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Information on legal and business topics from Canadian business lawyer Shane McLean

Archive for the ‘Business Structure’ Category

My Top 5 Books For 2014

Posted by Shane McLean on December 15, 2014

This is the time of year when we see annual lists start popping up.  I use annual book lists as a way to find new books to read so I thought I would share the top books I have read (or listened to in my car) in 2014.  Some of these books might not be new this year, but I finally managed to get around to them this year so I have included them.  In no particular order, I liked:

1.   Abundance: The Future Is Better Than You Think by Steven Kotler and Peter H Diamonds

A more positive look ahead based on the theory that, as it has in the past, new technology will rise to meet the problems facing humanity and the Earth going forward.   The book is not without its warnings for the future, but overall it presents a relatively optimistic (and usually believable) view of tomorrow.

2.  Enchanted Objects: Design, Human Desire, and the Internet of Things by David Rose

I found this to be a great discussion of different ways in which the “Internet of things” and connected objects might evolve.  It covers some of the design concepts and thinking necessary to make connected objects useful and easy to use.   Good backgrounder.

3.  Do More Faster: Techstars Lessons to Accelerate your Startup  by Brad Feld and David Cohen

This book, from the founders of Techstars, is a collection of essays about various aspects of startup life and building a business.  Very good practical information for any startup founder or anyone who works with startups (like me!).

4.  The Maker Movement Manifesto: Rules for Innovation in the New World of Crafters, Hackers, and Tinkerers by Mark Hatch

Mark Hatch is a co-founder of TechShop, a chain of membership based maker spaces in the US, and he offers up this discussion of the maker movement.  Mark provides a series of discussions based on makers he has met, including the inspirations, challenges and successes faced by makers as many of them turn their hobby or passion into a business.   At times it reads like a bit of commercial for TechShop (naturally) but it is worthwhile if you are at all interested in the maker movement.

5.  Hatching Twitter: A True Story of Money, Power, Friendship, and Betrayal by Nick Bilton

This book had a bit of controversy around the time of its release with a bunch of the folks involved condemning the way the author presented the history of Twitter.    I found it to be a well written book.  The author takes pains to describe his sources and methods for researching the history of Twitter and I suspect some of the people who object to the book are objecting due to the fact that it hangs some part of the blame for Twitter’s early dysfunction on virtually every one of main players.

Honourable Mentions:

Killing Lincoln by Bill O’Reilly and Martin Dugard

The Clockwork Universe: Isaac Newton, The Royal Society, and the Birth of the Modern World by Edward Dolnick

The Story of Earth: The First 4.5 Billion Years, from Stardust to Living Planet by Robert M Hazen

Flash Boys, by Michael Lewis

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Posted in Business Structure, Financing, Misc., Social Media, Startup, Venture Capital | Leave a Comment »

The Ins and Outs of Granting Equity to Your Tech Startup All Star Team

Posted by Shane McLean on November 13, 2013

This great article by my law partner James Smith is worth checking out if you are considering using equity grants to members of your tech startup team (hint:  you should be):

http://www.techvibes.com/blog/startup-equity-2013-11-13

Posted in Business Structure, LaBarge Weinstein, Law, Misc., Startup | Leave a Comment »

Roundup of Most Read CBLB Posts

Posted by Shane McLean on January 22, 2013

I was reviewing the stats for this blog recently and thought it would be neat to list the top 10 most popular posts to date:

10.  Update on the Ontario Emerging Technologies Fund (October 13, 2009)

9.     CPC Combinations Part 2 (September 16, 2009)

8.     From Wellington Financial -5 Pre Deal Questions to ask Your Venture Debt Lender (October 28, 2009)

7.    Ontario Small Claims Court Limit Raised to $25,000 (January 13, 2010)

6.    CPC Combinations Part 1 (August 9, 2009)

5.    What are Preferred Shares? (July 2, 2009)

4.    What is a Special Purpose Acquisition Corporation?  (June 7, 2009)

3.    Unanimous Shareholder Agreements  (September 22, 2009)

2.    Financing Term Sheet Basics (June 21,2009)

1.    What is the Capital Pool Company Program?  (May 28, 2009)

Since these posts continue to draw a lot of attention, my plan over the next several months is to review and update each one.  Most of these date back 3 years and things change so they could use a refresh.  Thanks for reading everyone.

Posted in Business Structure, Capital Pool Company Program, Financing, Law, Misc., Special Purpose Acquisition Corporations, Startup, TSX Venture Exchange, Venture Capital | Leave a Comment »

MaRS Launches Entrepreneurs Toolkit

Posted by Shane McLean on December 7, 2009

MaRS has recently launched a great new website which includes a  section called the Entrepreneurs Toolkit.  It’s a collection of articles, videos and other tools all aimed at educating and helping entrepreneurs understand the practical and legal aspects of startup life.   At launch the Toolkit boasts 10 workbooks, over 250 articles and over 150 videos live on the site.  The site even includes form documents and agreements that you can download and edit for your own use.

I was lucky enough to be able to assist and contribute to a number of the articles you will find on the MaRS site.  It is a great resource for budding entrepreneurs.

Posted in Business Structure, LaBarge Weinstein, Law, MARS, Misc., Startup | Leave a Comment »

What is the Capital Pool Company Program?

Posted by Shane McLean on May 28, 2009

Someone once asked me:  “What’s a C-Pick?”    When I asked a few questions it became clear that they were asking about Capital Pool Companies or “CPCs” under the TSX Venture Exchange’s  Capital Pool Company Program.  (By the way, I have never heard anyone else refer to it as a “C-Pick”.)

