Based on my 25 plus years of experience, business owners need to make sure they do the following:
If you lend money to your company – take security!
The bank takes security for the money it loans to your company, why shouldn't you? Banks generally do not have an issue with this. They will treat the money advanced as equity if you give them an assignment and postponement of claim. Assuming you do not do this at the eleventh hour, you will be a secured creditor in the event of insolvency, giving you priority over unsecured trade creditors. You will be unsecured creditor if you do not take security for your loan. Make sure you do this when you advance funds. Non-arm's length security taken within a year of insolvency is effectively void.
If you have a business partner you need a Unanimous Shareholders Agreement.
A shareholders agreement should deal with, among other things, the governance of the company and the transfer and disposition of shares. Think of it as a compass for your company, guiding its future direction. A company without a shareholders agreement is like a ship without a compass. A properly drafted shareholders agreement addresses how problems will be dealt with before they arise. Shareholders of a company without a unanimous shareholders agreement often have to go to court to resolve their differences. This is not only costly and time consuming, but a lack of strategic direction can threaten the very existence of a company. One other point: get your shareholders agreement negotiated as soon as possible. Shareholders' positions can become entrenched as time passes. It's like a marriage contract – it's a lot easier to negotiate from the get-go.
Keep abreast of changes in employment law.
There have been many changes to employment law in this province in recent years – and the changes have generally favoured the employee, not the employer. Make sure any employment and independent contractor agreements you have are reflective of the current state of law. One of the major new developments is the duty of employers to “accommodate” employees with a disability, which can include employees on stress leave. Failure to accommodate can prove to be costly. However, at the same time, employers want to be proactive to address unproductive employees – and avoid human rights claims and other employment related litigation.
Make sure your “standard form” agreements are current.
Making sure that invoices, bills of sale and other related terms of sale documents are current may seem trivial. However, minor “tweaks” to these documents can avoid huge problems. For example, limitation of liability clauses can be inserted that limit damages that can be claimed. If you are selling goods in the United States, it is important to have a choice of laws clause that states any dispute will be resolved by the Canadian courts, where, generally speaking, the cost to litigate is much more economical. These are just a couple of examples of situations where small changes can make a big difference.
Make sure your policies and procedures are in order.
A wise person once said “an ounce of prevention is worth a pound of cure”. Being proactive now can avoid a lot of problems down the road.