Contrasting and Comparing Salary Arbitration in Professional Sport: Major League Baseball vs. National Hockey League

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Introduction

Salary arbitration ensures fair compensation for players and promotes negotiations between teams and players. Before the arbitration hearing, players and teams have the opportunity to negotiate and reach an agreement on a contract, which may help them avoid the arbitration process. In this blog, we’ll explore the distinct salary arbitration systems used in Major League Baseball (MLB) and the National Hockey League (NHL), shedding light on their differences and the benefits they offer to players and teams.

MLB’s Salary Arbitration

MLB employs the “final-offer” arbitration system to resolve salary disputes between players and their teams. A three-arbitrator panel, handpicked by the MLB Players Association and the MLB Labor Relations Department, is responsible for the arbitration process. The panel considers proposals put forth by both parties in a hearing. During the hearing, the panel weighs several criteria, including the player’s past contributions, career consistency, compensation history, comparative salaries, and the team’s recent performance and public acceptance. After hearing arguments from both sides, the panel chooses either the player’s or the club’s salary figure for the upcoming season.

The final-offer system stimulates negotiations by encouraging each side to present more realistic figures. The arbitrator’s likelihood of choosing the opposing side’s offer motivates compromise, making the more reasonable demand or offer more likely to prevail.

NHL’s Salary Arbitration

In the NHL, both players and teams may elect salary arbitration. The NHL’s salary arbitration system is referred to as conventional arbitration. In this process, negotiators present their offers and arguments to an arbitrator. The arbitrator then makes a final decision, which could either align with one of the offers presented or fall outside of those proposals.

The hearing is presided over by a neutral arbitrator chosen from a group of eight members, all affiliated with the National Academy of Arbitrators. Each side, represented by the NHL Players’ Association (NHLPA)/player and the NHL team, is allotted ninety minutes to present their case, including counter-arguments and comparisons of players from the opposing party. They present their offers by using statistical criteria to identify contracts similar to the player’s and justify where the player stands in relation to those contracts. The arbitrator’s ability to exercise flexibility in salary selection fosters fair and reasonable resolutions, ensuring a well-balanced approach to determining salaries.

 

Conclusion

In conclusion, salary arbitration is an essential mechanism in MLB and the NHL to settle contract disputes between players and teams. The primary distinction between the systems lies in how arbitrators handle the offers. In MLB, the arbitrators must choose one of the two presented offers, while in the NHL’s system, they have the flexibility to select a salary figure not proposed by either side. These arbitration processes actively encourage negotiations, making them vital tools for ensuring equitable compensation and maintaining the competitiveness of both leagues.

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Purchase of a Business – The Importance of Employee Considerations

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Introduction

During the sale of a business, it is essential for both the seller and the purchaser to carefully examine the potential employment issues that may arise. Evaluating these matters during the due diligence process is crucial because hidden employment liabilities, which are often not apparent on the balance sheet, can significantly impact the financial viability of the transaction.

Employment Matters in Share Purchase Transactions

In a share purchase transaction, the purchaser –  by acquiring the vendor’s shares of the company – steps into the vendor’s shoes when it comes to employment issues. This means that existing employment agreements between the employees and the employer remain unaffected, and their terms and conditions continue unchanged. Maintaining employment continuity is of utmost importance in these transactions, and employers can simply inform employees about the share transaction after the closing date.

Employment Matters in Asset Purchase Transactions

In an asset purchase, the purchaser is not automatically obliged to take on the vendor’s employees. Unlike in share transactions, at common law, the sale often results in a termination of employment with the vendor company. Vendors should be aware that the sale of assets does not provide the employer with cause for discharge, reasonable notice, or severance pay. Consequently, the vendor remains liable for such claims, subject to an employee’s duty to mitigate damages or the purchaser agreeing to rehire.

Employment Standards Act of British Columbia

Purchasers must be mindful of section 97 of the Employment Standards Act (“ESA”), which stipulates that if a buyer continues the employment of the employees without any interruption, the buyer will assume the role of the employer and be required to take on all obligations and liabilities. Additionally, section 97 of the ESA states that if the purchaser employs a former employee of the vendor, the benefits contingent on the employee’s length of service, such as vacation, notice of termination, pay in lieu of termination, and severance pay, carry over to the employee’s employment with the purchaser. Consequently, the ESA presumes the purchaser to be liable for the employee’s full length of service with both the vendor and purchaser.

