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Corporate, Securities

Do I need a securities lawyer?

Small business owners who bring on new partners or investors without consulting a securities lawyer are putting themselves at risk, says Edmonton corporate commercial lawyer Kirk Goodman.

Goodman, principal of KGPC LLP, says every owner should ask themselves whether they need a securities lawyer when completing a deal for new investments.

Very few actually do ask the question and even those who do are likely to answer “no,” he tells AdvocateDaily.com.

“The answer should be ‘yes’ when the deal involves parties at arm’s-length from the founders,” Goodman says. “Provincial and federal regulations in this area are very complicated and it’s easy to run afoul of them.

“If you’re trying to bring in a third party as a partner who is not a founder of the business, or an entity that is not well known to you, then you could run into numerous issues with the securities commission, and face fines and penalties,” he adds.  

Goodman says he understands why some may be scared off from obtaining legal counsel, considering the reputation of some securities lawyers as being high-rate billers.

At KGPC, he’s doing his bit to fight that high-price image by offering up-front flat-fees for services on a sliding scale, depending on the complexity of a deal.

“Everything we do is flat-fee. Clients love knowing in advance what it’s all going to cost them,” he says.  

And getting over that fear pays dividends, says Goodman, who is frequently called in to clear up the mess left by business owners who gave in to the temptation to go it alone.

“You don’t have to hire an expensive downtown securities lawyer. For a small business, someone who is knowledgeable about securities laws can protect you,” he says. “Of course, for larger deals with big ideas and a lot of potential investors or partners, then a securities lawyer definitely needs to be consulted.”

Goodman says the most common problems small business owners run into relate to a lack of compliance with National Instrument 45-106, a set of Canada-wide regulations that outline private-market exemptions to securities requirements.

“As a company owner, you need to figure out whether you fall into one of those exemptions — and how to protect yourself if you do,” he says. “It’s amazingly convoluted, and each jurisdiction has different rules regarding the adding of investors, partners and shareholders.”

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