Protection and Transmission of Estates and Assets

Overview

We have extensive knowledge of the expectations and needs of wealthy persons and families, and can therefore offer you a personalized approach with customized services. We also have family offices among our clients – having a team devoted to serving them – and we can offer legal services that meet their needs or that complement the services traditionally offered by family offices including tax strategy, trusts, estates, wills, powers of attorney, mandates, philanthropy, governance and investment funds.

Hence, our team of professionals can offer you all the services you need at a single location, while providing you with advice and accompanying you at all stages. Furthermore, some of our professionals routinely act as directors of private companies and as trustees of inter vivos personal trusts or testamentary trusts.

With our multidisciplinary and integrated approach, we can therefore meet all your needs:

Family, Personal and Estate Law

Lavery has a team of experienced lawyers specialized in family, personal and estate law. Their practice covers all matters related to these fields, including marriage contracts, divorce, separation of common law spouses, child custody, child support, regimes of protective supervision, powers of attorney, mandates in anticipation of incapacity and estate litigation.

Trusts

We also specialize in the area of trust law, whether it is for a trust will, an asset protection trust, a trust for the benefit of a spouse or a “Henson” trust.

Tax

We offer a full range of services in tax law that include developing and implementing beneficial tax structures and strategies, representing clients in court, and negotiating settlements with the tax authorities. Our team of tax lawyers find ingenious ways to optimize our clients’ investments while reducing their tax expenses. We can therefore propose tax structures to put in place (in the short-term or long-term depending on the needs) to ensure that all obligations are met with respect to income tax, payroll deduction and tax compliance.

Governance

Organisations are subject to many provincial and federal laws regarding governance, and they must implement adequate measures to ensure that they comply with such laws. Failure to act may entail serious consequences for their activities and the liability of their directors and officers, and may tarnish their reputation as well as the reputation of their representatives. Beyond the legislative requirements, certain best practices regarding the governance of family offices are advisable depending on the particular circumstances of each estate. Our lawyers can recommend appropriate structures, help in implementing adequate measures and offer guidance in the resolution of crises and the investigation process of competent authorities.

Investment Funds

We have a particular expertise with respect to investment fund structures and the agreements that govern them as well as the rights of investors, and we can therefore provide advice in all stages of the life of any type of investment fund, whether the fund is a private equity or venture capital fund, hedge fund, mutual fund, or any other type of fund.

NPOs | Philanthropy

Non-profit organizations (NPOs) are a very important sector for Lavery, and we understand the regulatory framework that govern their operation. We advise a large number of NPOs such as private family foundations, charities, hospitals, health and social services organizations, professional associations and orders, community organizations, sports leagues, educational institutions, religious organizations and environmental groups.

Aeronautical Financing

We have extensive know-how of the financing of aircrafts and aircraft equipment which we put at the disposal of our clients who are buyers, borrowers or lessees. We also have in-depth knowledge of this market, and given that we have had the opportunity to work with a variety of major players in the industry – including financial institutions, lessors, airlines, aviation equipment manufacturers and aeronautical service operators – our clients can benefit from our business network.

Debt Financing and Real Estate Financing

We can meet your needs by putting at your service our team, experienced in all the particular and regulated aspects of the field of debt financing. Our team will be able to guide you through each of the crucial steps in implementing and negotiating this type of transaction. We are called upon to represent both lenders and borrowers of all types. Our expertise has been acquired in many types of financing, including real estate financing. In this regard, we regularly represent buyers and vendors, lessors and lessees, as well as lenders and borrowers, and our team’s expertise extends to commercial, industrial and multi-residential properties.