Given the potential liabilities associated with employee terminations, purchasers and vendors often engage in extensive negotiations. To minimize liability, vendors typically prefer the purchaser to hire their entire workforce on the same terms and conditions, rather than selectively retaining specific employees. If the purchaser chooses not to retain all of the vendor’s employees, both parties will negotiate to allocate liability for termination costs.

 

Conclusion

In conclusion, employment matters are critical aspects of business sales that demand thorough consideration from both the seller and the purchaser. Addressing these issues during the due diligence process helps identify potential liabilities and minimizes risks for both parties involved in the transaction. By carefully evaluating employment-related aspects, a smoother and more successful business sale can be achieved.

If you are in the process of initiating a purchase or sale of a business, contact Heath Law by PHONE: 250-753-2202 or send us an email.

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Conditions Precedent – What is it?

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Conditions Precedent – What is it and what does it mean?

In real estate or commercial purchase contracts, “Conditions Precedent” are specific conditions or requirements that must be fulfilled or satisfied by either the buyer or the seller (and in some cases both) before the contract becomes legally binding and enforceable.

These conditions act as prerequisites or contingencies that protect the interests of both the buyer and the seller and ensure that certain key elements are in place before the transaction can proceed.

The fulfillment or waiver of the condition precedents, or subject clauses, is normally referred to as “subject removal.” A common example of a condition precedent is: “the Buyer’s obligation to complete the purchase of the Property is subject to the Buyer being satisfied with the results of a physical inspection of the Property on or before [month, day, year].”

Conditions Precedent may vary depending on the specifics of the contract, but common examples include:

Financing: This condition requires the buyer to secure financing or a mortgage for the purchase of the property before the contract is finalized. If the buyer fails to obtain the necessary financing within the specified timeframe, the contract may be terminated without any penalties.

Inspection/Site Investigation: This condition allows the buyer to conduct a property inspection of the land, building or equipment by a qualified professional to determine whether the condition or state of the asset being acquired is satisfactory. If significant issues are found during the inspection, the buyer may request repairs, negotiate the purchase price, or even withdraw from the contract if the seller refuses to address the concerns.

Title Investigation: This condition involves a title search to ensure the property’s title is clear of any liens, charges, encumbrances, or legal disputes. The sale can only proceed if the title is free and marketable or if contractual language is included to address the discharge of any financial charges or encumbrances.

Zoning/Bylaws: The contract may include conditions that require the seller to obtain any necessary zoning approvals, building approvals or permits or other local government approvals for the property.

Third-Party Consents or Approvals: In some cases, the contract may stipulate that the purchase is contingent on obtaining consents or approvals from third parties, such as government authorities or regulatory bodies. Another example is where a business is occupying leased space and the consent of the landlord is required to a change in tenant. A further example is where a franchise is being purchased and the consent of the franchise system to a transfer of the franchise is required.

Have Questions about real-life uses of Conditions Precedent? 

Purchase of a Business – What Are Usual Or Typical Conditions Precedent That a Purchaser Would Want in an Asset Purchase Agreement

What Are Usual or Typical Conditions Precedent That a Purchaser Would Want in a Share Purchase Agreement

Key Differences Between an Asset Purchase and a Share Purchase in Business Acquisitions

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Securing Employee Matters

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Key employees are vital to a business’s success, and purchasers may include a condition precedent related to negotiating arrangements with these employees. This ensures that essential staff members are retained and motivated during the transition.

 

Compliance with Applicable Laws and Regulations: Purchasers need confidence that the target business is in compliance with all applicable laws, regulations, and licenses. This condition is essential to avoid potential legal and financial repercussions in the future.

 

Obtaining Third-Party Consents: If the transaction involves a change of ownership or assignment of contracts, purchasers may need to obtain consent from third parties involved in those agreements. This condition ensures that third-party relationships are maintained smoothly.

 

Material Adverse Change: To safeguard their investment, purchasers often include a condition precedent to confirm that there have been no material adverse changes in the assets or the target business since the negotiations began. This protects them from unforeseen risks that could negatively impact the acquisition.

 

Securing Necessary Financing: If external financing is required to fund the acquisition, purchasers may make the agreement contingent on obtaining the necessary financing commitments. This ensures that the purchaser has the financial resources necessary to complete the transaction successfully.

Every well-run business has one or more staff members that played a crucial role in helping your business thrive. Securing these employees can make or break the successful sale or purchase of a business so don’t overlook the employees when acquiring or selling a business venture. For assistance in evaluating and ensuring these key employees are included in your business transaction, contact Heath Law, located in Nanaimo, BC.

