Opinion letter

How BC law treats it

A legal opinion letter is a transactional document, not evidence. It is usually delivered at closing by the borrower's or vendor's counsel to a lender, purchaser or investor. For a BC company, a typical corporate opinion covers that the company exists under the Business Corporations Act, SBC 2002, c 57 (BCBCA), has the capacity to enter the transaction, has authorized it by the required directors' and shareholders' resolutions, and has duly signed and delivered the documents. An enforceability opinion goes further and states that the agreement is a legal, valid and binding obligation, subject to bankruptcy and equitable remedies qualifications. Every opinion rests on stated assumptions (for example, that signatures are genuine and that the other parties have authority), on searches and officer's certificates the lawyer relies on, and on qualifications that carve out matters the lawyer cannot confirm. The opinion speaks only as of its date and only on the law of the jurisdiction where the lawyer practises, so a BC lawyer opines on BC law and applicable federal law. A lawyer who gives an opinion to a non-client invites reliance and may owe that party a duty of care in negligent misrepresentation. Opinions therefore name who may rely on them and for what purpose. BC lawyers must also comply with the Law Society of BC's Code of Professional Conduct, including on conflicts when acting for one party while giving an opinion to another. This is separate from expert opinion evidence in litigation, which is governed by Part 11 of the Supreme Court Civil Rules.

What it means for your business

Lenders and sophisticated buyers often make delivery of an opinion a closing condition, so it can delay a financing or acquisition if corporate records are incomplete. Missing resolutions, unregistered share transfers or gaps in the central securities register must usually be fixed before counsel can give a clean opinion. Negotiating the scope of the opinion early saves cost and avoids last-minute disputes over assumptions and qualifications. Example: A Vancouver tech company borrowing $3 million from a bank must deliver its counsel's opinion that the company exists, has authorized the loan and has validly signed the security documents. Its lawyer first fixes gaps in the minute book.

Risks and common mistakes

Leaving minute book clean-up until the week of closing, when the opinion cannot be given without it. Agreeing in the term sheet to an opinion on matters no lawyer can reasonably confirm. Treating an opinion as a guarantee that the deal is commercially sound. Relying on an opinion addressed to someone else without being named as a permitted relying party. Confusing a closing opinion with an expert report used in court.