Archive April 2017

Learn more about the “Non-Resident Speculation Tax” (“NRST”) introduced in Ontario April 21, 2017

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2017 Ontario Provincial Budget Commentary

Our tax team presents an analysis of the Ontario provincial budget released on Queens Park on April 27, 2017.

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Regulators Keep Tight Reins on Corporate Behaviour

lores_business_man_building_street_walk_corporate_AMCanadian securities regulators are serious about corporate transparency and the need to maintain investor confidence in capital markets.

To achieve that objective, the regulators follow one set of rules in all provinces and territories and they apply to public companies, income funds, limited partnerships and some other entities. While the guidelines are voluntary – aimed at allowing business to tailor governance to their specific situations — companies that don’t comply with the disclosure rule will be breaking securities law and could face enforcement proceedings, as well as sanctions.

The governance guidelines set out a series of recommended best practices, including:

  • Maintaining a majority of independent directors on the board.
  • Appointing an independent chairman of the board or lead director.
  • Holding regularly scheduled meetings of independent directors without the presence of non-independent directors and management.
  • Adopting a written board mandate.
  • Outlining board responsibilities such as reviewing and showing satisfaction with the integrity of the company’s top officers and their efforts to develop a corporate culture of integrity.
  • Approving strategic plans at least once a year; actively taking part in succession planning; and overseeing internal controls.
  • Developing job descriptions for the board chairman, the chief executive officer and board committees.
  • Providing each new director with a comprehensive orientation, and all directors with continuing education opportunities.
  • Adopting a written code of conduct and ethics that deals with: conflicts of interest; protection of corporate assets; fairness toward shareholders, customers, competitors and employees; confidentiality; legal compliance, and ways to report illegal or unethical behaviour.
  • Appointing a nominating committee and a compensation committee composed entirely of independent directors.
  • Adopting a process for determining the competencies and skills of the board as a whole and applying this to the recruitment of new directors.
  • Assessing on a regular basis the board’s own effectiveness, as well as the contribution of each board committee and individual director.

Under the disclosure rule, companies must file a Corporate Government Disclosure Form with the provincial or territorial securities commission that requires information about each recommended governance practice, including:

  1. Information about the independence of directors and the names of other boards they sit on.
  2. Disclosure of whether the independent directors hold separate meetings and an explanation if they don’t.
  3. Disclosure of whether the board has adopted the recommended governance policy and if not, how their governance practices differ from the recommended standards and why that is appropriate to the company’s circumstances.
  4. Descriptions of the policies in effect and how they achieve the desired governance goals.

Companies are also required to file a copy of their ethics and conduct code (or any change to it) on the System for Electronic Document Analysis and Retrieval (SEDAR) by the date on which the issuer’s next financial statements must be filed.

Outsourcing: Eight Steps to Help Mitigate Risks

thmb_operations_travel_destination_international_business_amAnticipate Problems With Careful Planning

The outsourcing of business processes has helped numerous companies improve their financial performance, as well as increase customer satisfaction. In extreme circumstances, outsourcing can literally ensure a company’s survival.

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However, it can involve a number of risks. In order to determine if outsourcing makes sense for your organization, consider taking the following steps:

1. Identify and document your expectations regarding an outsourcing relationship. For example, by what amount would you like to reduce operating costs? Do outside providers have the expertise or skills that your company does not possess in-house? Is outsourcing consistent with your company’s business model and overall strategy?

2. Prepare a detailed inventory of the processes and procedures that you plan to outsource. While gathering the information, you may identify inefficiencies that need to be addressed before the processes can be outsourced. Alternatively, you may decide that inefficient or ineffective processes would be better outsourced, knowing that they will need to be refined by the provider. In any event, being aware of what you plan to outsource, as well as the state of those processes, is key to a successful outsourcing.

3. Prepare a detailed request for proposal (RFP) that identifies all requirements that need to be met by the provider. This can also serve as the reporting framework once a provider is engaged. In addition to preparing an RFP to be circulated to potential providers, consider documenting the attributes that a “perfect” provider would possess. The profile should include the location, industry experience, type of customers served, level of employee skills and the technology employed.