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Purchase of a Business – What Are Usual Or Typical Conditions Precedent That a Purchaser Would Want in an Asset Purchase Agreement

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Introduction:

Before completing an asset purchase agreement, prudent purchasers include conditions precedent to ensure certain essential requirements are met. These safeguards protect their interests, mitigate risks, and pave the way for a successful acquisition. In this blog post, we’ll explore the typical conditions precedent that purchasers seek to assert in an asset purchase agreement to make well-informed and secure investment decisions.

Reviewing Contractual Obligations: An important condition precedent involves the review of material contracts related to the target business. Purchasers want to ensure that all contracts have been disclosed and that there are no existing breaches or defaults that could impact the acquisition.

Due Diligence: Another key condition precedent is conducting thorough due diligence. This involves an in-depth assessment of the asset. In the case of real estate, due diligence could include an appraisal, geotechnical engineering reports and an environmental assessment.  In the case of equipment, the purchaser may want an evaluation completed to determine its operating condition.

Obtaining Consents and Approvals: To ensure a smooth transition, purchasers want confirmation that the seller has obtained all necessary consents, approvals, and permits required for the transfer of assets and ongoing business operations. This includes approvals from regulatory bodies and third-party stakeholders.

Clear Title and Ownership: Purchasers seek assurance that the assets being sold have clear title, free from any encumbrances or disputes.

If you’re not sure if all of your obligations and rights have been met or are fair and legal during the course of purchasing or selling a business or commercial property contact Heath Law on Vancouver Island.

Want to know more?

What Are Usual or Typical Conditions Precedent That a Purchaser Would Want in a Share Purchase Agreement

Key Differences Between an Asset Purchase and a Share Purchase in Business Acquisitions

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What are the usual adjustments in the purchase or sale of a home in Nanaimo?

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In British Columbia, certain adjustments need to be considered to ensure a fair distribution of costs between the Buyer and the Seller. Adjustments are typically based on the Buyer and Seller’s ownership of the property throughout the year. There are many potential adjustments that may be required in a transaction. However, in this article, we will explore the typical adjustments involved in the purchase or sale of a home in British Columbia.

  1. Property Taxes: Property taxes are payable once in a calendar year. The Seller pays taxes up to the closing date, while the Buyer assumes responsibility thereafter. Often the precise amount of taxes is not known at the time of the adjustment calculation, so a 5% increase from the previous year’s taxes is used. However, upon receipt of the tax bill, the amount may have to be readjusted.
  2. Strata Fees: For transactions involving strata properties, the strata fees are adjusted. The Seller pays the fees up to the closing date, and the Buyer takes over from then on. If a Special Levy has been issued prior to closing, it is usually the Seller’s obligation to pay it in full.
  3. Utilities: Utilities, such as electricity, gas, sewer, garbage collection, and water, are often adjusted. The Seller is responsible for paying the utility costs up to the closing date, while the Buyer takes over the expenses from the closing date onward.
  4. Deposits: Any deposit made by the Buyer is credited to the Buyer on the Buyer’s statement of adjustments.
  5. Rent and Security Deposit: If the transaction involves a rental property, an adjustment for rent may be needed unless the adjustment date falls on the same day that rent is payable. The Security Deposit is usually credited to the Buyer as it becomes an obligation owed by the Buyer to the tenant.

Are you purchasing or selling a home in Nanaimo and have a question? Contact us to ensure that all of your obligations and rights are covered.

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Vendor Financing in Business Sales: Security/Collateral and Key Considerations for Sellers

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What is Vendor Financing?

 

Vendor financing is a financing option where the seller of a business provides financial assistance to the buyer to help them complete the purchase. Many business sales involve vendor financing for at least a portion of the purchase price.

 

Why do Sellers Offer Vendor Financing?

 

Vendor financing offers several advantages to both buyers and sellers. Firstly, it attracts a larger number of potential buyers who may have difficulty obtaining traditional bank loans, thereby expanding the pool of interested parties. Secondly, it can lead to faster deal closures, streamlining the sales process and reducing the time it takes to finalize the transaction. Finally, seller financing can enable sellers to negotiate a higher selling price by providing an attractive incentive to the buyer, making the business or property more appealing. These benefits make vendor financing an attractive option for those looking to buy or sell a business or property.

 

Security and Collateral for the Seller

 

Security agreements for personal property: These grant the seller a security interest in specific assets owned by the purchaser. The security agreement may be general, offering broader protection covering the present and future assets of the purchaser.

 

Personal guarantees: Obtained from the principals of the Purchaser, making them personally liable for the repayment obligations of the Purchaser.

 

Mortgages over real estate: The Purchaser grants a mortgage to the Seller on the property being acquired.

