Growing Aboriginal business – should you incorporate?

Starting or Growing your Business? Don’t forget to protect your assets and plan your tax future on or off-reserve.

This brief overview can help you consider whether on-reserve incorporation is right for your business.

If you are a Status Indian and act as Director of a corporation, plan to set up a company, or have a board/planned board with others who are Status Indian Directors, choosing the location of your Registered Office may be an important tax planning decision. Depending on the nature of the corporation’s work, you may be able to take advantage of the tax exemption rights allotted under the Indian Act.  Thorough consideration of a number of factors may reveal that locating your Registered Office on a reserve is advantageous for you and your corporation. This article is meant to inform you of some factors to consider, however is not a comprehensive examination of this topic. You should consult a lawyer before taking the next steps with your business

This area of law has room to expand as Aboriginal business in Canada continues to grow exponentially, and more on-reserve business people seek clarification of relevant tax laws.

Why incorporate a company?

A business-owner’s decision regarding incorporation is driven by a range of factors. Conducting business as an individual or partnership exposes business owners to personal liabilities. As business grows, and the company deals with more clients, contracts, operations, etc., and potential liabilities can increase. When you are not incorporated, your personal assets (home, car, money, etc.) are directly available to be seized by creditors to satisfy a debt. A debt can arise from simple daily transactions with suppliers, or can result from lawsuit settlements and regulatory fines.  When you incorporate a company to manage your business affairs, you separate your business from your personal assets and income reporting, effectively increasing protection for yourself against creditors – in other words, limiting your personal liability. Knowing when to incorporate can be very important to your overall bottom line – you should talk to a lawyer about your specific situation and other considerations to know whether incorporation is right for you.

What does it mean to incorporate a company on-reserve?

The physical location of a company’s Registered Office is effectively the corporation’s location for the Registry of Joint Stock Companies. Often work will take place at other locations as well, however certain legal requirements apply to the Registered Office, and every corporation has one. A Registered Office is the place where company records are to be kept, made up to date, and be available for viewing by interested parties.

Incorporating on-reserve – some things you should consider:

Relevant laws:

First of all, incorporating a company on-reserve can be done through federal (CBCA) or provincial (NSCA) legislation. Deciding whether to incorporate federally or provincially requires an examination of your specific business needs. Secondly, on-reserve corporations are subject to some extra laws, including those under the Indian Act and its interpretations (including one which has decided that an on-reserve corporation does not have status as a legal person for the purposes of the Indian Act); and are also subject to any applicable bylaws created by the relevant band council. The band council of the relevant reserve has the ability to make some bylaws which affect business on-reserve, which can be a significant deterrent to incorporating on-reserve, as it leaves the regulatory landscape open to new rules which are not subject to the traditional legislative process – this could be detrimental or beneficial to an on-reserve corporation, depending on the band council’s attitude toward business on-reserve. If you ever choose to incorporate on a reserve, it is important to request copies of any/all relevant bylaws and keep abreast of new ones as they come into force. Other potential implications of on-reserve business should also be more deeply investigated should you decide to go this route. Don’t forget that band council decisions must be reasonable and you may be able apply to a court to get judicial review of a band council’s decision when it has affected you unfairly. Finally, the most attractive aspect of doing business on reserve is to benefit from the Indian Act tax exemption for Status Indians whose property is located on-reserve. For this, your corporation will deal with Canada Revenue Agency.

Is incorporation right for your business?

Does your corporation have a Status Indian Director(s)? Does its business take place on-reserve, and/or is it otherwise beneficial to First Nations/the relevant reserve? Does your business have a sufficient “nexus” in relation to First Nations? In order to answer these questions, you’ll need to have a close look at your business’ circumstances, along with legal definitions and Tax Court of Canada interpretations of on-reserve business scenarios. For this part of the decision, you should consult a lawyer.

The case law has decided that the on-reserve property tax exemptions granted by the Indian Act are essentially there to help preserve traditional living for on-reserve First Nations. The supporting principles have been interpreted so far as to allow First Nations businesses/individuals to arrange their affairs on-reserve so as to avoid tax – but the exemption is quickly limited by requiring a sufficient nexus between the work done by a business and the First Nation community. A nexus can be established if the corporation’s business benefits the community directly, and/or a significant amount of the organization’s work takes place on the reserve.

If you decide to incorporate on-reserve and claim the exemption, but engage in business without a sufficient nexus, you may end up in court trying to defend your relationship to the community and could be liable for fines or retroactive taxes.

There are options:

Incorporating on-reserve and claiming the property tax exemption might not be right for you right now – but can be other advantages to situating your business on reserve.

