Best Corporate finance lawyers in Canada as ranked by LexpertThe practice area of corporate finance lawyers includes financing vehicles or instruments, whether public or private, including IPOs, capital market equity offerings, installment receipt transactions, securities regulation and compliance, debt securities, bond issues, linked debt/equity instruments, structured financings, hybrid structured financings incorporating tax driven and capital markets products, private placements, commercial paper; financing structures related to capital reorganizations and restructurings, mergers and acquisitions, leveraged buy-outs, take-overs, management buy-outs and buy-ins; venture and development capital, high-risk (vulture) capital; asset backed financings, asset backed securities, asset securitization, receivables financing, off-balance sheet financing, etc.
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A corporate finance lawyer firstly ensures that the companies they work for complies with federal and provincial or territorial statutes regarding financial transactions. Referring to the below-stated laws and other laws, a corporate finance lawyer provides legal advice and ensures compliance on these laws.
Since corporate finance requires companies to deal with inter-corporate relations and dealings with the government or the state, corporate finance law governs this relationship to secure the rights of every party and that all laws and regulations are not violated. Hence, a corporate finance lawyer, who assist companies with the legal perspective of corporate finance, are mostly transactional, rather than litigious.
Since transactions for corporate finance may involve public or private entities, or even both, which may traverse over international boundaries, corporate finance law connects with other bodies of law, such as corporate law, taxation, licensing, contract law, property law, banking law, securities law, insurance law, private international law, and insolvency law, among others. A Corporate finance lawyer, as a result, is knowledgeable not only on corporate finance law per se, but also with these other bodies of law.
In Canada, corporate finance law may be part of the more general corporate law, which is primarily governed by the Canada Business Corporations Act (CBCA). It is the federal act respecting business corporations, providing for a general framework of corporate governance for businesses operating at the federal level. On the other hand, when incorporating or operating at the provincial level, the applicable provincial and territorial corporate laws would apply.
Another federal law which would apply as to corporate finance law would be the Bank Act and the regulations promulgated for its implementation. The Act regulates bank transactions, which may include corporate finance activities.
Corporate Finance refers to the activities of a business, corporation, or a company with regards to the planning and management of its resources, which includes capitalisation, accounting, budgeting, taxation, and investment. It includes long-term and short-term strategies in addressing current and future financial opportunities and problems of the business, corporation, or company. Overall, its goal is to increase profit while minimising expenses and other costs.
Day-to-day operations of corporate finance would be handling cash flows (ins and outs of money), preparing financial reports and statements, monitoring of budget vis-a-vis actual daily or monthly expenses, projection of costs which would have huge impact to the company, and recommendation of dividends, among others.
With this, a corporate finance lawyer is usually engaged by companies to help with legal side when conducting corporate finance matters.
The three main areas of corporate finance are (1) capital budgeting, (2) capital financing, and (3) working capital management.
Capital budgeting makes up most of the activities in a company’s corporate finance. This is primarily concerned with determining which capital investments should the company focus on. The company prioritises capital spending, by calculating future income from proposed and actual capital projects, and making decisions based on other company factors, such as current and projected cash flows, or corporate financial targets.
When a company or corporation lays out its financial plans through capital budgeting, capital finance comes in to capitalise these investments, and other corporate projects, or even its operational expenses. This may be done through acquisition of debts, equity, bonds, securities, or other capital-generating methods. In this sense, capital financing is heavily dependent on the capital budgeting.
Capital or financial management strikes a balance between capital budgeting and capital financing, specifically managing the company’s assets (e.g., investments) and liabilities (e.g., being able to pay creditors obligations become due) such as that the latter would not disrupt the company’s cash flow and budgetary requirements. By working capital management, the corporate finance ensures that there is sufficient liquidity to continue the current and future operations of the company.
A security is generally a financial instrument that can be sold or traded in public or private markets. These are usually offered by a company to increase capitalisation, hence, a part of a company’s corporate finance activities. The common four types of security are:
The most common examples of debt securities are bonds or a certificate deposit. These debt securities are bought or sold (depending on whose perspective it is) and they entitle the seller to fixed interest income based on the parties’ agreement on the interest rate and its maturity date (i.e., date of redemption).
In addition to interest, the principal amount is also repaid, which is in contrast to equity securities. In computing the interest rate of said securities, the borrower’s overall debt history, payment capability, liquidity, and solvency are taken into consideration.
Equity securities are investments in a company’s equity (or equity stock) which represents ownership over the company’s net assets, thus enabling one to become a shareholder in said company. While equity securities are entitled to interest payments, these can be sold to become profits of said shareholder.
When a company is financially stable, corporate finance works to ensure the regular dividends of its shareholders; however, when it is otherwise, or worse, when the company becomes insolvent, shareholders are only entitled to the net proceeds of the company’s assets after payment of other creditors (and securities).
When two different financial instruments are merged, such that this would have some characteristics of both a debt security and equity security, it forms a hybrid security.
When financial instruments based on the value of basic variables (or underlying assets) are traded or sold, these are called derivatives or derivative securities. Examples of basic variables include stocks, bonds, currencies, interest rates, or basic goods. Derivate securities may be in a form of:
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