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Preparing for a Recession, Capital-raising, Cryptocurrency Regulations & More: Timely Topics November 2022 Edition

Timely Topics with McCarthy Tétrault curates the latest market trends on a monthly basis to help you stay informed of developments that can affect your business. This content is current as of November 1, but please connect with us if you have any questions on any of the topics below.

Here are this month’s trending topics:

1) Canada headed for recession in 2023: how are organizations preparing themselves?

Economists say a recession in the first quarter of 2023 is almost inevitable. As organizations brace themselves for impact, one strategy making headlines is layoffs. In fact, we’ve seen a number of headlines about mass layoffs from very recognizable brands. Chief Economist at the Conference Board of Canada, Pedro Antunes, was recently quoted: “There’s always a churn in the labour market, and there’s sectors and companies that end up not doing well, and having to lay off workers.”

“Given employment laws in Canada, some considerations for mass layoffs include: the expense due to statutory notice and severance requirements, which can be greater in the case of mass or group terminations; and where no enforceable contracts are in place, guidelines on common law reasonable legal notice,” says our partner, Donovan Plomp. Additionally, employers need to consider the impact of layoffs on their Equity, Diversity & Inclusion (EDI) priorities. For example, the decision to lay off newer employees may disadvantage women and people of colour for organizations that more recently put EDI at the forefront of hiring practices.

Other strategies being considered as organizations prepare for economic uncertainty include pay cuts, leaning into growth, prioritizing certain areas of your portfolio, acquisitions and rethinking certain investments (such as real estate or technology).

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Please connect with a member of our National Labour and Employment Group if you’d like to speak about the implications of the impending recession on your workforce.

2) Canadian securities regulators streamline rules for capital-raising

Raising capital is often difficult for smaller issuers, especially against the backdrop of uncertain economic times. The Canadian Securities Administrators (CSA) announced the adoption of a new prospectus exemption, the Listed Issuer Financing Exemption, for issuers listed on a Canadian stock exchange. The exemption provides a more efficient way for issuers to raise smaller amounts of capital and have better access to retail investors. “We heard that the time and cost of preparing a short form prospectus was a barrier to capital-raising for smaller issuers,” said Stan Magidson, CSA Chair and Chair and CEO of the Alberta Securities Commission. “This exemption will reduce regulatory burden for small offerings while maintaining investor protection.”

However, the exemption might not be available to all issuers and there are limits on how much an issuer can raise relying on the exemption in any one year period. Check out our recent blog post which provides more detail.

The exemption is expected to come into force on November 21, 2022.

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We invite you to contact a member of our Capital Markets Group to discuss the impact of the new exemption on your capital-raising activities.

3) Regulatory changes for employers hiring temporary foreign workers

Given the labour shortage challenges across Canada, some employers have been turning to foreign workers to fill the gap. Now, for Canadian employers retaining the services of temporary foreign workers, specifically for temporary foreign workers hired under the Temporary Foreign Worker Program ("TFWP") or the International Mobility Program ("IMP"), there are some new regulatory requirements to meet. See our recent article, which outlines the updates to the Immigration and Refugee Protection Regulations.

The new regulations aim to deter bad actors from participating in the program, while providing greater transparency and clarity on the requirements and conditions of the foreign workers’ employment. Minister of Employment, Workforce Development and Disability Inclusion, Carla Qualtrough, noted: “Everyone deserves to work in dignity, in safety, and in health. With these changes, our government is strengthening protections for temporary foreign workers.” Among other requirements, employers must: (i) inform temporary foreign workers about their rights in Canada and make the information available to them throughout their employment, (ii) enter into written employment agreements on or before the first day of work, (iii) make reasonable efforts to provide temporary foreign workers access to health care services, and (iv) ensure the foreign workers are not charged any recruitment fees.

Changes to the regulations mean that Canadian employers will need to be more attentive to the practices and processes related to their temporary foreign worker recruitment activities and their employment of foreign workers. 

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If you’d like to discuss these changes to requirements, please connect with a member of our MT>iPlus team.

4) The U.S. introduces regulatory framework for digital assets: what does this mean for Canada?

The looming global recession and high inflation have businesses across sectors concerned, and the cryptocurrency market is no exception. While panic-selling, bankruptcies and liquidations, layoffs and frozen funds in the sector have made headlines for months, the focus is shifting to regulation. Most recently, the White House published its Comprehensive Framework for Responsible Development of Digital Assets, the first step in its “whole of government” strategy on regulating digital assets.

In Canada, our federal government and financial services regulators have also expressed intentions to review and regulate the digital asset sector. In a recent speech, Superintendent of Financial Institutions, Peter Routledge, shared plans to “refine the approval process so new entrants can join the regulatory system faster and more safely.” He also stated that “[The Office of the Superintendent of Financial Institutions (OSFI) is] working closely with our federal and provincial partners to ensure an appropriate and coordinated Canadian regulatory response to stablecoins.” In addition, earlier this year, a private members bill, Bill C-249 An Act respecting the encouragement of the growth of the cryptoasset sector, proposed requiring the Minister of Finance to develop a national framework to encourage the growth of the crypto asset sector.

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Please see here for an overview of the report on climate and energy implications for crypto assets in the US and here for an overview of OSFI’s first interim framework for crypto assets held by federally regulated financial institutions. Please connect with a member of our Fintech team if you’d like to discuss further. 

5) A modern corporate governance model: what does it mean for legal professionals?

The corporate governance landscape is changing. Across sectors, corporate boards face ever-evolving and greater societal expectations and activism, causing disruption in many forms, and a shift in the idea of corporate purpose – from a focus on profits to a focus on long-term value creation for all stakeholders, including employees, customers and communities in which businesses operate.

Recently, the National Association of Corporate Directors, a U.S.-based member organization for corporate directors, released a report entitled Future of the American Board: A Framework for Governing into the Future which details a new vision for the board of the future: a purpose-driven, empowered and engaged board of directors that challenges the traditional governance model seen in the past.

What do the shifting expectations of corporate governance mean for legal professionals? A recent Canadian Lawyer Magazine article explores the role legal departments play in navigating corporate governance, featuring legal leaders from across sectors.

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If you’d like to speak about the emerging trends in corporate governance, including shareholder activism and climate and ESG-related shareholder activism, please connect with our team

6) Act respecting French, the official and common language of Québec, is back on the table following Québec’s election

The Québec provincial election was held on October 3, 2022. Premier François Legault was re-elected and will be serving his second term in this position. The Coalition avenir Québec (CAQ) is back in power, securing 90 of 125 seats. Among the implications for businesses, the Act respecting French, the official and common language of Québec, formerly known as Bill 96, is back on the table but still being challenged in court from CAQ’s first term. If all goes in CAQ’s favour, this Act has significant impact on certain contracts, requiring they be drafted in French. Employers also face obligations with respect to offers, contracts, written communication and more. Check out our article providing an overview of the Act and its impact on businesses

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If you’d like to discuss a legal translation solution to meet the requirements of the Act in more detail, please connect with MT>Version team, who specialize in lawyer-revised legal translations.

This newsletter is designed to provide general information only. This newsletter does not provide legal advice on specific issues. You are encouraged to consult with legal counsel should you require assistance in addressing a particular issue or concern.

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