For example, you could incorporate on-reserve but not claim the exemption, or you could claim it just for “nexus” work if relevant. This option would require deeper investigation and careful accounting to support a structure in which corporate property subject to the exemption would be claimed separately from non-exempt corporate property (again it would only be the portion relevant to nexus work). This option could get very complicated, and should be carefully considered with the help of a lawyer and accountant.

Note that regardless of where you incorporate, you may be able to offer HST-exempt services to rightfully exempt on-reserve businesses paying you for your services. And keep in mind, a Registered Office can be changed periodically – to adapt to your business needs.

Personal property income tax exemption for income from the on-reserve corporation:

Whether a Status Indian Director or employee of an on-reserve corporation lives on or off-reserve will play a role in the availability of the property tax exemption to his/her personal income from the tax-exempt corporation. In a Tax Court case regarding an on-reserve corporation without a sufficient nexus, great efforts were made by the Status Indian Director to appear to be living and working on-reserve (she had a house with an office and claimed to be living there much of the time) – and she was found to be outside of the right to claim the exemption. Individuals should seek accounting and/or legal advice, specifically in relation to the relevant tax exemptions for personal income of Status Indians.

Find the solution that is right for your business

Your business has endless potential. It is up to you to strategically plan the future in order to maximize success. Two important aspects of this strategy include tax planning and protection against liabilities – among many others. While you dream big and do great things, take some time to cover these important bases for your business.

Contact Natalie at 902.240.4080 or by email at natalie@cslegal.ca.

Wastewater, pharmaceutical products, and international law

Municipal wastewater treatment plants allow trace elements of household pharmaceutical products such as ibuprofen to enter lakes, rivers, and coastal areas. Scientific studies generally indicate that the concentration levels of these chemicals are too small to cause real harm to humans and local wildlife but there is a lot of uncertainty surrounding long-term effects and potential risk of bioaccumulation (i.e. persistent concentration in one organism over time).

The precautionary principle present in international and Canadian law acknowledges that “where there are threats of serious or irreversible damage, the lack of full scientific certainty shall not be used as a reason for postponing measures to prevent environmental degradation” (Nova Scotia’s Environment Act). In other words, if a given activity poses a significant threat to the health of the environment, uncertainty surrounding the exact consequences of that activity should not be used as an excuse to stall preventative measures.

The challenge for policy-makers with respect to effluent management and similar emerging issues is to determine (1) when threats of environmental harm are significant enough to justify action, and (2) how to interpret and apply existing legal principles in light of new scientific findings. Sarah will be addressing these issues today in a presentation at the Coastal Zone Canada conference in Halifax, NS.

To accompany Sarah’s presentation, we have compiled a quick reference guide to Canadian wastewater laws and regulations. You can find it below, with links to free resources on CanLII.

Table of Canadian Wastewater Legislation – Shiels

Contact Sarah at 902.209.6537 or by e-mail at sarah@cslegal.ca

Federal Court has N.S. Band Reconsider its own Decision

What’s Next for Self-Governance and First Nation Band autonomy? It isn’t Completely Clear.

A look at the context, facts and potential implications of the federal court decision with respect to Cheryl Maloney v. Shubenacadie Band 2014 FC 129.

Summary

Cheryl Maloney, a member of the Shubenacadie Band (the “Band”), contracted with the Band for licences to fish a quota, which had been granted to the band by the federal government, and which was to be distributed through the band’s discretion. When Ms. Maloney was left out of the Band’s subsequent contracting decisions with respect to a third party and licences – she asked the court for a judicial review of the Band’s decision. The federal court did not overturn the Band’s decision, nor did it offer Ms. Maloney any financial remedies – but found that given that her livelihood was affected by the decision, she had a right to a higher level of procedural fairness. The decision was sent back to the Band for reconsideration, and implementation of a fairer process, in which Ms. Maloney would be more involved with the decision-making process.

The federal court’s decision to reach into decision-making powers, which had been allotted to a Band without material restrictions, touches on the broader issue of a Band’s freedom to self-govern, and potentially widens the grey area through which a court may interrupt the body’s autonomy.

For First Nations Bands, this case sends a message to be more careful when making decisions, and to consider what level of procedural fairness is owed to Band members, or other interested parties. For Band members and others who contract with First Nations Bands, this case may strengthen rights to be involved in the otherwise internal decision-making processes.

The Case 

The Right to Grant Licences

In 2005 the Shubenacadie Band entered into an agreement with the Federal Department of Fisheries and Oceans to take on a certain number of fishing licenses, under the authority of section 4 of the Aboriginal Communal Fishing Licences Regulations, SOR/93-332. The right for First Nations to take part in a communal fishery to earn a moderate living, or assign an interest to do so, is recognized thanks to the Supreme Court of Canada decision of R v. Marshall, [1999] 3 SCR 456 [Marshall].

