The Power of Perspectives

The Canadian Bar Association

Yves Faguy


How to kickstart crowdfunding in Canada

By Yves Faguy March 5, 2013 5 March 2013

Michael Geist has a helpful post on why Kickstarter and other crowdfunding sites are having trouble getting traction in Canada (an issue Leo Singer recently looked into in a recent article for National on the sharing economy):

The barriers to Canadian crowdfunding extend beyond payment problems and sparsely populated websites. Legal uncertainty about venturing into crowdsourced investment has limited the ability of Canadian creators to tap into their home market. Canadian sites are typically based on a donation model in which there is no expectation of financial return, though some creators offer incentives and gifts in return for support. The United States has opened the door to an investment model that would allow for crowdfunding investments that could result in revenue sharing or the issuance of stock in the project or company.

The Ontario Securities Commission just closed a consultation on the issue with many potential safeguards being considered. These include registration requirements, investment limits, disclosure obligations, and "cooling off" periods that would allow investors to back out of an investment.

The failure of Canadian crowdfunding sites to keep pace with sites such as Kickstarter unsurprisingly means that creators are forced to look south of the border for financial support.

Of course, part of the problem too is that there is no single securities regulator in Canada. If the provinces are ever to permit crowdfunding by Canadian issuers, they'll have to change the rules Geist refers to under each of their respective Canadian securities laws.

That said, crowdsourcing does have its critics who might applaud Canada's slow pace of change. Steve Rattner, slamming the US JOBS Act, compared it in a recent NYT article to gambling:

While such lightly regulated capital raising has existed for years, until now, “investors” could receive only trinkets and other items of small value, similar to the way public television raises funds. As soon as regulations required to implement the new rules are completed, people who invest money in start-ups through sites similar to Kickstarter will be able to receive a financial interest in the soliciting company, much like buying shares on the stock exchange. But the enterprises soliciting these funds will hardly be big corporations like Wal-Mart or Exxon; they will be small start-ups with no track records.

Picking winners among the many young companies seeking money is a tough business, even for the most sophisticated investors. Indeed, most professionally run venture funds lose money. For individuals, it’s pure folly. Buy a lottery ticket instead. Your chance of winning is likely to be higher.

Which might explain its popularity. According to Deloite estimates, crowdfunding portals will lend $1.4 billion worldwide in 2013, up from 50 per cent in 2012. More on the state of international crowdfunding here.

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Whatcott reactions, continued

By Yves Faguy March 1, 2013 1 March 2013

The Whatcott decision generated a ton of commentary, so we rounded up a few more reactions.

Ariane Krol recognizes that the court struggled to bring clarity to the debate, but the decision, she writes, still leaves plenty of room for interpretation:

The trouble is that the Court’s test rests on impressionistic criteria. Could it be the reason why it took the justices 16 months to reach a decision about four pamphlets?

The [hateful] expression must not only inspire violent and extreme sentiments, but must be “likely to expose the targeted person or group to hatred by others.” Following the decision, we must ask ourselves what “a reasonable person, aware of the context and circumstances’ would think. But that won’t change anything. Measuring intensity and the evaluating the possible consequences is an inherently subjective exercise. It’s to be expected that the administrative tribunals that will have to apply these criteria will continue to render controversial rulings. (Our translation)

It’s a nuanced and well-crafted decision, according to Michael Plaxton, but one that forces us to confront difficult questions:

The decision in Whatcott forces one to ask just how important it is that matters of private sexual morality be debated in the public sphere. Maybe it’s fair enough to say that the state has no place in the bedrooms of the nation. But does that mean private citizens should not be allowed to express an opinion about what goes on in them? After all, although it may seem a trivial matter for many of us, for others, sexual morality is tied to questions of the highest spiritual significance and urgency. Perhaps a commitment to equality demands that their views be muffled somewhat. If that is true, though, we should be honest about what we are doing.

(More after the jump)


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Getting serious about oil spill liability

By Yves Faguy February 28, 2013 28 February 2013

Earlier this year there were reports that Ottawa is planning on raising spill liability limits for offshore drilling. It isn’t clear yet whether new rules would apply to inland pipelines as well. As things stand now, provided there is no negligence, oil companies have their liability capped at an absurdly low $40 million in the North and $30 million off the East Coast. To put things in perspective, the BP spill in the Gulf of Mexico three years ago caused damages estimated at $40 billion. Who knows how much worse it could be in Arctic waters?

We caught up with Will Amos, director of the Ecojustice clinic at the University of Ottawa, to give us some insight on where the government might be headed, how it should handle this issue and what it might mean for the resource industry.

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Whatcott reactions

By Yves Faguy February 27, 2013 27 February 2013

It took 16 months for the Supreme Court to release its unanimous decision in Whatcott. Though predictably, reactions split both ways. Here’s the bottom line from a somewhat disappointed Jonathan Kay:

The Supreme Court of Canada’s decision in the case of Saskatchewan Human Rights Commission v. Whatcott can’t be considered a win for free-speech champions — especially religious conservatives. But nor is it an outright victory for human-rights censors. By reaffirming that human rights commissions cannot punish speech that merely “ridicules, belittles or otherwise affronts the dignity of” an alleged victim group, the Court struck a measured blow against political correctness.

Charlie Gillis writes that the compromise was inevitable. And yet:

To me, their decision to stand-pat represents a missed opportunity to erect robust legal protections around a bedrock Canadian value. And yes, my employer has a stake in this. But if we learned anything from the Maclean’s-Ezra Levant human-rights fiascos, it’s that the rights process is too blunt, too one-sided an instrument to deal with such a sensitive issue as speech.

A couple of other thoughts: all eyes should now turn to the provinces that have anti-hate speech provisions in their human rights codes, some of whose leaders have echoed the above-stated qualms. They’ve been sitting on the sidelines to see whether Whatcott would give them the cover needed to do the right thing, and now the onus is on them.

(More after the jump)

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Shareholder activism: Is it going too far?

By Yves Faguy February 26, 2013 26 February 2013

National recently had an item on shareholder activism and the substantial increase in proxy fights in Canada. Walied Soliman, a partner with Norton Rose is quoted in the article as saying he has been involved in some 40 proxy battles over the past three or four years. What’s more, he believes we’ll see the number of proxy fights increase in Canada “mainly because there’s evidence of success.”

Well the big success story in New York, and perhaps a harbinger of things to come in Canada, is last week’s ruling by a federal court judge in favour of hedge fund manager David Einhorn in his legal battle against Apple. Einhorn is trying to pressure the company into distributing some of its massive cash reserves to shareholders through the issuance of (cutely-named and) dividend-paying iPrefs. Apple responded by trying to limit its ability to issue preferred shares by submitting a bundled proposal that was supposed to be put to a vote at this week's annual shareholder meeting. But the judge rejected the actual bundling of the proposal with other poposals.

Admittedly, the win is no more than a procedural – some might say “trivial” – one for Einhorn. Nevertheless, Andrew Ross Sorkin looks at the big picture (Einhorn’s attempt to force Apple to distribute its cash) with an interesting column today on abuses of shareholder power (more after the jump).

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