Succession Planning Event–November 29, 2011

A long-term client of our firm, Salit Steel will present its amazing story of a century long business success on November 29, 2011 during a Family Firm Institute (FFI) Ontario Chapter Event.

You won’t want to miss Steve Cohen, fourth generation owner of 100-year-old Salit Steel, and Alan Litwack, partner in the Business Law Group of Miller Thomson, LLP, for a robust exploration of succession planning and what keeps Salit Steel resilient.

From scrap yard to steel company, Salit Steel has galvanized four generations to create a company with markets across Ontario – against better-capitalized competitors. Today the company continues to flourish with two primary divisions, Rebar and Steel Service Center, serving Southern Ontario in the traditions long ago proudly established by Myer Salit in 1905.

This is an unusual opportunity to hear first-hand what obstacles and opportunities confronted Myer Salit who started the company in Niagara Falls, ON with resolve, a vibrant work ethic, an idea – and little else. You’ll also learn of the strategies that kept subsequent generations not only engaged but also eager to build on the original dream.

The ‘nuts and bolts’ will be also discussed, ranging from an estate freeze to succession strategies that have contributed to the success of the business.

The event will take place on November 29, 2011, 5:30 PM to 7:30 PM at Ivey ING Direct Leadership Centre (130 King Street West, Ground Floor, Toronto, ON M5X 1A9). To register, please click here.

FFI is an international professional membership organization dedicated to providing interdisciplinary education and networking opportunities for family business and family wealth advisors, consultants, educators and researchers and to increasing public awareness about trends and developments in the family business and family wealth fields. Please visit the direct link to the Ontario Chapter at: http://ontario.ffi.org/.
For information on the Ontario Chapter, please contact Larry Klar, President, at klar@argosypartners.com or (416) 867-8090.

Bruce Roher, CA • IFA, CBV, CFE
President
Fuller Landau Valuations Inc.
151 Bloor Street West 12th Floor
Toronto Ontario M5S 1S4
broher@fullerlandau.com
416.645.6526 Direct
416.645.6500 General
416.645.6501 Fax

A Successful Succession

Just as moving into a new life stage requires careful preparation, transitioning your business into a new phase calls for thorough planning. Read more by clicking below:

Succession Planning Bakers Journal

Removing A Minority Shareholder From The Board Of Directors

An interesting Ontario case was recently decided where the court refused to restrain a defendant from holding a special shareholders’ meeting to remove his brother as a director of family corporations. The defendant owned 55 per cent of the shares and his brother, the plaintiff, owned the remaining shares. The court was not satisfied based on the evidence presented that holding a special meeting to elect new boards of directors would be unfairly prejudicial or oppressive to the rights of the minority shareholder. The court held that the issued could be revisited if after the change of directors, there was oppressive conduct. See Witiluk v. Witiluk, [2011] O.J. No. 613, Ont. S.C.J., Warkentin J., Jan. 31/11. Digest No. 3041-008.

Succession Planning For Boomers

I recently heard a stat that every day 1,000 boomers are turning 65. Many of these boomers who own a business have no desire to retire. However, many may want to spend more time away from their business to accomplish their personal goals or do things they enjoy.

Providing key managers with a minority share interest in the business can be a way to facilitate the owner’s wish to spend less time in the business. At the same time, the key managers will be more locked into the business and will likely act more like owners than employees.

If you are considering selling or transferring shares to a key employee or to a third party, a valuation of the company’s shares will be necessary. The value of your business is based on the maintainable future cash flows, to which multiples are applied reflecting the internal and external risks inherent in the business, industry and economy.

Keep in mind that one day, when you are ready to retire, the minority shareholder may be interested in acquiring your remaining shares of the business.

Shareholder/Employee Termination

In situations where an employee who is also a shareholder is terminated, a valuation of his or her minority shareholder’s interest may be necessary.

The shareholders’ agreement must first be examined to determine if a buy-sell provision exists, whether or not the remaining shareholders or the company are compelled to buy the departing shareholder’s interest at a certain amount or at “fair market value” or if there is a pre-determined valuation method or formula which must be applied. The agreement might also address whether or not a minority discount is applicable in the circumstances.

The shareholders’ agreement may also specify the process by which the departing shareholder’s interest must be valued. For example, the shareholders’ agreement might provide that the fair market value must be determined by a Chartered Business Valuator agreed to by the shareholders. The agreement might specify that the resulting valuation is binding on the parties with no right of appeal, or it might allow for the valuation to be arbitrated if the parties do not agree with the valuation.

In circumstances where the majority shareholder(s) have unfairly prejudiced the rights of the minority shareholder, it may be appropriate for the minority shareholder to issue an oppression claim against the majority shareholder(s).

In my valuations practice, I help majority and minority shareholders deal with the valuations required in these situations. It is critical for the parties to consult with independent legal counsel to ensure that their rights are protected whether they are majority or minority shareholders. If you would require a recommendation for an employment, corporate or litigation lawyer, please contact me using my contact details below:

A New Divorce Site

An interesting new source of information is available for those of you dealing with divorce. Arianna Huffington and Nora Ephron have launched “The D-Word” on the site, The Huffington Post. The website can be found at www.huffingtonpost.com/divorce . It offers financial advice and interesting posts such as “How to Choose a Divorce Lawyer” and “Dealing with Dollars”.

Bruce Roher, CA • IFA, CBV, CFE
President
Fuller Landau Valuations Inc.
151 Bloor Street West 12th Floor
Toronto Ontario M5S 1S4
416.645.6526 Direct
416.645.6500 General
416.645.6501 Fax

The Cheques Often Tell The Story

In forensic investigations, I often find that bank information is one of the most important sources of information. Banking information includes bank statements, cancelled cheques, deposit books, debit memos, credit memos, wire transfer details, cheque stubs etc. In the circumstances where you do not have access to the defendant’s banking information, legal counsel can use a variety of methods to obtain the necessary information for purposes of the forensic accounting investigation (including a Norwich Order or Anton Piller Order).

Here are some examples of possible procedures that could be performed in a forensic accounting review of cheques and other banking information:

Identify who is signing the cheques. Did that individual have cheque signing authority? Were two signatures required but the cheques only had one signature?

Look at the back of the cheque to see who endorsed it and for indications of transfers to other related or suspicious accounts.

Carefully examine any debit memos and wire transfer advices for transfers to bank accounts of related parties. I have often discovered corporations and bank accounts of the defendant that were not known prior to the review of bank statements.

Review the cheques for any unusual payees, alterations to cheques and manual cheques.

Determine where the cheques were recorded in the general ledger and review bank reconciliations.

The particular procedures employed by the forensic accountant will depend on the purpose of the engagement and the objective of the investigation. Following the trail of cheques in an investigation can provide valuable information.