For the licences issued under these Regulations, the Band is allocated quota. Quota refers to the amount of a certain fish that is permitted to be caught under the entire fishery – a portion of which is then allocated to each individual licence. Quota is calculated considering the number of licences granted – balancing profitability with the overall concern of conservation. Pursuant to the Regulations, the Band, as a designated “aboriginal organization” was given the authority by the Minister, to allocate licences. The Minister left it to the Band to designate the individuals and vessels authorized to fish under the licences.

Over the years, the Band created its own policies and business deals with respect to its allocated licences.

Cheryl Maloney’s Contract for Quota

Cheryl Maloney, a Shubenacadie Band Member, successfully took out a loan to finance a fishing boat, and was fishing the Band’s entire quota in 2009, 2010 and 2012, partnering with another licensee for 2011.

In 2012, the Band exercised its authority to allocate licences again, entering into an agreement with a non-aboriginal fishing enterprise, which agreed to pay the Band the shore price (less fishing costs) in exchange for the Band’s snow crab fishing quote for 2013 and 2014.

This decision of the Band triggered Ms. Maloney’s application to the federal court, in which she asked for the court to review the Band’s decision, and delve into whether it had authority to allocate its fishing licence and quota to a non-Aboriginal fishing enterprise – to the exclusion of a similarly-situated fishing enterprise, led by a Band member.

What makes the Band Council’s decision a subject of review by the Federal Court?

The court undertook a careful consideration of whether the Band, as a decision-making body acting on a regulatory grant of power, was in fact subject to judicial review by the federal court; and undertook a secondary analysis as to the nature of the decision – whether it was a decision of a public nature (which can be judicially reviewed) versus one of a private nature (which cannot).

The decision reviews case law which has shown that some, yet not all decisions of a First Nation Band, are subject to judicial review. In this situation, much of the case law pertaining to grants of power made pursuant to the Indian Act were found to be not directly applicable – yet helpful when used in the analogy – as this grant of power was made pursuant to the Regulations of the Fisheries Act.  Ultimately the court found that the decision was one of the Band council, under the power of a grant of authority provided by regulation – and therefore subject to judicial review.

Despite the First Nation’s assertion that its relationship with Ms. Maloney was purely contractual and therefore private/not subject to judicial review, the court found it to be of a sufficiently public matter, and therefore subject to review.

Was Ms. Maloney treated fairly?

The second part of the analysis was to determine whether Ms. Maloney was entitled to any level of involvement in the decision-making process, and/or notice, etc., throughout the process. In other words, what rights did Ms. Maloney have to be kept abreast, and maybe even partake in, the band’s decision?

In determining what level of procedural fairness (on a scale from minimal to great) the court considered, among other factors, that the decision had implications on Ms. Maloney’s livelihood – raising the bar for procedural fairness owed. The importance of her livelihood as a factor in this analysis was not lessened by the fact that she had another source of income. The level of fairness owed to Ms. Maloney was elevated by the fact that it had been represented by the Band that she would have access to the communal fishery for a certain period; and because she relied on the contract for financing of her boat – a fact which was known to the Band. Other facts surrounding the understanding between Ms. Maloney and the band also contributed to the elevated level of procedural fairness owed.

Ultimately, it was found that Ms. Maloney’s rights to procedural fairness were violated by the Band’s decision-making process. The decision was put back to the band to be re-determined, with the opportunity to be afforded to Ms. Maloney (and the other party involved) to submit proposals and have a discourse with the Band about its concerns about her financial performance.

What does this mean for First Nations governments?

The application of a Federal Court decision, with respect to band governance, has national effects. This means that a federal court decision regarding a Band in British Columbia, could potentially have a direct influence on an issue in Nova Scotia – and vice versa. The decision also, naturally affects other Bands in this region.  The court’s decision to reach into the governance structure, and direct the First Nation’s decision-making abilities could have vast consequences for the perceived and desired autonomy and self-governance enjoyed by First Nations across the country. While the Federal Court did not dictate the proper outcome to be reached in this decision, it did send a strong message by disagreeing with the procedure used to reach the ultimate decision, forcing the First Nation go back to the drawing board.

Contact Natalie at 902.240.4080 or by email at natalie@cslegal.ca.

Aboriginal Claims: An issue that affects all Canadians

On an ongoing basis many First Nation communities in Canada, including those within the Atlantic region, exercise their rights to research, establish, negotiate and ultimately claim proper compensation from the Government of Canada with respect to Specific Land Claims.

What are Aboriginal Land Claims?

In Canada, Aboriginal Land Claims are executed in two different forms: Specific Claims and Comprehensive Claims.

Comprehensive Claims deal with unfinished business related to treaty-making; in other words, relevant subject matter which was not originally dealt with and therefore requires a new agreement.