4. Once a short list of providers has been identified, request references from customers that have worked with the providers for one, three, five and if possible, 10 years. Immediate cost savings from an outsourcing relationship can be straightforward to capture. However, maintaining and improving on those savings over time is considerably harder. Talking with companies that have experience working with the providers can help your company gauge an outsourcing company’s ability to deliver sustained improvements

5. Ensure that the contract with the provider contains sufficient flexibility to respond to changes in the economic environment. Also, incorporate incentives for the provider to improve performance over time. By offering incentives in the contract, you can dramatically increase the chances the provider will meet the expectations. Just as importantly, incentives should reward a balanced approach. For example, invoice processing time should not be rewarded at the expense of accuracy.

6. Establish a cross-divisional team to consider the risks that can result from engaging an outsourcing firm. Your company’s team could include representatives from operations, legal, accounting, finance, human resources, security, fraud and corporate communications etc. The type of risks that can result from an outsourcing relationship include fraud by the provider’s staff members, interruption in service due to terrorist activity, political instability and corruption in the location, and backlash if jobs are transferred overseas. Depending on the size of the proposed outsourcing relationship, sub-teams may need to be created to address specific issues, for example, the impact of outsourcing on employee morale.

7. Find out what tax implications are involved in the relationship. This could involve the rules for independent contractors, if outsourcing locally, or the tax laws of another country, if you are shipping work overseas. Your tax adviser can help ensure your company is in compliance with applicable laws.

8. Determine the infrastructure needed to support the provider once the outsourcing relationship commences. For example, do you need to assign company personnel to work on-site at the provider’s offices? If not, how often do company personnel need to visit the provider’s operations? How much will it cost to send staff to the provider’s location?

Outsourcing can provide considerable savings. But as you can see, it is not without risk. The steps noted above can help your company navigate the process and deliver sustainable long term savings that directly improve the bottom line.

Ten Home Improvements that Add Value

Before deciding where to spend home improvement dollars, consider talking to real estate professionals who are familiar with your area and have years of experience. They spend their days talking to potential buyers and know what features are likely to result in a “thumbs-up” on a house.

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First Impressions Matter

For the best chance of selling your home at the best price, presentation is key:

Basic maintenance – Home value doesn’t increase when you do small repair projects, such as replacing torn screens. But leaving them in place can signal neglect.

Furniture – Before showing the home, move furniture away from the doorways in each room. This gives a more open, larger appearance. Stand in doorways and evaluate the space of the rooms. You may be able to make them look bigger by rearranging furniture.

Clutter – The home should look lived-in but not crowded. Clear away knick-knacks and put surplus furniture in storage. Empty out crammed closets.

Windows – Open curtains so sunshine comes through clean windows, providing a light, airy feeling.

Flowers – Plant bright flowers near the front entrance and the back fence line, especially if they are visible through the home’s windows.

Smell – Air the home out and avoid strong pet odors, fried foods, etc. Ask your real estate pro the best way to create an inviting aroma.

Summer Barbecues on the Deck

Summer means barbecue season and with that comes the urge to kick back and relax outdoors.

Building a backyard deck will increase the resale value of your home by providing an extra “room” outdoors, a perfect place to relax after a cold Canadian winter. Estimated payback: 60 per cent to 90 per cent.

Pool Anyone?

Depending on where you live, a pool may be considered a requirement – or it may turn your home into a hard-to-sell white elephant.

People often disagree on the subject of pools. Some say the cost of a $25,000 pool won’t be recouped while others say it adds value.

There is one point of agreement. A pool can limit the size of your home’s market. Families with small children may view it as a danger, while other buyers may see it as a nice amenity, but not worth the work and extra expense. On the other hand, for many people, a pool conjures up fun images that could be enough to seal the deal.

