Natural Resources

Trump Seeks to Uproot the Obama Climate Change Agenda

Citing concerns over economic harm, President Trump has targeted his predecessor’s climate change agenda. He has sought reversal of a number of key Obama regulations, directives, and other actions, including the Clean Power Plan and the U.S. participation in the Paris accords. The overall blueprint for these actions is found in his March 2017 Executive Order on Promoting Energy Independence and Economic Growth. This order lays out for the Environmental Protection Agency and Department of Interior, as well as other agencies, specific actions to take to promote the development and use of domestically produced oil, gas, coal, and nuclear power. The agencies are only now beginning to undertake these actions, which could have...

Corporate / Tax

Delaware Corporations – Don’t Authorize Too Many Shares, or “No Par Value” Shares

Occasionally, we will see Canadians or Canadian companies assume that they can authorize as many shares for issuance as they want when forming a Delaware corporation, or that they can authorize shares without par value. That’s technically true, but Delaware will make you pay dearly for it, up to $180,000 per company per year. A Delaware corporation must pay the state an annual franchise tax. This tax is initially based on the number of authorized shares. Provided the authorized shares have a stated par value, the tax assessment can be re-calculated on an assumed par value basis using a formula that involves the number of shares authorized for issuance by the certificate of...

Employment / Litigation

Damages: Making Anti-Harassment Policies Work in the United States

Harassment has been in the news a lot lately in the United States, with several high-profile terminations at well-known companies. Companies are losing millions of dollars, not just in settlements and verdicts, but in lost customers and bad publicity. The Equal Employment Opportunity Commission, or EEOC, is the administrative agency responsible for enforcing laws prohibiting workplace harassment in the United States. The EEOC has issued new guidance suggesting that conventional anti-harassment training isn’t enough. So what is an employer to do? Maintaining an effective harassment reporting procedure is simple, but not always easy. Often, it means a willingness by the company to put its money where its mouth is. This involves taking the...

Corporate / Securities

Foreign Private Issuer Calculation Date for Calendar Year-End Foreign Issuers is June 30, 2017

As a reminder to all foreign issuers that have a December 31 fiscal year end, the upcoming end of their second fiscal quarter, June 30, 2017, will be the calculation date for their status as a foreign private issuer (“FPI”) for purposes of both the United States Securities Act of 1933, as amended (the “Securities Act”) and the United States Securities Exchange Act of 1934, as amended (the “Exchange Act”). We recommend that issuers begin the analysis early to determine whether actions should be taken prior to the June 30th date to avoid an unintentional loss of FPI status. An early determination of the business nexus test (as described below) is also needed to...

Litigation

Exporting Products Across the Border – Avoiding Product Liability and Other Litigation Risks in the United States

Canadian companies exporting products across the border into U.S. markets face significant risks of litigation or regulatory action arising from products sold and distributed in the United States. In a recent article, our colleague Kent Schmidt outlines ideas for managing these risks and creating a litigation risk profile around the four key areas of vulnerability: product liability claims, breach of warranty claims, false advertising and consumer protection claims, and claims related to collection, use, or compromise of consumer data and personal information. The full text of Kent’s article is available at www.dorsey.com/newsresources/publications/articles/2017/05/avoiding-unnecessary-us-litigation. For a more thorough discussion on how Canadian companies can avoid product-related claims in the United States, we invite you to...

International Trade

Trump Administration Announces NAFTA Renegotiation

After months of public pronouncements on the future, including threatened withdrawal from, the North American Free Trade Agreement (NAFTA), the Trump Administration announced on May 18, 2017, its intention to begin negotiations with Canada and Mexico. Signed by Robert Lighthizer, the newly confirmed U.S. Trade Representative, the notification letters to Congressional leaders do not contain any details on specific targets for negotiations. The letters describe instead broad aims for discussions with U.S. Congressional leaders and industry constituents, and the administration’s intention to begin negotiations with Canadian and Mexican counterparts in mid-August or later. President Trump previously railed against NAFTA and its alleged impact on the U.S. manufacturing sector. However, the agreement’s impact has...

Securities / Tax

Tax Consequences to U.S. Shareholders of Holding Shares in a Passive Foreign Investment Company or PFIC

If a non-U.S. corporation (the “Company”) is a “passive foreign investment company” or “PFIC” for any tax year during which a U.S. shareholder owns shares in the Company, certain adverse U.S. federal income tax consequences of the acquisition, ownership, and disposition of shares will generally apply to such U.S. shareholder. A U.S. shareholder will be subject to the rules of Section 1291 of the Internal Revenue Code (described below) with respect to (a) any gain recognized on the sale or other taxable disposition of shares and (b) any “excess distribution” received on the shares. A distribution generally will be an “excess distribution” to the extent that such distribution (together with all other distributions...

Benefits / Securities

State Securities Laws – Granting Options and Equity Comp in the United States

A Canadian company that proposes to grant stock options or other types of equity compensation to persons in the United States must comply with the securities laws of the state in which the recipient is located, unless the type of equity being issued (e.g., the underlying common shares, in the case of options to purchase common shares) is listed on a “national securities exchange” such as the NYSE, Nasdaq, and NYSE MKT. This means that private companies, Canadian public companies that are not listed in the United States, and Canadian companies that are listed in the United States only in over-the-counter markets such as the OTCQX, OTCQB, or Pink Sheets, are required to...

Intellectual Property / Litigation

Protect Your Intellectual Property in Cross-Border Distributor Relationships

Canadian manufacturers who sell products through U.S. distributors should ensure that they take appropriate action to establish their U.S. intellectual property rights, and to deal clearly with those rights in their cross-border distribution agreements. In a recent post on Dorsey’s IP blog, The TMCA, Sandra Edelman discusses the difficulties encountered by Covertech Fabricating, a Canadian manufacturer of protective packaging and reflective insulation, in establishing that it was the rightful owner of the trademarks in its branded products, not its U.S. distributor. Read her analysis of the recent court decision here: thetmca.com/who-owns-that-trademark-the-manufacturer-or-the-exclusive-distributor/

Capital Markets / Securities

Compensation to Newsletter Writers Must Be Disclosed

On April 10, 2017, the SEC’s Division of Enforcement brought enforcement actions against 27 individuals and entities behind various alleged stock promotion schemes. These actions arose when public companies, through promoters or communications firms, hired newsletter writers to generate publicity for their securities without publicly disclosing that the writers were being paid. While it is not illegal to hire newsletter writers, Section 17(b) of the Securities Act of 1933 (Securities Act) requires that newsletter writers fully disclose both the amount and the nature of the compensation received, including the dollar amount of a cash payment, the number of shares issued, or any other compensation. Additionally, newsletter writers and persons who adopt, approve or...