  1. New rules will make it easier to transfer family businesses

    The 2023 Federal Budget (the “Budget”), tabled on March 28, 2023, proposes amendments to certain provisions of the Income Tax Act (ITA) that would make “genuine” intergenerational business transfers no longer subject to the anti-avoidance rules of section 84.1 and allow the transferor to benefit from their capital gains exemption. To do so, the Budget establishes new general conditions that the parties must meet, as well as specific conditions that apply to “immediate” transfers, or those made over a period of no more than 36 months, and “gradual” transfers, or those that take five to ten years to complete. The general conditions that the parties must meet when disposing of a company may be summarized as follows: The vendor must be an individual other than a trust. Immediately prior to the transfer, the vendor, alone or with their spouse, must control the currently operating company. At the time of the transfer, the purchasing company must be controlled by one or more of the vendor’s children, who must be at least 18 years of age. The notion of “child” also includes stepchildren, grandchildren and nieces and nephews. The shares of the company being transferred must be qualified small business corporation (QSBC) shares or shares of the capital stock of a family-farm or family-fishing corporation (QFFP). The specific conditions relate to the transfer of control, economic interests and management of the company, and vary from case to case. FOR AN IMMEDIATE TRANSFER (36-MONTH TEST) In the case of immediate transfers, de jure control (being the holding of the majority of shares having voting rights), and de facto control (which includes the economic influence making effective control of the company likely), must be transferred at the time of sale. Voting and participating shares not transferred to the purchasing company at the time of sale must be transferred within the following 36 months, such that after this period, the transferor may hold only preferred shares, that is, non-voting or non-participating shares for an indefinite period (vs 10 years in the case of a gradual transfer). Also, the child, or at least one member of the group of children, must participate in the family business on a regular, significant and continuous basis for a minimum period of at least 36 months after the transfer is made. Lastly, the transferor must take reasonable steps to transfer the business’s administration and know-how and completely cease to manage the business before the 36th month after the transfer was made. FOR A GRADUAL TRANSFER (FIVE–TO–TEN–YEAR TEST) If the transfer is gradual, only de jure control must be transferred at the time of disposition. The balance of the voting and participating shares not transferred at the time of disposition must be transferred within 36 months of the first transfer. However, under the rules respecting gradual transfers, the transferor will only be bound to transfer de facto control of the business within 10 years of the initial transfer. In the case of a transfer of economic interests, the vendor is expected to significantly reduce the value of the equity and advance they have invested in the business within 10 years of the initial sale. The same requirement for a child’s active participation in the company and transfer of the management of the business apply, but this time for a period of 60 months after acquisition. PREVIOUS RULES (Bill C-208) The provisions of the 2023 Federal Budget have the effect of setting aside certain requirements of Bill C-208 applicable to the realization of a capital gain. Under Bill C-208, for the transferor to benefit from their capital gains exemption, the operating company and the purchasing company could not be amalgamated within 60 months of the sale. The bill also required that an independent assessment of the fair market value of the company’s shares be filed with the Canada Revenue Agency, along with an affidavit signed by the vendor. However, as of January 1, 2024, these criteria are no longer applicable. An assessment will no longer be required, although under section 69 of the ITA, the transfer will still have to be made at fair market value. The 2023 budget (reinforced by the 2024 Federal Budget) also introduces new rules for the alternative minimum tax, a temporary tax that the transferor in an intergenerational business transfer often has to pay. To avoid having this temporary tax becoming permanent, it’s important to understand the subtleties of these new rules. Our team of tax professionals will be happy to help you and answer any questions you may have about these new legislative changes.

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  2. Environmental obligations: directors and officers, you may have more responsibilities than you think

