business software. A number of precautions can be taken to reduce the risk of cybersecurity incidents. Robust internal policies at all levels of the business help maintain a safe framework for business operations. Combined with employee awareness of the legal and business issues surrounding cybersecurity, these policies can be important additions to IT best practices. In addition, employee awareness facilitates the adoption of best practices, including systematic investigations of performance anomalies and the use of programming methods that protect trade secrets. Moreover, it may be advisable to ensure that contracts with clients provide IT suppliers with sufficient access to conduct  the necessary monitoring for the security of both parties. Ultimately, it is important to remember that the board of directors must exercise its duty with care, diligence and skill while looking out for the best interests of the business. Directors could be held personally liable if they fail to meet their obligation to ensure that adequate measures are implemented to prevent cyber incidents or if they ignore the risks and are wilfully blind. Thus, board members must be vigilant, be trained in and aware of cybersecurity in order to integrate it into their risk management approach. In an era in which intellectual property has become a corporation’s most important asset, it goes without saying that it is essential to put in place not only the technological tools, but also the procedures and policies required to adequately protect it! Contact Lavery for advice on the legal aspects of cybersecurity. See Page, Carly, “This new Android spyware masquerades as legitimate apps,” Techcrunch, November 10, 2021. https://techcrunch.com/2021/11/10/android-spyware-legitimate-apps; Page, Carly, “FBI says ransomware groups are using private financial information to further extort victims,” Techcrunch, November 2, 2021. https://techcrunch.com/2021/11/02/fbi-ransomware-private-financial-extort. Gardner, Frank, “NSO Group: Israeli spyware company added to US trade blacklist,” BBC News, November 3, 2021. https://www.bbc.com/news/technology-59149651. Claburn, Thomas, “Spyware, trade-secret theft, and $30m in damages: How two online support partners spectacularly fell out,” The Register,June 18, 2021. https://www.theregister.com/2021/06/18/liveperson_wins_30m_trade_secret. Brittain, Blake, “LivePerson wins $30 million from [24]7.ai in trade-secret verdict,”Reuters, June 17, 2021. https://www.reuters.com/legal/transactional/liveperson-wins-30-million-247ai-trade-secret-verdict-2021-06-17.

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  1. Guillaume Lavoie participates in a McGill-HEC Montréal EMBA panel on governance

    On June 13, Guillaume Lavoie, partner and head of the Lavery CAPITAL and Mergers and Acquisitions groups, will participate in a panel on governance organized by McGill-HEC Montréal EMBA being held at the HEC Montréal. Entitled Les défis et enjeux de la gouvernance, the panel will address the various issues and challenges faced by different industries and types of organizations to stimulate a discussion on governance based on concrete examples experienced by the panelists. The panel will also include Louise St-Pierre, former CEO of Cogeco Connexion, Josée Duplessis, Chief of Staff for the Federal Minister of Family, Children and Social Development and Ginette Mailhot, founder of Capital Humain Plus and a director of Anges Québec. All profits will be donated to Women in Governance and its president and co-founder, Caroline Codsi, will moderate. Click here to register.

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