 

Share escrows: Act as security for the unpaid purchase price, the seller retains physical control of the shares of the Company being purchased and if the Purchaser defaults on their repayment obligations the Seller regains control of the Company.

 

Assignments of life insurance: The seller may require the buyer to assign a life insurance policy to them as collateral. This ensures that, in the event of the buyer’s death, the seller will receive the policy’s proceeds to cover any outstanding debt or obligations.

 

Main Considerations of Vendor Financing

 

The length of the term and the interest rate applicable to the vendor financing are crucial aspects negotiated between the parties. Risk and return play a significant role, as the seller gains potential buyers and a higher chance of selling the property or business, but also faces the risk of non-payment or default. Flexibility is a key advantage of vendor financing, providing buyers with more accessible down payment options and flexible repayment schedules. Proper due diligence is necessary to assess the financial health of the property or business and ensure the viability of the financing arrangement. Additionally, legal documentation, including promissory notes, security agreements, guarantees and mortgages, is vital to safeguard both parties interests and facilitate a smooth transaction. Lastly, the tax implications of vendor financing must be carefully evaluated with the assistance of tax advisors to understand the potential tax consequences for both the buyer and seller.

 

 

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Purchase of a Business – What Are Usual or Typical Conditions Precedent That a Purchaser Would Want in a Share Purchase Agreement

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Introduction

Acquiring shares in a company is a momentous decision that demands careful consideration and protection of the buyer’s interests. Within a share purchase agreement, conditions precedent play a pivotal role in safeguarding the purchaser’s investment. In this blog post, we’ll explore the vital conditions that purchasers typically seek in a share purchase agreement to ensure a seamless and secure acquisition process.

Key Conditions Precedent

Due Diligence: This comprehensive examination assesses the target company’s financial, legal, operational, and regulatory aspects, uncovering potential risks and liabilities. This would include a review of financial statements and tax returns.

Consents and Waivers: Assurance that all required consents, approvals, and waivers from third parties, such as lenders or business partners, are obtained, facilitating a seamless transfer of ownership.

Material Adverse Change: Buyers require confirmation that no significant adverse changes have occurred in the target company since the initial negotiations began, protecting them from unexpected challenges.

Litigation Assessment: Verifying the absence of pending lawsuits or legal disputes is crucial to gauge the company’s overall stability and reputation.

Employee Matters: Addressing employee-related issues, such as agreements, benefits, and severance obligations, ensures a smooth transition and fosters employee goodwill.

Clear Title to Shares: Purchasers must verify that the seller has clear and marketable title to the shares, free from any encumbrances or claims.

Financing Arrangements: If external financing is required, purchasers may include conditions to obtain necessary financing commitments, securing the funds for the acquisition.

Tax Compliance: Ensuring the target company is up-to-date on tax matters and has no outstanding liabilities safeguards the purchaser from future tax burdens. A holdback may be required to offset the risk of unpaid tax.

Corporate Governance: Compliance with corporate documents, bylaws, and constitutional requirements establishes a stable foundation for the acquisition.

Intellectual Property Rights: Confirming the ownership or proper licensing of essential intellectual property assets is crucial to maintaining business continuity.

Asset Investigations: whether the land, equipment and inventory owned by the target company are in a certain state or condition and are clear of any charges, liens or encumbrances.

Not what you’re looking for?  Read What Are Usual Or Typical Conditions Precedent That a Purchaser Would Want in an Asset Purchase Agreement? 

Or Key Differences Between an Asset Purchase and a Share Purchase in Business Acquisitions

 

 

 

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Key Differences Between an Asset Purchase and a Share Purchase in Business Acquisitions

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Introduction:

When buying a business in British Columbia, two primary methods are available: an asset purchase and a share purchase. Each approach comes with its own legal, financial, and tax implications, and understanding these differences is crucial for making an informed decision that aligns with the buyer’s goals. This blog post will explore the key distinctions between asset purchase and share purchase transactions in British Columbia.

Nature of the Transaction: An asset transaction involves the acquisition or divestment of certain or all of a company’s assets, which may include equipment, inventory, real property, contracts, or lease agreements. Some liabilities may still transfer due to successor liability rules, but the seller retains ownership of some of the operating entity. On the other hand, a share purchase involves acquiring shares or ownership interests of the target company, resulting in ownership of the entire business, including assets, liabilities, and obligations. The buyer inherits all existing liabilities and risks associated with the business, even those not immediately apparent.

