Bruce Telecom to operate as multiple companies for tax purposes

New board of directors to be appointed to oversee financial management
Section: 
News

By Barb McKay

The establishment of Bruce Telecom as a municipal services corporation could be completed as early as the beginning of October.

Following a lengthy closed session last Monday evening, the Municipality of Kincardine council held a special meeting to approve the new governance model for the municipally-owned telecommunications company, appoint a selection committee for a new board of directors and allow Kincardine CAO Sharon Chambers to initiate the recruitment process.

After considering a number of potential corporate structurescouncil, Bruce Telecom’s current board of directors and legal consultants with Borden Ladner Gervais settled on a holding company model. The Municipality of Kincardine will own the parent holding company and there will be two subsidiaries – one that serves customers within the municipality of Kincardine that will be non-taxable and another that serves customers outside the municipality, which will be subject to corporate taxes.

Mark Rodger of Borden Ladner Gervais has been working with the board and council since the beginning of 2016 on how best to move forward with Bruce Telecom following the failed sale of the company to Eastlink. In April of last year, council resolved to begin the process to convert Bruce Telecom to a municipal services corporation from a municipal services board in order for the company to keep its business strategies more confidential and therefore be more competitive in the marketplace.

“If (Bruce Telecom) were to remain as it is it would be a harvesting of the assets and the value would erode over time,” Rodger said.

There are a number of legal steps that have to be completed before the new corporate structure becomes official. A shareholder declaration needs to be finalized that outlines the Municipality of Kincardine’s (as sole shareholder) expectations for the company moving forward and establish a policy for dividends. A bylaw for an asset transfer agreement needs to be passed by council which would authorize the transfer of lands and employees and determine how contracts would be handled. Under the agreement, council can attach conditions to any transfer of assets.

Over the course of the summer, Bruce Telecom’s management team is expected to complete an implementation plan for the companies. That plan and all the final agreements are expected to be presented to council by Sept. 20.

The Municipality of Kincardine is currently advertising for candidates to make up the new Bruce Telecom board of directors. Rodger said that although there will be three companies there will be a single board to provide one source of contact to council and avoid duplication. That board will be involved in decisions regarding strategies to grow Bruce Telecom and the implementation of the business plan. The board will also be responsible for ensuring that Bruce Telecom complies with the shareholder agreement between it and the Municipality of Kincardine.

Rodger said that successful candidates for new board will need to have past experience on private or public boards, business or industry expertise and senior-level accounting, marketing, financial or legal experience. Current board members are welcome to apply but members could potentially come from across Canada. The deadline for applications is Sept. 1 and the new board could be in place by early October.