Canadian Lawyer

w w w . c a n a d i a n l a w y e r m a g . c o m J A N U A R Y 2 0 1 9 7 N E W F O U N D L A N D A N D L A B R A D O R NO EASY FIX TO OUTDATED ILLICIT LOANS LEGISLATION W hen it comes to illicit loans, under the terms of the Newfoundland and Labrador Corporations Act, it is not business as usual. Unlike most other jurisdictions in Canada, Newfoundland and Labrador has neither repealed the financial assistance provisions in its Corporations Act nor restricted their scope. As a result, says Anna Cook, a partner with Cox & Palmer in St. John's, financial institutions are limited in how they can structure a lending transaction because many common forms of financial assistance are caught within the broad reach of the legislative restrictions. She points out, for example, that it can be very difficult to ensure the use of inter-corporate guarantees are compliant with the existing provisions. "If not, any inter-corporate loans, guarantees or other forms of financial assistance could be found to be unenforceable. This also causes difficulty for lawyers in transactions where lenders require enforceability opinions from borrower's counsel." Cook proposes four solutions to address the issues raised by the province's "out- dated and antiquated" financial assistance provisions. Exporting the company out of Newfoundland and Labrador to another jurisdiction is the most drastic of the workarounds, she notes, but it is also the one that gives the most certainty. When this option is exercised, the company providing financial assistance is no longer obligated to meet conditions set forth in the Newfoundland and Labrador Corporations Act. "In essence, this is an avoidance strategy," Cook says. Once a company is exported, if it carries on business in the province, it will have to register in Newfoundland and Labrador as an extra-provincial company. This means additional time and expense, and it also means two sets of annual returns and filing fees every year, Cook says. Among the other options financial lenders may wish to consider are solvency certificates. However, these are complex to pre- pare and are becoming more and more difficult to obtain, says Cook. Qualifying for statutory exemption — which can allow companies to take advantage of an exemption but involves costs to restructure and carries with it potential tax implications — is another option. Finally, companies may wish to make the guarantor a co-borrower. The co-borrower is then no longer giving the "financial assistance" that is prohibited by the act but is instead a recipi- ent of a loan, Cook notes. Several members of the provincial business law section of the CBA are actively working on a proposal to repeal these sections of the act, says Cook. — donalee Moulton REGIONAL WRAP W H A T ' S H A P P E N I N G F R O M C O A S T T O C O A S T LAW SOCIETY OF ONTARIO REMOVING PRIVILEGES FROM SOME LIFETIME BENCHERS P.9 LAW FIRM REGULATION IN B.C. WORRIES SMALL FIRMS P.13 "Any [non-compliant] inter-corporate loans, guarantees or other forms of financial assistance could be found to be unenforceable." Anna Cook, Cox & Palmer N O VA S C O T I A JUDGES ACCESS GOVERNMENT SALARY REPORT N ova Scotia's judges are having their days in court. In an ongoing legal battle, Provincial Court and Family Court judges are contesting salary increases below that are recommended by an independent tribunal. In the most recent skirmish, the Nova Sco- tia Court of Appeal ordered the release of a report to Cabinet. The seeds of the recent skirmish were sown in February 2017, when the Finance and Treasury Board publicly announced it had rejected a recommendation from the Nova Scotia Provincial Court Judges' Sala- ries and Benefits Tribunal that called for a salary increase of approximately 9.5 per cent over three years, including a 5.4-per-cent increase in the first year. Instead, the gov- ernment gave the judges a salary increase of one per cent in 2019-20 and no increase in the first two years, the same wage increase given to Crown attorneys and physicians. In response, the judges, represented by the Nova Scotia Provincial Judges' Association, sought judicial review of the government's "The judicial review would focus on matters vital to the administration of justice, the proper functioning of the executive and the relationship between two branches of government. To the extent the [report and recommendation] speaks to those significant topics, its airing for the judicial review is, on balance, in the public interest and is well supported." Justice Joel Fichaud Continued on page 8

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