Specific Claims deal with unhonoured promises made by the Government of Canada ( (and previously, the British Crown) to First Nations through treaty-making or otherwise; or where a First Nation objects to the way the government has mishandled assets which are considered to be owned or controlled by that First Nation (for example, the resources of the land in dispute). When a claim is established by the First Nation, the government is then to negotiate with the First Nation to reach settlements which honour the government’s obligations. This process can involve remedial actions which affect Provincial and Territorial governments as well.

What does this mean for you? 

Successful Specific Claims may entitle First Nations to compensation. If you are a member of a First Nation which has reached a successful conclusion to a Specific Claim, you may be entitled to compensation.

If you own or otherwise reside on land in Nova Scotia, that property potentially could be the subject of a Specific Claim.

The Role of the Federal Government

On behalf of the British Crown and its own predecessors, the current Government of Canada is responsible for receiving Specific Claims and working with First Nations to right past wrongs.

The government-issued Specific Claims Policy and Process Guide provides the framework approach for First Nations to draw up, submit, and seek compensation for their Specific Claims. The Government of Canada is responsible for contributing funding for the First Nations’ research and claims submission, responding to claims, negotiating with First Nations, as well as providing an independent Tribunal to make decisions on claims which are not resolved during the negotiation process.

Recently, substantial cuts to the Specific Claims process in Canada have caused concern for Treaty and Aboriginal Rights Research Centres and for individual First Nations with ongoing and planned claims. You can read more about this and the potential impact in this APTN article.

Positive Developments for First Nations at the Tribunal Level

Amidst the Government of Canada’s substantial cuts to the Specific Claims process, the government itself has been the target of a serious reprimand from the Specific Claims Tribunal with respect to its dealings with First Nations claimants.

Specific Claims can take years of research (through archival documents, in the community, etc.), many hours of legal work (hashing out the actual grounds for the claim), and much dedication from the First Nations claimants. The claims are sometimes then met with a drawn-out negotiation process. Should a solution not be reached, the Specific Claims Tribunal is available to provide independent adjudication. This last step has recently rendered a surprisingly delightful decision, at least for First Nations looking to proceed to the Tribunal.

In his decision regarding a claim from the Aundeck Omni Kaning (AOK) First Nation in January 2014, Judge Patrick Smith of the Specific Claims Tribunal criticized the current federal administration for its unfair approach when responding to First Nations’ claims.

In his decision, Justice Smith outlined a number of useful points regarding the case law with respect to negotiating with First Nations. He reviewed the government’s responsibility to negotiate in good faith with First Nations. At paragraph 90 of his decision, Justice Smith found that this obligation meant that the government could not be inflexible, because “ […] otherwise they cannot be considered negotiations. Inflexibility restricts any meaningful discussion and undermines, nullifies and contaminates the process with unfairness.”  At paragraph 89 he strongly criticized the government for consistently responding to a certain kind of Specific Claim in a way that is “paternalistic, self-serving, arbitrary and disrespectful of First Nations.”

You can read Justice Smith’s decision regarding the AOK First Nation claim here.

Despite the financial cuts and the Government of Canada’s recent treatment of the Specific Claims process – First Nations will continue to seek justice. This is a live issue for all Canadians.

Contact Natalie Clifford at 902-240-4080 or by email at natalie@cslegal.ca.

Landlords and Leases: What to know before you rent

Sarah Shiels recently gave Dalhousie students an information session about the law and tenants’ rights with respect to residential tenancies in Nova Scotia.

During her seminar “Landlords and Leases” she provided renters with a number of tips to support a successful leasing relationship.

Click here for an article by Sher Scott, outlining a selection of highlights from Sarah’s talk.

Get in touch with Sarah today to discuss your leasing issues, or if you’d like to host a similar seminar for your community group, school or workplace.

Contact Sarah Shiels at 902-209-6537, or by e-mail at sarah@cslegal.ca.

 

What is a Codicil – and should you have one?

I recently asked two friends to act as witnesses to the signing of a codicil. At first, neither was entirely sure of what they were going to witness. A codicil, I explained, is simply a document that makes changes to a will. In order to be effective, it must be executed in the same manner as the will: signed by the testator and two non-beneficiary witnesses. Once executed a codicil is typically attached to the will. There can be more than one codicil, but if the testator (the author of the will) wants to make significant changes, it may be easier just to revoke the original will and make a new one.

You should consider making changes to your will whenever your life circumstances change. If you buy or sell property, give away a significant item, enter into a new family arrangement, or change your mind about a beneficiary, make sure your will is updated accordingly.

If you have a will and would like to make changes, we would be happy to talk with you about which option is best for you. We can help you make a codicil or revoke and replace your original will. Don’t have a will in the first place? We can help with that too.

Contact Sarah Shiels at 902-209-6537, or by e-mail at sarah@cslegal.ca.