This document discusses options for structuring Aboriginal business ventures in the context of Impact and Benefit Agreements (IBAs) with resource developers. It notes that limited partnerships have traditionally been used but recent court rulings mean they may no longer allow access to tax exemptions. The document explores alternative structures like corporations, sole proprietorships, general partnerships, and limited liability partnerships, concluding that First Nation limited liability partnerships may provide better liability protection and tax treatment going forward.

1. Creating Aboriginal Enterprises
Merle Alexander & Georgia Pears
Aboriginal Land and Resource Forum
Coast Salish Territory, BC
IBA negotiations and structures for First Nation Collaborative
Business Ventures

2. IBA Elements to Ensure Future Benefits
• Equitable role in the economy
• Respect for our culture and TK
• Environmental compliance that sets
standards
• Prosperous and sustained livelihood
• Benefits that leave a legacy
• Investment equal to extracted resources
• Fairness stands the test of time
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3. Collaborative Ventures to Maximize IBA Opportunities
• Popular forms - joint ventures, partnerships and
alliances
• Can be set up alongside and integrated into IBA
• Industry gains preferential access to major contracts
• Helps fulfill project proponents’ obligations to consult
and accommodate
• Fosters capacity building for First Nation businesses
and citizens
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4. How to Make Contracting Opportunities Meaningful?
• Conduct due diligence on existing First Nation
businesses and entrepreneurs
• Determine an inclusive and flexible definition of “First
Nation Business”
• Accommodate operating challenges
• Capacity development to participate more broadly
• Tax planning
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5. Options to Maximize Contract Opportunities
• Direct award contracts
• First preference processes
• Open book negotiations
• Appropriate tendering criteria (eg bonding)
• Define role of primary contractor
• Size contracts to allow participation
• Business development assistance
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6. Sustaining Momentum
• Monitoring performance
• Reporting out
• Branch out to new projects/areas
• Conduct periodic reviews to assess what’s working
• Set targets
• Retain project liaisons for continuous communication
• Tailor dispute resolution
• Maintain employment and business inventories
• Provide adequate resources for implementation
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7. Strategies to Reach Collaborative Ventures
• Clear understanding of goals and objectives
• Demonstrated business skills and capacity
• Credibility
• Listening to the signals
• Flexibility as the project changes
• Pilot projects or stepped commitments
• Understanding the deal
• Understanding the risk/reward relationship
• Solid business partners
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8. Structures for Business Ventures
• Sole proprietorship
• Corporation
• Contractual JV
• Corporate JV
• General Partnership
• Limited Partnership
• Limited Liability Partnership
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9. Limited Partnership
• Typically, First Nation business ventures have
taken form as Limited Partnerships:
• First Nation band as limited partner: 99.9% interest
• Band-controlled and owned incorporated entity as
general partner: 0.1% interest
• Why?
• Compared to contractual JV, corporation and
proprietorship, LP was thought to give both limited
liability protection and profit maximization through
access to s.87 Indian Act exemption
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10. LP: Liability
• General partner controls and manages LP: unlimited
liability, but corporate form protects the SHs
• Limited partner(s): not liable for the obligations of the
LP except in respect of amount of property he/she
agrees to contribute to the LP
• Limited partner(s) cannot participate in the
management of the LP: if they do, they are liable as
general partners:
• “limited partner is not liable as a general partner unless
he or she takes part in the management of the business”
s.64 Partnership Act
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11. In LP: s.87 thought to apply proportionally
• Section 87 Indian Act
• 87(1): Notwithstanding any other Act of Parliament or any Act of
the legislature of a province, but subject to section 83 and section
5 of the First Nations Fiscal Management Act, the following
property is exempt from taxation:
• (a) the interest of an Indian or a band in reserve lands or
surrendered lands; and
• (b) the personal property of an Indian or a band situated
on a reserve.
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12. 2013: Earth Shattering Changes for the FN LP?