    In general, the directors and officers of a legal person have obligations and responsibilities relating to the legal person’s activities. Each director must act with prudence, diligence, honesty, loyalty and in the legal person’s interest.1 Each officer is responsible for representing the legal person and directing its activities.2 That said, directors and officers must keep in mind that they have greater duties and responsibilities and a heavier burden to meet when it comes to ensuring compliance with certain environmental laws. Since it came into force on May 12, 2022, the Act respecting certain measures enabling the enforcement of environmental and dam safety legislation (the “Act”) has ensured the enforcement of various environmental laws.3 The Act essentially provides for two types of consequences arising from the actions of directors, officers and, in some instances, other representatives of a legal person. The first involves a particular burden as regards compliance with environmental laws, and the second, consequences relating to the administration of the environmental authorization scheme. The duty of directors and officers to ensure compliance with environmental laws The Act’s criminal provisions provide for stiffer penalties for directors who commit an offence under an environmental law. Section 47 of the Act provides that where an offence is committed by a director or officer of a legal person, the minimum and maximum fines that would apply in the case of a natural person for such offence are doubled. Also, where a legal person commits an offence under an environmental law, its director or officer is presumed to have committed the offence, unless it is established that they exercised due diligence and took all necessary precautions to prevent the offence.4 The Act additionally provides that anyone who, by an act or omission, helps a person to commit an offence or induces a person, by encouragement, advice, consent, authorization or order to commit such an offence commits that offence and is liable to the same penalty as that prescribed for the offence they helped or induced the person to commit.5 Naturally, this rule applies to the directors and officers of a legal person, but is not limited to them. For example, it would also apply to an engineer or legal advisor who provides a legal person with advice causing it to commit an offence under an environmental law. Lastly, where a legal person has defaulted on payment of an amount owed,6 the directors and officers are solidarily liable, with the legal person, for payment of such amount. However, they may be exempted from this obligation if they are able to establish that they exercised due care and diligence to prevent the failure which led to the claim.7 This rule could apply, for instance, where a legal person is insolvent, which underscores the need to anticipate and effectively manage the environmental issues that a legal person is likely to face. Conduct of directors, officers and shareholders and the environmental authorization scheme The Environment Quality Act (EQA) establishes a ministerial authorization scheme for certain activities considered likely to have an impact on the quality of the environment.8 This authorization scheme is discretionary. Any activity covered by such scheme cannot be legally carried out unless the required authorization has first been issued. Holding and keeping such authorization is therefore fundamental for the company in question to continue to pursue its activities. Under the Act, the Minister of the Environment9 may refuse to issue, amend or renew a ministerial authorization, or decide to amend, revoke or cancel such an authorization, or oppose its transfer in certain situations relating to the conduct of the directors, officers and shareholders10 of the legal person holding the authorization.11 Situations in which the Minister may intervene in this way are, for example, those where one of a legal person’s directors, officers or shareholders has: filed a false declaration or document, or false information, or has distorted or omitted to report a material fact to have the authorization issued, maintained, amended, renewed or transferred failed to comply with an injunction made under any act that is administered by the Minister of the Environment defaulted on payment of an amount owed under any act administered by the Minister of the Environment (including monetary administrative penalties or any other fees that must be paid under such acts) been found guilty of an offence under an act administered by the Minister of the Environment or any regulations made under those acts been found guilty of an offence under a fiscal law or an criminal offence connected with activities covered by the authorization12 Thus, the conduct of directors, officers or shareholders can have repercussions on a legal person’s rights and obligations in carrying out activities authorized by the Minister. In addition, their conduct could hinder or even prevent the transfer of an authorization as part of an asset sale. Directors and officers have a vested interest in ensuring that the legal person they represent complies with environmental laws. Evidently, compliance is not only in the interest of the legal person itself, but also that of its directors and officers, whose personal liability and assets could be at stake should the legal person fail to comply. Articles 321 and 322 of the Civil Code of Québec (C.C.Q.) Article 312 of the C.C.Q. These environmental laws are the Environment Quality Act, the Act to increase the number of zero-emission motor vehicles in Québec in order to reduce greenhouse gas and other pollutant emissions, the Natural Heritage Conservation Act, the Act respecting threatened or vulnerable species, the Pesticides Act and the Dam Safety Act (section 1 of the Act). Section 51 of the Act. Section 49 of the Act. The amount owing may be a monetary administrative penalty, a fine or financial compensation required under a notice of execution, among other things. Section 66 of the Act; In addition, under section 67 of the Act, the reimbursement of an amount owing is secured by a legal hypothec on the movable and immovable property of the debtor, in this case the director and officer of the legal person. Section 22 of the EQA. The EQA also provides that certain activities listed in the Regulation respecting the regulatory scheme applying to activities on the basis of their environmental impact may benefit from the more flexible declaration of compliance framework, or even an exemption. There is no need to describe these in detail for the purposes of this article. In accordance with section 2 of the Terms and conditions for the signing of certain documents of the Ministère du Développement durable, de l’Environnement et des Parcs (M-30.001, r. 1), assistant deputy ministers, directors general, the secretary general, directors, regional directors and assistant directors are authorized to sign any document relating to such decisions. For the purposes of these provisions of the Act, a shareholder means a natural person holding, directly or indirectly, shares that carry 20% or more of the voting rights in a legal person that is not a reporting issuer under the Securities Act (section 2 of the Act). Except in a situation where urgent action is required, the Minister must give prior notice of such a decision to the person concerned, so that they may submit their observations (section 39 of the Act). The Minister’s decision is then notified to the person concerned (section 40 of the Act), who may contest it before the Administrative Tribunal of Québec (sections 40 and 41 of the Act). See sections 32 to 36 of the Act.

