Presentation will cover - oktla · all profit distributions to First Nation Limited Partners Income...
Transcript of Presentation will cover - oktla · all profit distributions to First Nation Limited Partners Income...
Presentation will cover 1. Securing informed and lasting
consent 2. Distinguishing political approval
from economic development 3. Maintaining decision making
consistency 4. Recommended best practices
When Approvals will be sought
Formation of FN Entity
Formation of Project
Partnership
Securing Equity
Financing
Tasks to assist Senior
Financing
Grants
Amendments
Corporate Structures Goals: Minimize Liability Minimize Tax Payable For off-reserve Projects, 2 options: Limited Partnership Principal Business Corporation
Corporate Structures 1. Limited Partnerships
Comprised of a General Partner (corporation) and Limited Partners (First Nations); Most decisions made by board of directors of the GP
First Nation is responsible for electing board; recommend board members not be chief and council (s. 13 Limited Partnership Act)
Limited Partnership Agreement and GP Shareholders Agreement stipulate matters requiring First Nation approval
Chief and Council may identify a proxy to hold authority for providing such approvals
Corporate Structures 1. Limited Partnerships
Partnership Agreement should allocate virtually all profit distributions to First Nation Limited Partners
Income Tax Act exempts from tax income earned by a “public body performing a function of government.” First Nation may qualify as such a public body by: Passing by-laws under ss. 81 & 83 of Indian Act Entering health service transfer agreements with
other levels of government Providing education in band-operated schools
Corporate Structures Limited
Partnership
General Partner Corporation First Nation A First Nation B
First Nation A
First Nation C
First Nation B
First Nation C
Limited Partners Shareholders of General
Partner
Corporate Structures 2. Principal Business Corporations
Corporations whose principal business involves the generation or transmission of electricity in Ontario
Proposed amendment of the income tax act to allow such corporations tax exempt status (proposed since 2002; not yet passed although amendment is uncontroversial)
Corporation governed by its board of directors; simpler structure for First Nations participating in energy and infrastructure projects, but not yet available
Corporate Structures 3. Project Representative
Ensures information flows between: Proponent Advisors (Financial, Legal, Technical) Board of Directors of General Partner Chiefs and Councils / appointed
proxies / Communities Benefits: Provides instructions to advisors Sustains political support for project Keeps community informed
Community Approval Project should be defensible. Consider:
1. Is the Project a good fit for the community?
2. How much does the community stand to gain?
3. How is this gain balanced against the initial outlay of capital needed to get a project off the ground?
4. Responsibility to cover project costs if project doesn’t reach financial close?
Community Approval: Jobs Difficulty: How FN Project revenues are managed are
dependent on Chief and Council; may not hold broad support
Recommendation Secure priority job opportunities for community
members; take steps to realize opportunities Benefit Jobs have a significant, positive, impact at the
community level Support can cross political lines following job
creation
Community Approval: Env’t Difficulty: Skepticism about proponent’s intention in
community and desire to protect environment and culture in traditional territory
Recommendation: Involve members of the First Nation in Project
committees overseeing environmental decisions Benefit: Real steps taken to form true partnerships
increase trust and likelihood that a Project will have a mandate from the community to proceed
Community Approval: Info Difficulty Without clear information, community’s perception of
a proposed project may not be accurate Recommendation Hold frequent meetings in each community, before,
during and after approval process Invite both proponent reps and community advisors to
attend to ensure robust discussion about benefits Benefit Helps maintain community consent; dispel
misinformation A strong community meeting can provide chief and
council confidence that it is operating according to the wishes of its electorate
Council Approvals Time and effort is required to present a proposal
for a Project to a community and obtain direction from chief and council to proceed
Corresponding band council resolutions should have the proper breadth to carry out this direction: Adequacy of consultation undertaken in respect
of the Project Approval of the FN corporate structure and
appointment of directors / proxies Approval of entering partnership documents with
proponent Raising equity financing of First Nation corporate
entity and pledging security held by First Nation Any other related approvals
Council Approvals Shift from political approval to
economic development BCR should vest future decision making
authority of First Nation in a particular individual (e.g. Project Rep.)
Of greater importance with those projects involving many first nations
Unless otherwise revoked by BCR, authority should last until individual’s resignation or commercial operation date of Project
Council Approval Benefits Beyond council approval of Project, future
approvals may still be needed from a First Nation Easier if there is a representative with knowledge
of and support for the Project; chief and council often have many other critical items on their plate
BCR granting authority should be revocable; intention is to avoid situation of being unable to make a decision
Difficulties May not be possible: gov’t / lenders are
conservative in interpreting breadth of a BCR; also need FN comfort with delegation
Conclusion 1. Corporate Structure:
Limited Partnership Principal Business Corporation
2. Community Approvals:
Defensible Project Jobs Environmental Input Community Meetings
3. Council Approvals:
Take the time to secure one approval Grant authority to an individual to make future
approvals
Conclusion During approval stage of Project, a First
Nation is required to appoint: 1. Board of Directors of General Partner 2. Project Representative to Liaise with
Community 3. Proxy of First Nation Shareholders /
Limited Partners 4. Authorized signatory for First Nation (as
First Nation) All individuals should be in place until
resignation or commercial operation, whichever is earlier.