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13. 1. Edenvale Restoration vs. BC (Finance) 2013
• Justice Tysoe: “the General Partner was the
‘purchaser’ because it acquired property ‘on behalf of
or as agent for the principal’
• In Sum: A GP must pay the full amount of PST that
applies to any purchases made on behalf of a LP even
where the limited partner would not have to pay PST
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14. 2. Tron Power v. Saskatchewan (Finance) 2013
• Tron Power LP: The Typical FN LP structure
• “... sales of assets conducted by the general partner
are transacted by that general partner. It becomes the
owner of such assets. For tax purposes, it is treated
independently.”
• “the mere fact that Tron buys goods and takes delivery
on-reserve in its capacity as the general partner of a
limited partnership does not allow Tron to shed its
corporate mantle and obtain the benefits of an
individual while retaining the benefits commensurate
with corporate status...”
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15. 3. B.C. Ministry of Finance
• PST Bulletin 319 (2013)
• “Unless a limited partnership agreement provides
otherwise in writing...any transaction involving the limited
partnership is considered to be a transaction with the
general partner...the general partner(s) is considered to
own the partnership’s assets.”
• Ministry of Finance Tax Bulletin (2014)
• “Unless a limited partnership agreement provides otherwise
in writing, any transaction involving the limited partnership
is considered to be a transaction with the general partner”
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16. Consequences
• The Typical FN LP structure is now at risk of losing
access to the s.87 Indian Act exemption for PST
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17. What’s Left?
• Corporation?:
• Incorporated entities not entitled to the s.87 exemption
• Sole Proprietorships/contractual JVs?:
• liability concerns and structuring difficulties
• General Partnership?:
• Partners in a general partnership are liable for all
partnership obligations: liability issues
• Unincorporated GP in an LP?:
• Liability issues will arise since the GP has unlimited
liability: a risky move
• Change wording in the LP partnership agreement?
• The Ministry of Finance has given limited guidance as to
what would be the necessary wording to ensure s.87
applicability: trade-off would be LP loses limited liability
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18. What about the Limited Liability Partnership?
• The LLP is relatively new to Canada
• Since 2004, non-professional LLPs are allowed in B.C.
[not available in all jurisdictions]
• A hybrid of the LP and the GP models
• No General Partners: the GP’s role may be spread
out across all partners of an LLP: can draft as you wish
to concentrate GP role for one partner
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19. Structure of the LLP
• s.104(1)(a): a partner in an LLP is not personally
liable for:
• An LLP obligation simply because he/she is a partner
• An obligation under a K between the LLP and another
• But partners are liable for:
• Their own actions in the LLP
• Partnership obligations to the extent of the partner’s own
share in the LLP’s assets
• Wrongdoings of other partners or LLP employees if they
knew about it and did nothing to stop it
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20. S.87 Treatment for LLPs
• Each partner in an LLP is considered to own a
proportionate share of the partnership assets equal
to the partner’s interest:
• The LLP should be able to claim the s.87 exemption to
the extent of interests owned by the Indian and/or Band
partner(s) (unless the partner is incorporated)
• “…LLPs with a First Nation partner(s) are entitled to an
exemption from motor fuel tax and carbon tax…the
exemption is proportional to that First Nation
partner’s interest in the partnership...” – Ministry of
Finance 2014
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21. RISKS?
• The LP may seem safer, but partners in LP risk
losing limited liability
• what constitutes “participating in management”?
• Unclear and uncertain
• The LLP may give more certainty regarding
partners liabilities
• The LLP allows for management to the degree wished
and places clearer statutory limits on liability
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22. First Nation LLPs may be the way of the future
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23. montréal  ottawa  toronto  hamilton  waterloo region  calgary  vancouver  beijing  moscow  london
Thank You
Georgia Pears
Tel: 604-443-7618
Email: georgia.pears@gowlings.com
Merle Alexander
Tel: 604-891-2271
Email: merle.alexander@gowlings.com