Liabilities and Risk: With an asset purchase, the buyer has more control over the liabilities they assume, leaving behind unwanted debts with the seller. However, certain liabilities may still transfer due to certain legislation. In a share purchase, the buyer assumes all existing liabilities and risks, including known and unknown ones, like pending lawsuits and tax obligations. If the business being purchased carries substantial potential for unknown liability claims, such as product liability, professional negligence, or environmental hazards, it may strongly indicate the necessity of opting for an asset purchase.

Contracts and Permits: In an asset purchase, the buyer usually negotiates or obtains new contracts, licenses, and permits to continue business operations, as existing agreements do not automatically transfer. On the other hand, in a share purchase, existing contracts and permits typically remain in force since the legal entity remains unchanged, avoiding the need for extensive renegotiations. This can be beneficial as in most cases it allows the buyer to continue business operations without the need for extensive renegotiations or obtaining new approvals.

Tax Implications: The choice between a share acquisition or asset acquisition becomes more complex due to the inherent conflict between the interests of the vendor and purchaser regarding income tax considerations. Typically, buyers prefer asset purchases as it provides a cost base for certain assets which can be depreciated. On the other hand, sellers prefer share purchases as it may result in preferential tax treatment, treating the sale proceeds as capital gains. Resolving this conflict becomes a matter of negotiation.

Due Diligence: Share purchase due diligence is broader and more encompassing, as it involves assessing the entire target company and assuming all its liabilities. On the other hand, asset purchase due diligence is more focused, as it centers on the specific assets to be acquired and allows for more control over the liabilities taken on by the purchaser.

Transfer of Employees: In an asset purchase, employment contracts do not automatically transfer to the buyer. While the asset purchase allows for a selective assembly of the workforce, certain obligations, such as length of service for severance pay, may still transfer. On the other hand, in a share purchase, the purchaser inherits the entire workforce and all severance obligations to employees, significantly impacting future plans for downsizing or integration.

Conveyancing Costs: Transferring shares is simpler than completing an asset transfer. Share transfers involve limited conveyance documents, while asset transfers require an extensive set of documents and potential third-party consents. Asset transfers may also incur significant registration costs and Property Transfer Tax. Share purchases may have to deal with contracts with third parties that contain restrictions on a change in control.

Want to know more?

What Are Usual Or Typical Conditions Precedent That a Purchaser Would Want in an Asset Purchase Agreement? 

What Are Usual Or Typical Conditions Precedent That a Purchaser Would Want in a Share Purchase Agreement?

 

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Understanding the Usual Terms for a Letter of Intent in British Columbia Business Purchase

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Introduction:

A letter of intent (LOI) is a valuable tool for parties seeking to assess their initial agreement on significant business terms before diving into formal purchase and sale negotiations. Acting as “term sheets,” a LOI streamlines the creation of final binding agreements.

Common LOI Terms

Parties: Clearly identify the involved parties accurately, providing their full legal names and addresses, ensuring the document’s legality and a strong foundation for negotiations. Additionally, the LOI should identify any rights that are assignable to a third party.

Purchase Price: Outline the purchase price, either as a fixed figure or within a negotiable range, along with payment method and timing details. Additionally, the sellers may often require purchasers to make a deposit towards the purchase price.

Assets and Liabilities: Clearly specify the assets and liabilities to be included in the purchase to avoid any misunderstandings during negotiations.

Due Diligence: Grant the buyer the right to conduct due diligence on the business to ensure transparency and assess viability.

Exclusivity: Consider an exclusivity clause to commit both parties to negotiate exclusively during the specified period.

Important Dates: To ensure a smooth and efficient transaction, it is advisable to establish a well-defined timeline that outlines key dates for signing the purchase agreement, target closing date, and other critical milestones.

 

Non-Solicitation: The seller will aim to incorporate a binding clause in the letter of intent, preventing the buyer from soliciting or recruiting the seller’s employees if the transaction does not proceed. On the other hand, the buyer will seek to restrict the non-solicitation provision to enable hiring the seller’s employees through general job postings.

Confidentiality: Include a confidentiality clause to safeguard proprietary information exchanged during negotiations. Additionally, the confidentiality prevents employees from becoming preoccupied with the ramifications of the sale and maintains their loyalty.

Binding or Non-Binding Nature: Explicitly state whether any part of the LOI is binding on the parties.

Termination: Address conditions for termination, such as mutual agreement or failure to reach a definitive agreement.

Conclusion

The LOI sets the stage for negotiations when purchasing a business in British Columbia. By outlining key terms and conditions, buyers and sellers establish a framework for discussions and ensure a smooth and transparent transaction process.

 

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