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  3. COVID-19: Anticipating Capital Gains, Wealth, Gift and Inheritance Taxes

    The deficits being generated by the emergency measures that the federal and provincial governments have implemented since March 2020 are a reminder of the magnitude of our governments’ pre-crisis deficits. This situation will inevitably lead to a greater tax burden for businesses and individuals at some point. Despite the unprecedented nature of these circumstances and the difficult financial situations that organizations find themselves in, steps can be taken now to mitigate repercussions. For several years, there has been increasing speculation about the capital gains inclusion rate being increased. Rumours also abound about the potential creation of an inheritance tax, which would undoubtedly be accompanied by a gift tax and a wealth tax. In this context, it is becoming ever more plausible that the federal government will finally increase the capital gains inclusion rate and tax the value of inheritances and gifts as early as the next budget, which has been postponed because of the ongoing crisis. An annual wealth tax on high net worth individuals could likewise be in the pipeline. As is now customary, the measures would apply as of midnight the night before the budget is tabled, closing the door to most tax planning strategies to reduce the impact of such measures. In the face of this situation, several steps can be taken as of now as, for instance: Crystallization of unrealized capital gains using a business corporation, partnership or trust; Gifts of money or property to family members or trusts; Termination of Canadian tax residency in favour of a lower-tax jurisdiction. The majority of tax planning strategies aiming to reduce or postpone the impact of such measures can be reversed should the anticipated measures not be adopted. In the event that governments do not increase the tax burden straightaway or opt for other, difficult-to-predict measures, well-planned transactions, such as realizing an accumulated gain on certain assets, making a direct gift, or making a gift through a trust, will ensure that additional taxes need not be paid. If you would like more information, our taxation team is available to help you.

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  4. Artificial Intelligence and the 2017 Canadian Budget: is your business ready?

    The March 22, 2017 Budget of the Government of Canada, through its “Innovation and Skills Plan” (http://www.budget.gc.ca/2017/docs/plan/budget-2017-en.pdf) mentions that Canadian academic and research leadership in artificial intelligence will be translated into a more innovative economy and increased economic growth. The 2017 Budget proposes to provide renewed and enhanced funding of $35 million over five years, beginning in 2017–2018 to the Canadian Institute for Advanced Research (CIFAR) which connects Canadian researchers with collaborative research networks led by eminent Canadian and international researchers on topics including artificial intelligence and deep learning. These measures are in addition to a number of interesting tax measures that support the artificial intelligence sector at both the federal and provincial levels. In Canada and in Québec, the Scientific Research and Experimental Development (SR&ED) Program provides a twofold benefit: SR&ED expenses are deductible from income for tax purposes and a SR&ED investment tax credit (ITC) for SR&ED is available to reduce income tax. In some cases, the remaining ITC can be refunded. In Québec, a refundable tax credit is also available for the development of e-business, where a corporation mainly operates in the field of computer system design or that of software edition and its activities are carried out in an establishment located in Québec. This 2017 Budget aims to improve the competitive and strategic advantage of Canada in the field of artificial intelligence, and, therefore, that of Montréal, a city already enjoying an international reputation in this field. It recognises that artificial intelligence, despite the debates over ethical issues that currently stir up passions within the international community, could help generate strong economic growth, by improving the way in which we produce goods, deliver services and tackle all kinds of social challenges. The Budget also adds that artificial intelligence “opens up possibilities across many sectors, from agriculture to financial services, creating opportunities for companies of all sizes, whether technology start-ups or Canada’s largest financial institutions”. This influence of Canada on the international scene cannot be achieved without government supporting research programs and our universities contributing their expertise. This Budget is therefore a step in the right direction to ensure that all the activities related to artificial intelligence, from R&D to marketing, as well as design and distributions, remain here in Canada. The 2017 budget provides $125 million to launch a Pan-Canadian Artificial Intelligence Strategy for research and talent to promote collaboration between Canada’s main centres of expertise and reinforce Canada’s position as a leading destination for companies seeking to invest in artificial intelligence and innovation. Lavery Legal Lab on Artificial Intelligence (L3AI) We anticipate that within a few years, all companies, businesses and organizations, in every sector and industry, will use some form of artificial intelligence in their day-to-day operations to improve productivity or efficiency, ensure better quality control, conquer new markets and customers, implement new marketing strategies, as well as improve processes, automation and marketing or the profitability of operations. For this reason, Lavery created the Lavery Legal Lab on Artificial Intelligence (L3AI) to analyze and monitor recent and anticipated developments in artificial intelligence from a legal perspective. Our Lab is interested in all projects pertaining to artificial intelligence (AI) and their legal peculiarities, particularly the various branches and applications of artificial intelligence which will rapidly appear in companies and industries. The development of artificial intelligence, through a broad spectrum of branches and applications, will also have an impact on many legal sectors and practices, from intellectual property to protection of personal information, including corporate and business integrity and all fields of business law. In our following publications, the members of our Lavery Legal Lab on Artificial Intelligence (L3AI) will more specifically analyze certain applications of artificial intelligence in various sectors and industries.

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