The CPC Program essentially works like this:

  • 3 to 6 people get together and incorporate a company.  Together they must invest at least $100,000 in seed money into that company with at least $5,000 each.  
  • The company has no assets other than the seed money and no operating business (hence, it is commonly referred to as a “CPC shell”)
  • With the help of a banker the CPC shell “goes public”.  Essentially this means that it raises between $200,000 $1,900,000 using a prospectus  from at least 200 shareholders that are unrelated to the founders and begins trading on the TSX Venture Exchange.  The process is not unlike a traditional IPO except that you don’t have the usual level of business and financial information to disclose because the CPC shell would have been only recently formed and has no business or assets.
  • Once the IPO is out of the way and the shares are listed on the TSX Venture Exchange, the sole purpose of the CPC shell is to seek out an operating business or some other asset(s) to acquire within 24 months.
  • Often the target business is acquired through a “reverse takeover”.  Instead of paying cash for the company or asset being purchased the CPC shell often pays by issuing new shares to the owners of that company or asset.  The “reverse takeover” part comes in because at the end of the day the total number of shares issued to the owners of the target often represents a majority of the outstanding shares of the CPC shell, meaning that as a group the previous owners of the target now control the overall company.

Why would anyone do this?  For the founders and IPO investors of the CPC shell, the hope is that the target business will ultimately be very successful and their initial small investment will be returned to them many-fold.   For this reason, the pressure is on the CPC shell founders to find a viable target with good prospects.   For the owners of the target it is a way to obtain a public listing for their shares, eventual liquidity (i.e. an ability to sell their ownership stake on the public market) and it may provide the company with access to public market capital (i.e. $) that is not available to it as a private company.  

Why would a target do a CPC deal rather than an IPO?  There is a level of skepticism in the market relating to IPOs.  I think it is a bit of hangover from the dot-com bubble where people thought getting in on an IPO was the key to riches.  Once bitten, twice shy.  People seem more comfortable to invest a relatively small amount of money into the CPC shell IPO based on the reputation of the founders and then let those founders make the ultimate investment decision by choosing the right target.  We see serial CPC founders who do it again and again and, if successful, they can build a following of investors willing to invest in their CPC IPOs.  A traditional IPO works best if you have a splashy business story that makes good press and is easy to sell to potential investors.  For companies that have a very viable business that represents a solid investment but may not itself be overly exciting, gaining a public listing by being a target company in the CPC process may be the preferred route.

There are a lot of details about the process and a lot of pros and cons that I don’t have the space to include here.  If you have questions about the CPC program please feel free to give me a call.  I have experience on both sides of these kinds of transactions (i.e. CPC shell and target).

Posted in Business Structure, Capital Pool Company Program, Financing, Mergers and Acquisitions, Misc., TSX Venture Exchange | 1 Comment »

Should I incorporate or not?

Posted by Shane McLean on May 14, 2009

Should I incorporate my startup?  This is a question I get asked a lot.  The answer may be different if you look at the short term or the long term.  

Long term the answer is generally yes.  Despite the added complexity involved in having a corporation it is almost always beneficial in many respects including taxation, personal liability and flexibility of structure.  If you ever intend to sell your business or to look for outside funding in the form of angel financing, venture capital financing or any other kind of equity investment you will almost certainly have to end up in a corporate structure eventually.  Other forms of business  are not as investor/purchaser friendly as a corporation.  

In the short term, if you expect to lose money at first as you get the business up and running and if during that initial period of time you (i) don’t need outside investment, (ii) have limited involvement by anyone other than you and (iii) are not yet putting products or services out into the world, you may consider using a sole proprietorship or partnership to operate your business initially.   One benefit of those structures is that they allow the individual(s) operating them to take any losses and set them off against other sources of personal income.  Corporations do not permit for this tax treatment.   However, these structures also come with unlimited personal liability for your actions or the actions of your partners so the moment you plan to come out of stealth mode and start shipping product or providing services or if you end up bringing a bunch of “partners” on to help you should have a look at your risk profile with a good adviser and think about getting a corporation set up to put a wall between the business and your personal assets.

Here is a link to a recent presentation I did called “How Do I Structure My business“.  It has some additional high level information in it about the pros and cons of a few of the various business structures out there.   

These are just some of the general considerations that go into choosing a structure for your business.  Every situation and fact scenario is different so if you are considering starting a business you should speak to good legal and accounting advisers to figure out  the best course in your specific situation.

Posted in Business Structure, Law, Startup | Leave a Comment »

TeamCamp Presentation

Posted by Shane McLean on May 8, 2009

Last night I gave a presentation called “How Do I Structure My Business” at a TeamCamp event.   Here is a copy of my  presentation.  I am happy to discuss if anyone has any questions. Please feel free to give me a call (613 599 9600 ext 262) or shoot me an e-mail (smclean@lwlaw.com).

Posted in Business Structure, Events, Law, Startup | Leave a Comment »

TeamCamp on May 7

Posted by Shane McLean on May 5, 2009

I just wanted to let everyone know that I will be speaking at the TeamCamp event being held at The Code Factory  on May 7.  I will be talking about how to structure your startup business.  See more details at Chris Schmitt’s  TeamCamp Blog.

Hope to see you there.

Posted in Business Structure, Events, Startup | Leave a Comment »