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A shareholder plan for farm employees

With family and non-family ownership, Marie-Claude Mainville’s management of this Quebec farm may become a new Canadian pattern

Back in 1979, friends Jan Van Gennip and Orance Mainville decided to join forces to get into the feedlot business. Van Gennip had the farm, Mainville brought his knowledge of cattle and business, and together they formed Fermes Janor.

Since then, Mainville (now semi-retired) has been joined by his daughter Marie-Claude, and many partners have come and gone in what’s now called “Groupe Janor.” But the corporate collective business model has remained.

Together, with four other shareholders, the Mainvilles manage two farms; one near Farnham, in Quebec’s Eastern Townships and the second southwest of Montreal at Saint-Anicet along the St. Lawrence River.

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The other shareholders are Benoit Cusson, Denis Roy, Emmanuel Decelles and Jean-Marc Paradis. Together with Marie-Claude, the five are full-time employees along with eight other workers carrying out the day-to-day operations.

In total the team markets 7,000 head of beef cattle annually from feedlots at the two locations and also produces mainly corn, soybeans and wheat in rotation on 3,600 acres of highly variable soils (about three quarters corn, 15 to 20 per cent soybeans and the remainder in wheat).

Importantly, the shareholders are all actively involved in the corporation and deeply connected through family and employment. Two of the current shareholders are long-term employees and are the current field and barn managers. When the farm needed a specialized operator, Marie-Claude’s partner/husband Benoit Cusson stepped up. When they needed someone for management and help in the office, they found Jean-Marc Paradis through his wife.

For some shareholders, the ownership strategy is a way to recognize the value of their input into the business and for others, it was a way to attract and retain specific skills, says Marie-Claude Mainville.

Mainville is responsible for the financial, banking, and buying operations as well as crop marketing. Basically, she’s in charge of the paper side of the business, including ensuring the farms are compliant with strong environmental laws in Quebec.

She also leads the ownership and management in decision-making on top of working with Paradis on human resources and being involved outside the company on boards related to feedlot production.

“I’m probably the one who speaks more with all the others on different levels to link everything,” says Mainville. “For example, when it’s time to decide if we buy new equipment, we decide all together, but I am the central point.”

For Mainville, the challenges are many, from external pressures like the volatility of the livestock market and the limited availability of land in Quebec, to internal issues like managing operations across two locations.

However, Mainville says it’s important to keep it in perspective, and although they all want to make money, they need to have fun doing it.

Why a shareholder plan? Marie-Claude Mainville’s answer comes quickly: “You can’t be afraid to bring in the people who are key to the business.”
photo: Studio Nala

The volatility within the market remains the most stressful part of managing the farm. “That makes our financial status highly variable, so that adds stress. You don’t know if you can invest, because it might change in six months,” says Mainville.

Asked if she considers herself an innovator, she dismisses the notion, noting that although they do have a precision seeder with GPS and they adopted cover crops a few years ago (trying inter-cropping in 2017), they’re “somewhere in the middle” technologically, like many farms in the region.

Yet the six-shareholder arrangement for their operation is innovative.

Although such relationships are fairly common in business, in farming they are rare.

In this case, the overall organization begins with a network of companies.

The ownership structure is that Ferme Janor (Orance and Marie-Claude) is the parent company and is a shareholder of the other companies. The four other shareholders have shares in the companies they work for (Fermes Roda, Fermes Richard, Ferme Opso and Ferme EDL).

An Alberta Comparison

Reid Wilkie, a lawyer from Smith and Hersey in Medicine Hat, Alta., is seeing more of these types of structures being used on farms, as farm size increases and as farms transition to the next generation, although it’s still more common to see a partnership owned by several companies, he says.

Wilkie says some farms are using this multi-prong strategy to separate their enterprises, such as cattle versus cropping versus hogs. It also helps with big-value estate planning with multiple children, and can help navigate thorny family issues and operational differences by not farming in one large company.

For example, if one brother wants to expand while the other is more risk averse, separate corporations can be set up for each, with Mom and Dad holding the shares of the parent company.

The strategy also works well for separating enterprises and for sharing ownership of enterprises that carry more liability, such as custom work, so no assets are put into the custom work corporation.

For one 65-quarter farm, Wilkie created this type of structure to help split the land three ways according to time invested in the farm and situations of three sons. The three brothers still share equipment in the common corporation and wrote joint venture agreements to work together.

