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Can your Indigenous Community Achieve its Economic Development Goals?

Updated: May 6

- 10 QUESTIONS AND ANSWERS FROM A LEGAL EXPERT

Stacey Jessiman



Sustainable economic development is a key goal for Indigenous communities working hard to recover from 150+ years of colonial laws and policies aimed at shrinking traditional territories and destroying Indigenous economies.



While the goals for sustainable economic development differ among Indigenous communities, they often include creating revenues, training, employment and infrastructure while protecting traditional lands and resources and increasing cultural connection and community wellness -- both immediately and for generations to come.


Indigenous communities often ask me to figure out why their business groups have not been successful at meeting these goals, and how to meet them in the future. As a lawyer with 25+ years of experience working in Canada and internationally on corporate structuring and governance matters, securities issuances, corporate transactions, Indigenous business and intellectual property issues, and resolving commercial and Indigenous heritage disputes, I have developed the broad understanding of Indigenous clients’ interrelated business and cultural realities that is needed to optimize chances for successful sustainable economic development.


Determining why a business group is performing poorly, and then putting in place the structures, processes and legal documents needed to fix problems (which I refer to as “business group optimization work”), is challenging. It may require assistance from accountants, consultants and others.


(Please note, for the purposes of this blog, I assume that your business group has at the top of its structure either a standalone corporation or a corporation acting as general partner of a limited partnership or managing partner of a limited liability partnership, of which the community represented by its leadership is the 100% owner (ie, its sole shareholder), as well as several businesses that are wholly or majority-owned by that corporation/partnership).


On top of analysing whether a business group’s various corporate entities (e.g., corporations, societies, limited partnerships, limited liability partnerships etc.) are appropriate to the client’s specific circumstances, and whether the legal documents that created those entities need revising, I look for other factors that can lead to costly financial and legal consequences including:

  • inadequate financial and operations reporting by the Board of Directors to the shareholder/community, and by the CEO to the Board of Directors;

  • lack of performance reviews of directors and officers;

  • lack of strategic and business planning;

  • failure to do independent audits; and

  • a shareholder (e.g., a member of Chief & Council) controlling management and use-of-profit decisions (I explain below how this can sometimes cause problems).

If your community is willing to do business group optimization work that is based on principles drawn from decades of success stories on Indigenous economic development, the problems mentioned above can usually be fixed. Below are 10 questions that can help you analyze your community’s readiness for business group optimization work and the likelihood it will achieve its economic development goals.

1) Do your community and its leadership support business group optimization work?


It is easier for business groups to carry out optimization work and attract business opportunities if the community members and leadership support the work. Optimization work usually requires direct involvement of community leadership -- for example, appointing new/more directors to an economic development corporation’s Board of Directors. A key step is engaging with leadership and community members on the process and benefits of business group optimization. I frequently do concise workshops for leadership on these subjects. If your community has not yet done this sort of engagement, I can advise on the options and available funding sources.


2) Does your business group have a Strategic Plan?


A Strategic Plan is essential to successful sustainable economic development. It provides shareholders, directors, officers and employees with clarity on business group goals and methods of achieving them. Strategic Plans usually contain vision and mission statements, identify potential business activities and assets/resources available to support the activities, propose timelines and methods for achieving goals, and describe the process for updating the strategic plan. They should be reviewed annually at the time of operations planning and budgeting, and undergo comprehensive review and revision at least every five years.


Communities that engage in comprehensive community planning typically address economic development strategy as part of that planning work. However, it can also happen separately with the help of experienced consultants. The BCAFN Economic Toolkit (available online) is a useful resource for this work.


3) Does your community have a Trust, with terms clarifying how funds can be used?


A key ingredient of sustainable economic development is community confidence in its business group. Creating a Trust - a legal entity that holds community funds for the benefit of the community (who are the Trust’s “beneficiaries”) – can help achieve this.


A Trust Agreement sets out the purposes of the Trust and permitted uses of funds. The purposes of the Trust should take into account the particular circumstances of each community, and may include the provision of specific goods, programs and services such as skills training, education, housing, culture and language retention, health services including senior care, and sports programs. The Trust can receive distributions of business group profits, and the community can have confidence that those profits will be used in accordance with the trust’s terms, which they helped negotiate. Some Indigenous communities that have received revenues from settlement or impact benefits agreements already have Trusts in place. Experienced advisors typically help with managing and growing trust funds.


4) Is there a written agreement on shareholder and director roles and responsibilities, and key subjects like profit distribution?


