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When you and your partner started the business, you were the best of friends. Five years down the road, you have a falling out over which direction to take the company. Without a shareholders agreement in place, the only solution appears to be court action. A recently hired senior executive is not performing up to expectations. You give him two weeks notice and ask him to clear out his desk. Ten days later, he is back, with his lawyer, and he is demanding an outrageous sum of money for unlawful dismissal. Business is booming. You decide to upgrade your computer system to keep up with demand. In the process, you discover that your contractual agreement with the company which sold you the original system prevents you from acquiring another system from a competing computer company.

Similar events are played out every day in the normal course of business. "The biggest mistake a client can make is not seeking legal counsel before they start their business," says Parker Fillmore, a senior partner in the law firm of Fillmore & Riley in Winnipeg. "It's like that old oil filter commercial where the guy says: 'You can pay me now, or you can pay me later,'" says Fillmore.

More often than not, it will cost you more to repair the ensuing damage than it would had you taken measures to prevent it from occurring in the first place. Reeh Taylor, senior partner at the law firm of Taylor, McCaffrey, Chapman, Sigurdson, likens a lawyer's role to that of a doctor. "Much of what we do is the legal equivalent to preventative medicine," he says.

Disputes between shareholders cannot always be prevented, but with a shareholders agreement in place from the outset, the means of resolving the dispute can save you not only a lot of grief but a great deal of money, too, he explains. "It's our job to focus our clients' minds on potential problems that may arise and to cover the bases ahead of time," says Taylor.

There are any number of pitfalls and dangers lying in wait for the unsuspecting business person. Acquisitions, including the purchase and sale of business assets, public and private financing, corporate structuring or restructuring, securities law matters, trademarks, competition law, partnership law, franchising, leases, distributorships and labor legislation being but a few.

"Then there is a whole series of sub-specialties like family law, tax law, real property transactions and even environmental law, that can be brought into the area of corporate law," says Taylor. "In one recent case, our client wanted to acquire a piece of commercial real estate to accommodate his expansion and we had to make certain the land was squeaky clean," he says.

The terms seemed reasonable but Taylor advised his client to secure a set number of conditions prior to finalizing the deal. After a series of soil tests and background checks, all of which were paid for by the client, it was discovered that remedial work needed to be done before the client could be granted the necessary government approvals to proceed with construction.

The fundamental theme in all corporate or commercial law is to plan ahead. This includes selecting the right lawyer or law firm to suit your business. Martin Freedman, Q.C., recognized as Manitoba's pre-eminent private practitioner in corporate law and a senior partner with the law firm of Aikins, MacAulay & Thorvaldson in Winnipeg, notes that many business people fail to consider what kind of lawyer it's in their best interests to employ.

"The truth is that you have to be as careful in picking out your lawyer as you would be in selecting an accountant or a doctor," he says. An entrepreneur who has a lot of business experience and is used to calling the shots may be well served by a lawyer who will simply react to his requirements. "If you are just starting out in business, however, you would probably be better off with a lawyer who is pro-active and one who can be constructive and creative in the setting up of your business," says Freedman.

Learn to exploit your lawyer's skills, advises Freedman. "So often, business people see their accountant as the lead player in their financial affairs and their lawyer's role is viewed as an option," he says. Wrong. The increasing complexity of the law requires that the business person, accountant and lawyer work closely together as a team.

The disgruntled ex-employee is a case in point. It is not enough to award the individual a cash settlement negotiated between yourself, your accountant and the dismissed individual. "Unless the dismissed executive signs a waiver relinquishing any rights to future financial considerations, he could come back for more," says Fillmore. Which, of course, is where the lawyer comes in. Better yet, if the business owner had planned ahead, he and his lawyer could have prevented the situation in the first place by having the terms of dismissal included in the employee's contract.

Drawing up and reviewing contracts and leases is the bread and butter of corporate law. "More and more of my time is being taken up in reviewing computer system contracts," says Fillmore. Not only are standard agreements exceedingly lengthy, the terms and conditions can be quite mystifying to someone unaccustomed to dealing with them. "The client may not always be aware that he can make changes to the standard form and negotiate terms that are better suited to his particular enterprise," he says.
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Title Annotation:hiring a lawyer to help your business
Publication:Manitoba Business
Date:Dec 1, 1991
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