With so many opinions, it’s no wonder that real estate professionals often advise homeowners that, if they’re going to add a big-ticket item like a pool, they should do it primarily to enhance their own lifestyles rather than to increase value for resale purposes.

Good guideline: Avoid trends that will appear outdated in a couple of years. By doing some fairly simple projects, you open your home to a broader market and hopefully, a quicker sell at the price you want.

Here are ten projects that generally add the biggest per-dollar punch to your home’s value and saleability:

1. Paint – New paint adds a fresh smell and a well-maintained appearance. On the other hand, a home that needs to be painted looks neglected. Estimated payback: As much as 300 per cent.

2. Landscaping – Well-trimmed bushes and a manicured lawn are signs a home has been maintained. These tasks may involve more sweat equity than financial investment. While landscaping, take a look at your mailbox. If it’s rusty and wobbly, replace it. A nice yard adds to the curb appeal that may get drive-by home shoppers out of their cars and through the front door for a better look. Avoid excessive landscaping unless it’s for your own pleasure. Buyers may admire it but few will pay extra thousands of dollars for it, regardless how much you spent on it.

3. Light fixtures – They don’t have to be expensive. But some old light fixtures make rooms look dated.

4. Window coverings – Do they let in the light? You don’t need costly drapes, but worn, outdated, or heavy window coverings are a definite negative. Natural light appeals to most home buyers.

5. Floors – Attractive flooring adds a lift and can be fairly inexpensive. If carpet is a neutral color and in good condition, it may only need professional cleaning. If not, replace it, stick to mid-grade, neutral tones that will go with all color schemes.

Nice-looking hardwood floors can be a major drawing card. If yours appear worn, it would be a smart use of your home improvement dollars to have them refurbished.

6. Central air conditioning – Depending on the area, this can be a feature that many buyers expect.

7. Updated kitchen – The kitchen is generally a major selling point, but it is expensive to totally redo it. Although prices can quickly change, the cost of a completely remodeled kitchen can range from $20,000 and $30,000, and even higher if you plan to install a showcase kitchen. That’s not bad if you’re doing the work for your own benefit and will enjoy it for a few years.

An alternative is do spot remodeling jobs that can be accomplished for less money. Consider a new sink and fixtures, counter tops, cabinet fronts, lighting, a paint job, and even drawer and cabinet pulls can add up to a nice kitchen face lift. If the appliances look old and used — or if they do not match — consider replacing them. Estimated payback on a complete remodel can range from 68 per cent to 120 per cent.

8. Bathroom – You can also do spot remodeling jobs on the bathroom with new, expensive looking, fixtures, a new vanity and an interesting mirror. Make sure vanity mirrors are at an accessible height for every member of the family. As with a kitchen, soft lighting and warm colours can go a long way in increasing home value. Add vases and plans as design elements. Estimated payback: 65 per cent to 120 per cent.

9. Energy features – If your home is older, energy loss may be a concern for would-be buyers. In that case, improved insulation for windows, doors, and storm doors can be smart upgrades. Given the nature of Canadian winters, consider installing thermal windows which help trap heat inside, keeping the home warm and reducing heating bills.

Prices change, but thermal windows range from about $20 to about $50 a square foot. Estimated payback: 50 per cent to 90 per cent. Some retrofits, like better insulation and high-efficiency furnaces, pay for themselves relatively quickly. Others, like solar panels, heat recovery ventilators, and tankless water heaters, may take years to pay for themselves. Payback: Highly variable.

10. Room addition – An added room may increase the value of your home, but may not pay for itself. Before building an extra bathroom or adding a family room, talk to a real estate professional to see what is selling in your neighborhood. If your home has two bathrooms, for example, but recent sales have been mostly three bathroom homes, it might be a worthwhile project. Otherwise, save you money. General estimated payback: 50 per cent to 83 per cent, depending on the addition.

These are just some considerations when improving your home for resale purposes. Getting top dollar for your home generally requires some work and cash. But with a little planning and some advice from real estate professionals, you can help make sure the dollars spent on improvements will come back in the sales price.