Another important step in business group optimization is a written agreement (sometimes called a Governance and Fiscal Agreement) negotiated between the economic development corporation’s Board of Directors and community leaders (e.g., Chief and Council, as representatives of the corporation’s shareholder). It sets out the rights and responsibilities of the directors and shareholder, and other key terms such as Board composition, budgeting and financial reporting, profit distribution, and employment and skills training.


Board composition, and in particular whether and how many community leaders are eligible to serve as directors, is a sensitive issue. Research and case studies, including by the Harvard Project on American Indian Economic Development and the Banff Centre’s Indigenous Business and Economic Development program, show that community leaders controlling management and profit use decisions may compromise sustainable economic development. Why? Community leadership may change regularly, creating instability and loss of key knowledge. Also, while in power, leaders may be under pressure from community members to use profits in certain ways. And, depending on which corporate entity is used, involvement by political leaders in management may violate laws like the BC Partnership Act.


These are some reasons for the recommendation to “separate business from politics”. However, this frequently misunderstood phrase does not mean severing communication between community leaders and the business group. It means structuring a business group and putting in place clear rules and procedures so that the business group is insulated from political instability and so that decisions about profit-use are made with transparency, accountability and community confidence according to best practices (e.g., through annual review of director performance and a director appointment process according to a competency matrix, discussed below).


The issue of profit distribution is another challenging but key aspect of a Governance and Fiscal Agreement. Leadership and community members may want distribution of significant profits, while the Board of Directors must act in the best interests of the corporation, which may require reinvestment of revenues in operations (especially in its early stages) to ensure viability and growth. In reality, the interests and goals of the two groups should be similar -- sustainable economic development. I can advise on formulas for profit distribution to help achieve that goal, taking into account best practices and your community’s individual situation.


Finally, the issue of community member employment and skills training should be addressed. Studies show that Indigenous business groups that invest revenues in capacity building/skills training of community members do better long-term, as do the community members.


It is important that all this is in a written agreement. A written agreement legally binds the parties to respect its terms. A Corporate Governance Policy (see below), which contains key rules relating to shareholder and Board of Director behaviour, also must be prepared, but a policy is generally not enforceable in court like an agreement.


5) Does your economic development corporation have a Corporate Governance Policy?


A Corporate Governance Policy (also sometimes called a Manual) sets out rules on how a corporation operates and interacts with its shareholder, and is a crucial element in sustainable economic development. A well-drafted policy supports ethical business practices and increases confidence of the community and potential business partners, which in turn contributes to stability and profitability.


In the Indigenous economic development context, a Corporate Governance Policy often starts with a description of the Indigenous laws, community values and mission guiding the corporation. Ideally it uses Indigenous language to express key concepts and ideas. This helps community members and potential business partners better understand the business group’s guiding laws, values and vision. It also calls attention to the fact that the Indigenous community shareholder, unlike a western shareholder that might decide to sell its shares, has particular qualities and multi-generational interests that must be taken into consideration.


The policy should also set out the rules governing the Board and its management activities including, among other things:

  • Board composition and appointment according to a list of needed competencies (“competency matrix”);

  • Director roles and responsibilities;

  • Board meetings and decision-making;

  • Code of Conduct;

  • Director performance review;

  • Shareholder/community meetings and responsibilities;

  • CEO responsibilities, and Board oversight and performance review of the CEO;

  • Business venture evaluation and approval;

  • Dispute resolution;

  • Asset protection.

I usually advise clients to let me “hold the pen” and collaborate on the development of the Corporate Governance Policy with any consultants hired to assist with community engagement. Because legislation and case law must be taken into account when managing corporations, involving a lawyer later in the drafting process can result in having to change aspects of the document that the community has agreed on. Not bringing a lawyer in at all can also lead to expensive litigation down the line.


The outcome should be a comprehensive but concise document that complies with applicable Indigenous and Canadian laws, has community support and will be easy for future leadership and Board directors to understand.


6) Is the size and composition of your economic development corporation’s Board of Directors appropriate?


Determining the composition and size of an Indigenous economic development corporation’s Board of Directors involves striking delicate balances between efficiency and affordability, needed competencies and representation of community interests, and community and stakeholder confidence in decision-making.


I typically recommend a Board of between 3 and 7 members and always an odd number, which includes “outside” members (i.e., not community members), with Board size being reviewed from time to time by the shareholder in consultation with the current Board of Directors. Why?

  • A corporation that does not yet have significant revenues may need a smaller Board, to afford and facilitate attendance at meetings needed for decision-making, while a corporation with significant revenues and business streams would likely benefit from a larger Board with a wider variety of competencies;

  • An uneven number of Board members helps ensure tie-breaking during votes;

  • Appointing outside Board members can help avoid accusations of conflicts of interest and lack of stakeholder confidence in decision-making, while adding skills needed to complete the competency matrix. Many successful business groups mandate having a majority of “outside” directors;

  • A competency matrix should be reviewed annually and take into account current and projected activities.

