AN OVERVIEW OF SOME U.S. LEGAL ISSUES RELEVANT TO …...• Visa status is available where: – Same...

Presented at the Smythe Ratcliffe US and Cross-Border Seminar 2013

Jeffrey A. Peterson [email protected] Dorsey & Whitney LLP 604 630-5202 U.S. Lawyers in Canada

AN OVERVIEW OF SOME U.S. LEGAL ISSUES RELEVANT TO CANADIANS

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2013 Dorsey & Whitney LLP

TODAY’S TOPICS

• Corporations “Why Delaware?”

• Contracts “I can read American English”

• Lawsuits “I know I’ll be sued”

• Immigration “I hate crossing the border”

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1. U.S. Corporations

• Very straightforward

– no citizenship or residency requirements

– no in-state meetings, office or presence (except registered agent)

– single individual as sole officer and director

– incorporate in a day or two

– objective names (no numbered companies)

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Which State?

• Delaware

– Preferred among U.S. lawyers

– Very sophisticated law and courts

– Largely historic

– Caution if a large number of authorized shares

• Nevada (“made in Canada”)

• Key: Where are the employees and assets?

• Washington?

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Other Entities

• Limited Liability Companies (LLCs)

– Americans use to avoid taxation at entity level

– U.S. blocker corporation (holding company) necessary for use by Canadians

– Members accorded limited liability protection

– “Member” = Shareholder

– “Manager” = Director

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A Risk

• Many sound reasons for a U.S. subsidiary

– Tax, marketing presence, etc.

• But if title passes through U.S. subsidiary, then it is the importer of record

• Potential liability for:

– Customs

– Anti-dumping

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2. Contracts

• Rules of Construction and Interpretation

– Canada - Plain Meaning

– U.S.A. - Context

• “Context” allows finding intentions

– Broad discovery

– Scope for Courts & Arbitrators

• Differing underlying law

• Changing the governing law clause can be dangerous

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* denotes non-U.S. assets of the Canadian parent

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3. Can Canadians Do Business in the U.S.A. without Exposing their Ass[ets]* to U.S. Courts?


U.S. Jurisdiction

Jurisdiction is the Threshold Issue

“Jurisdiction” = whether a court will hear and determine a case; whether a court has the power or legal right to decide a lawsuit

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“Minimum Contacts”

Minimum

Minimum

minimum

minimum

minimum

U.S. veil piercing

U.S. subsidiary acting as U.S. agent

Parent company acts in the U.S. (e.g. directed advertising)

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Arbitration: Predictable

• The NEW YORK CONVENTION

– The 1958 Convention on the Recognition and Enforcement of Foreign Arbitral Awards

– A Treaty

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Treaty Requirements

• U.S. courts must recognize a written agreement to arbitrate

• U.S. courts must refer parties to arbitration

• U.S. courts must recognize and enforce arbitral awards

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Sample short form clause

“Any dispute, controversy or claim arising out of or relating to this Agreement, or the breach, termination or invalidity of it, shall be settled by arbitration in accordance with the UNCITRAL Arbitration Rules in effect on the date of this Agreement.”

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Arbitration only Binds Contract Parties

• Arbitration Clause = Contract

• a Contract is only binding on parties

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Third Party Claims

• An employee of the U.S. customer

• The innocent third person on the street

• The third party business’s lost profits

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A Structure

• Properly capitalized U.S. entity can help, but …

– subsidiary acting as agent?

• Remove key Canadian assets to a holding company

– Implicates Canadian corporate shield

– Tax benefits too where holding company is offshore

– Canadian operating company still exposed?

• No assurances!

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Insurance

• Essential protection

• Check your Policy

• Perhaps no real exposure if “safe” goods

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4. Business Immigration

• NAFTA: 4 types

– L-1

– E

– TN

– B-1

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Visas and Work Permits

• Nonimmigrant status

– Temporarily work in the U.S.

• Immigrant visas or “Green Cards”

– Permanently work in the U.S.

– Similar to “Landed” Status in Canada

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Bottom Line

• If there are U.S. operations, Canadian citizen managerial or essential employees very likely can obtain U.S. work authorization

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Two Most Common

• L-1

• E-2

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Executives and Managers (L1-A) and Specialized Knowledge (L1-B)

• Employed abroad for one year in last three

• Canadian company is parent, subsidiary, affiliate or branch office

• Canadian company continues to conduct business

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L-1A

• “Manager”

– Means an employee with staff to manage or

– An employee who manages a key function

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L-1B

• “Specialized Knowledge”

– Means unique or proprietary knowledge

• Takes at least one year to acquire

– Subjective interpretation

• Abused

– Doesn’t mean someone who holds an advanced degree

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Benefits of L-1s

• For Canadians

– Short adjudication time

• may apply at the border

– Green Card may be obtained on same basis

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Start Up L-1s

• L-1A only granted for one year; extension required thereafter

• Must prove:

– employing Americans

– generating revenues, etc.

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E-1 (Treaty Trader)

• Visa status is available where:

– U.S. company is ultimately majority owned by Canadians

– Employee is a Canadian

– 50% of international trade between Canada and the U.S.

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E-2 (Treaty Investor)

• Visa status is available where:

– Same a E-1, except rather than trade requirement:

– “Substantial” investment of capital into the U.S.

– Capital is “at risk” to the investor

– U.S. employees (active U.S. business operations)

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Contact

Jeffrey A. Peterson

Partner, Dorsey & Whitney LLP

T: (604) 630-5202

[email protected]

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mailto:[email protected]

AN OVERVIEW OF SOME U.S. LEGAL ISSUES RELEVANT TO …...• Visa status is available where: – Same...

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