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Positioning for the recovery - Legal perspectives

Published on December 03, 2009


By Eric Spindler, Blake, Cassels & Graydon LLP 

In the last year, we've been through one of the worst recessions in recent memory. Companies have cut costs and pruned their balance sheets just to survive. Hopefully the worst is over and we can begin to look forward to recovery. As conditions improve, there should be opportunities on various fronts. Here are some things to think about which have legal implications.

Customers: During the tough times, you may have made accommodations for customers, allowing for extended payments, delivery postponements and order cancellations. As the climate improves, it may be worthwhile to review your contractual arrangements. Prompt payment provisions might be considered. Ongoing purchase commitments might be established. Terms and conditions might be renewed in your favour.

Suppliers: Relationships with suppliers may have been affected by the recession as well. You may have needed price concessions, reduced volumes or other adjustments. As things pick up, reliability of supply may become increasingly important to you. Delivery schedules may be of mounting concern. Quality specifications may need to be upgraded as competition intensifies. You may want to add some of these things to your agreements.

Logistics: As business activity is restored, supply and distribution channels will fill up again. Are your logistics arrangements sufficient for the future? Should you consider outsourcing or insourcing various aspects? There may be contractual considerations that need to be taken into account in achieving the best solutions.

Lenders: Hopefully lenders will become more accessible as credit conditions improve. This may allow for a review of loan arrangements for operating lines and asset financing. There might be possibilities for adding to availability or adjusting covenant restrictions or security. Sources of private debt or equity capital may also become available. Structuring their involvement would require careful consideration.

Employment: Having gone through lay-offs and wage-freezes, it will be refreshing to look towards new hiring and performance incentives. Compensation and terms of employment for management people may need renewed attention, along with labour relations for both union and non-union hourly workers.

Acquisitions: Improving financial flexibility may allow for acquisitions. This could be a good time to increase scale by acquiring a competitor, or maybe to broaden scope by adding product or geographic reach. Alternatively, conditions for divestiture of a non-strategic asset may be better. In either case, there may be room for negotiation of purchase and sale terms. There may also be opportunities for joint ventures, depending on the scope and terms of engagement with potential partners.

Technology: Investment in plant and equipment and expenditures for research and development could become a priority again. With increasing demands for productivity improvement and product specialization, protection of technology and other intellectual property continues to be vitally important.

Competition: Coming out of the gate, there may be a chance to get ahead of competitors. You may want to check with your marketing and sales people that they understand and can avoid problems with competition laws.

Trade: As global conditions improve, you may be able to take advantage of additional trade opportunities with the United States, Europe, China, India and other countries. International trade rules and practices are complicated and there are traps for the unwary. It may be worthwhile to seek guidance from people with experience.


Environment: This is an increasing priority with lawmakers and regulators in Canada and abroad. As economic worries subside, environmental requirements may well intensify. It could be beneficial to look well into the future as to how your business will be affected and how to stay onside.

So, there are some thoughts about what may lie ahead and the underlying legal implications. Overall, it will be good to look forward to positive growth again.

 

November 9, 2009
Eric Spindler
eric.spindler@blakes.com
416-204-2374

 

 

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