Director appointments are often one of the most controversial subjects. Leadership and community members understandably want to ensure the business group is operating in a way that respects community laws, values and stewardship obligations towards traditional territories. Including a competency matrix in your Corporate Governance Policy that requires ensuring expertise in key areas when there are Board vacancies (for example: community lands, resources and culture; finance; legal; prior Board experience; experience in relevant industries) can help avoid conflict over director appointments.


7) Does your CEO report regularly to the Board and is performance reviewed annually?


Regular reporting by the CEO to the Board on operations and financial matters, and annual performance review of the CEO by the Board, are crucial to your business group’s success short and long-term. Your Corporate Governance Policy can help ensure the CEO’s good businesses practices by outlining the CEO’s responsibilities -- including budgeting, financial and operations reporting, and business planning - and by providing a detailed performance review procedure as well as a Code of Conduct that the CEO must follow. Making sure your CEO understands its duties as company senior officer and Board employee can help avoid expensive legal problems. I can assist your corporation with putting in place systems needed to ensure this.


8) Are financial statements audited regularly, and do you hold in-person Annual General Meetings?


When Indigenous leaders ask me why their business groups have not been profitable, one of the first questions I usually ask is whether they are invited to in-person Annual General Meetings (AGMs), and whether corporation financial statements are audited annually by am independent accounting firm.


A mistake that community leaders sometimes make is signing annual shareholder written consent resolutions, which by law relieves their economic development corporation from holding an in-person AGM. Corporations’ Records Offices (which are often law firms) prepare these consent resolutions as part of annual maintenance work. They often contain boilerplate language acknowledging receipt of financial statements by the shareholder and waiving an audit. Audits may be expensive, but they help ensure good financial practices and stakeholder confidence, and should not be waived without careful consideration.


An AGM provides an important opportunity for the shareholder to receive a report on operations from the directors, and ask questions about financial statements to the directors and auditor (who must by law be invited). The other important aspect of AGMs is the appointment (or re-appointment) of directors, which should be preceded by shareholder review of director performance (the process for evaluation of director performance should be set out in your Corporate Governance Policy).


9) Does your Board of Directors hold regular meetings, and are meeting minutes and written consent resolutions filed in the corporation’s Records Book?


In addition to obligations set out in an economic development corporation’s Governance and Fiscal Agreement and Corporate Governance Policy (and its Code of Conduct), directors and officers have other duties to corporations set out in legislation and case law. For example, the BC Business Corporations Act states that:


142(1) A director or officer of a company, when exercising the powers and performing the functions of a director or officer of the company, as the case may be, must

(a) act honestly and in good faith with a view to the best interests of the company,

(b) exercise the care, diligence and skill that a reasonably prudent individual would exercise in comparable circumstances,

(c) act in accordance with this Act and the regulations, and

(d) subject to paragraphs (a) to (c), act in accordance with the memorandum and articles of the company.

How do directors and officers fulfill these obligations? Your Corporate Governance Policy, if properly drafted, will discuss ways to fulfill these duties, among them calling and attending regular Board meetings, ensuring proper records are kept by the Secretary of decisions taken at meetings, and maintaining the confidentiality of information obtained in their role as director or officer. I can provide training sessions for your directors and officers on their legal duties and ways to fulfill them.


10) Have your employees signed employment, confidentiality and intellectual property agreements?


Sustainable economic development is easier to achieve when revenues that could be spent on growth do not have to be diverted to employment and intellectual property lawsuits. One way to reduce the likelihood of lawsuits is to have employees sign employment agreements drafted by employment law experts that contain clear terms on job responsibilities, performance reviews, compensation and benefits, termination and severance, and confidentiality (to protect your company’s business data and secrets), among other things. Employees should also be asked to sign:

  • intellectual property agreements that clarify that any creations (e.g., inventions such as software, designs such as logos) during employment are assigned to and owned by the corporation, and

  • non-solicitation agreements prohibiting employees from soliciting business group employees and clients when they leave.

Without these in place, your business may be at risk, and you are more likely to have to spend revenues on litigation.



As the last few years have taught us, unpredictable events such as a pandemic can affect business group success. However, if you answered yes to most or all 10 of these questions, your business group is increasing its chances of achieving its economic development goals. If you need help with any of the processes or documents mentioned above, please feel free to contact me at stacey@jessimanlaw.com



© 2021 Stacey R. Jessiman