Essay Flashcards
Why do First Nations use business structures?
(i) the legal status and legal personality of “Indians” and bands (not legal persons)
(ii) restrictions on ownership and title to reserve lands while also having constitutional protection of Aboriginal rights and title, and
(iii) subjection to and exemption from taxation
S87 income on reserve
ITA s149 public body performing function of gov (bands, modern treaty FNs )
(iv)s91(24) gives fed gov the authority re “indians, and lands reserved for the indians” but prov has residual power related to indigenous as far as they are subject to “laws of general application” → FN may elect to avail themselves of fed or prov laws as they apply to associations and commercial transactions
(v) liability reasons
(vi) restriction on engaging in business activities under financial administration law
What business structures are available to FN
simplest structure for First Nations to use is simply the unincorporated First Nation itself
problems of liability, fiduciary duty, legal capacity, and deficits of legal personhood,
advantage of always having s149(1) ITA exemption
Second best is a society that is a corporate mirror of FN.
BUT might not be possible to mirror with canadian corporate law, and the use might not address all issues.
GDC - “choose” canadian law
Maybe s35 issue though to force to give up traditional form of gov
Consider:
specific individuals who will be involved,
the relationship between the leaders of the political unit and the business,
whether the relationship of an owner to a manager will make sense.
Common structures of indigenous peoples and FN in Canada
Joint Ventures
Not legal entity. Just contract. Protects against certain liabilities, allocates risk
Might be deemed partnership - significant risk
Make sure when drafting contract that the parties wont be agents to each other
Partnerships/ LPs
Used when FN contributes to relationship adn when multi FNs work together
LP is most common of all structure
Benefit of liability protection, ITA exemption
Generally, an industrial business partners i GP and two LPs will be one business org owned by G and the FN or a FN owned entity.
LLPs
apportions not only profits, so as to provide income tax exemptions for First Nations pursuant to Section 149(1)(c) of the ITA, apportions civil liability such that the First Nation is not at risk, but also provides the additional benefit of apportioning certain kinds of operating expenses that are attributable to proportionate ownership of the partnership’s assets (more of which is covered below).
Corporations
Lose s87 income exemption but s149 ITA exempts income of corps owned by FN that conduct 90% of business on reserve or settlement land
Trusts
Not legal person. Just parties w fiduciary relationship
But many trusts are deemed individuals for income tax
FN often put settlement funds into reversionary trust where income on trust is taxed in hands of FN qua settlor
Reversionary trusts can be used in order to keep streams of revenue accounted for separately and to use as a sovereign wealth fund
Co-ops and Non Profit Societies
Flexible, confer legal personhood and liability protection, useful for bridging political/economic divide since goals can be a variety of things
Corporation is also flexible enough to have purposes beyond profit though
Some problems with forming corporations
Chiefs owe a fiduciary duty to bands and band members → conflict of interest if they also owe fiduciary duty as director of corporation. Thus cannot be director, must appoint ppl. Terms of agreement thus v important.
Corp is run by directors (either appointed or elected by shareholders) –> might go against traditional laws
Legal personhood of a band may make it hard to know which party is the proper owner of a share - and how that share is voted and valued by members of the FN
If a band doesn’t have legal capacity to hold a share, chief will hold the share in bare trust for the nation
This gets complicated when a change in leadership occurs, as in Gitga’at
In order for the first nation to speak, it speaks the colonial language in the term of a resolution - decides what is gonna happen and directs chief to vote in that way
Complicates tax planning under s149 - must be on reserve