There are more legal and accounting costs to operating multiple structures. “You can still quasi-farm together,” says Wilkie. “But you need a separate set of books for each of them.”

Wilkie warns though that it’s complex and requires a lawyer to carefully consider all the tax consequences and to ensure the corporations are not considered “linked.”

Since it’s complicated, Wilkie adds, agriculture-smart professionals are a must, especially if you are offering a share plan to non-family employees.

For example, he says, if you have a cattle operation, and you have an employee you want to grant shares to, you can have one company own all the cattle and a different company own the land. That way if you make the employee a shareholder, you can do it in the cattle company (where their good management skills with cattle will pay off) and they won’t then be participating in the value growth of the land since the land is in a different company.

One other thing of note, Wilkie says, is that in the event you bring in a non-family member as a shareholder, it is essential that you have a quality USA (unanimous shareholder’s agreement) in place so the employee is limited in what they can do with those shares. “You wouldn’t want them being sold to some other person without your consent, or being given to an ex-spouse in a divorce,” he says.

Wilkie also emphasizes the need to design a solid exit plan right from the beginning.

Adding a new shareholder

When a new shareholder enters the Janor Groupe, they freeze the value to keep the accumulated value for the existing shareholders. Then the new associate receives participative shares so they will now share any growth in value of the company.

Mainville sees a major strategic value in the approach. “You can’t be afraid to bring in people who are key to the business,” she says.

The strategy, she says, means they “share the capital from the farm… not just a salary, but also sharing the value of your farm,” and she says it can be a powerful attraction, helping ensure the farm attracts and retains people who will drive its performance.

“That’s something I don’t see very often in farming,” she says. “Within the operation, we’re always trying to see the best for the farm — what’s coming and what’s best for the animals.”

Annually they also review share value, trying to balance between the value of the business (i.e. its value if they were putting it on the market) and their annual performance numbers, says Mainville. “We all have to think of the company survival if one of us were to leave or die,” she says.

When retiring, the shareholder will receive payment, some as a loan (capital plus interest) and some via straight dividends, but based on the company’s capacity, and they are paid monthly or annually over a long period in a system similar to a pension.

Again, though, the focus is on building a plan that works for the individual, so there’s some flexibility in the system and they can evaluate the best way to pay at the time the shareholder leaves.

“We have an excellent fiscal adviser,” says Mainville. “If we agree with the person who leaves, you’re not obliged to follow exactly the convention.”

At the beginning of their agreement, the percentage of participation was proportionate to the money invested. Denis Roy went to the bank and took a loan, not a big amount but enough to show his commitment.

Shareholders with a college degree were able to obtain funds from the provincial agriculture support program. This money was put in special shares and accounts for the total of the shareholder. (Quebec offers up to $50,000 for starting farmers.)

The owners/managers of Janor also participate in local farm associations, sharing their thoughts and experiences, and are well known in the feedlot industry in Quebec. “We are influencers.” says Mainville. “We often have visitors to the farm, including agricultural students and veterinary students. We’re trying to give them a good look, a good vision of what they can become. And it might be a surprise to see how a feedlot operates and the business side of it.”

It’s also part of their outlook on farming and life, sharing what they know with people who want to learn. “We don’t have any secrets and we’re very generous with how we open the door,” she says.

Building local market opportunity is a challenge since there’s no large-scale processing plant nearby and much of the beef from the region is processed in Ontario. “Presently we’re working with the association and trying to create “Quebec Beef,” so that the consumer can buy beef that they know has been produced here.”

Mainville sees enormous value in connecting with consumers. “Today, we are obliged to do that, or else they’ll leave us… We have to be sure that people will eat beef, and show them that we’re good and that there are actual people behind the steak they are eating.”

In fact, she believes that more and more consumers are listening — more than she had earlier thought.

A system based on trust

Group managing with six shareholders on two geographically separate locations means everyone has to trust each other.

This trust is uniquely built into their business ownership model since they all have a stake in the operation. In other words, each is involved in the success of the operation because it’s their farm too.

As for growing the operation, Mainville acknowledges the challenges that stand in the way, namely the provincial land-use restrictions and the environmental awareness that goes with livestock farming.

“It’s motivating to try to do more with what we have,” she says. “And it’s forced us to be creative.”

This article originally appeared as “Six shareholders” in the January 2018 issue of Country Guide.

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