Doing Business in Canada
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DOING BUSINESS IN CANADA 2016 2 | Doing Business in Canada Doing Business in Canada | 3 WELCOME TO CANADA Canada is one of the world’s premier locations for business investment. Boasting an exceptional wealth of natural resources, a sound financial system and world-class infrastructure, Canada is known for innovation in a wide range of sectors. Gowling WLG understands the challenges of establishing and conducting business in this country. With offices in major cities across Canada and around the world, we provide effective counsel and insightful business solutions that help our clients access the full potential of the Canadian marketplace. As one of Canada’s leading business law, advocacy and intellectual property law firms, Gowling WLG understands the challenges of establishing and conducting business in this country. With offices in major cities across Canada and around the world, we provide effective counsel and insightful business solutions that help our clients access the full potential of the Canadian marketplace. Doing Business in Canada was developed to provide business executives, foreign counsel and investors with an overview of the legal aspects of Canadian business operations. The information in this guide is current as of September 2016 and is for general information purposes only. It does not constitute a legal opinion or other professional advice. If you are doing business in Canada or planning to do so, it is highly recommended that you seek detailed and specific advice from experienced professionals. To learn more about doing business in Canada and the services that Gowling WLG provides, visit us at gowlingwlg.com 4 | Doing Business in Canada CONTENTS A. INTRODUCTION TO THE LEGAL E. TAXATION 25 STRUCTURE OF CANADA 8 1. General tax rules 26 1. Federal and provincial jurisdiction 9 2. General application of Canadian 2. Branches of government 9 tax to non-residents 29 3. Common law and civil law traditions 10 3. Canadian taxation of a Canadian resident subsidiary 31 4. Canadian taxation of a branch operation 34 B. BUSINESS STRUCTURES 11 1. Sole proprietorship 12 F. MERGERS & ACQUISITIONS 36 2. Partnership 12 3. Corporation 13 1. Planning a private M&A transaction 37 4. Branch operations 14 2. Regulatory approvals 37 5. Joint venture 14 3. Tax matters 38 4. Employment and labour matters 38 5. Distressed M&A 40 C. SECURITIES LAW & CORPORATE GOVERNANCE 15 G. EMPLOYMENT LAW 41 1. Distribution of securities 16 2. Listing in Canada 16 1. The contractual nature of the 3. Initial public offerings 16 employment relationship 42 4. Continuous disclosure requirements 17 2. Termination of employment 42 5. Civil liability 17 3. Duty of confidentiality 45 6. Financial reporting requirements 18 4. Restrictive covenants 45 7. Shareholder meetings 18 5. Legislation governing the 8. Expedited public financings employment relationship 45 and private placements 18 6. Labour relations 49 9. Prospectus-exempt distributions 18 7. Public health insurance 50 10. Early warning reporting 19 8. Workers’ compensation 50 11. Take-over bids 19 9. Employment Insurance 51 12. Insider reporting 20 10. The Québec Charter of 13. Insider trading and tipping 20 the French Language 51 14. Corporate governance 20 11. The "status" of workers 51 15. Québec 21 16. Dealer, adviser and investment fund H. IMMIGRATION & WORK manager registration requirements PERMIT CONSIDERATIONS 52 and exemptions 21 1. Canada’s Immigration and Refugee Protection Act (IRPA) 53 D. SECURED FINANCING 22 2. Canada’s entry and work permit rules: 1. Banks 23 A general overview 53 2. Other financial institutions 3. Labour Market Impact Assessments and private lenders 23 (LMIAs) through Service Canada 54 3. Security 23 4. LMIA-exempt work permit categories 54 5. Permanent resident status 56 6. Provincial nominee programs 56 7. Other immigration and entry issues 57 8. Other considerations 58 Doing Business in Canada | 5 I. COMPETITION & ANTITRUST LAW 59 N. INTELLECTUAL PROPERTY 89 1. Mergers 60 1. Copyright 90 2. Criminal matters 62 2. Industrial designs 91 3. Reviewable practices 63 3. Patents 93 4. Trademarks 97 5. Enforcement of intellectual J. REGULATION OF FOREIGN INVESTMENT 66 property rights 99 1. Canadian business 67 2. Foreign investor 67 O. PRIVACY LAW 101 3. Acquisition of control 67 4. Review thresholds 68 1. The privacy landscape in Canada 102 5. Review 70 2. Employers 103 6. National security 71 3. Reporting privacy breaches 103 7. State-owned enterprises 72 4. Cross-border transfers and outsourcing 104 8. Sector-specific legislation 72 5. Enforcement 105 K. INTERNATIONAL TRADE 73 P. ADVERTISING & MARKETING 106 1. Importation of goods 74 1. Packaging and labelling 107 2. Anti-dumping and countervailing duties 74 2. “Product of Canada” and 3. Export controls and sanctions 75 “made in Canada” claims 107 4. Controlled goods regime 76 3. IP and copyright 107 5. Investor-state disputes 76 4. Environmental claims 108 6. Canada’s blocking legislation: 5. Contests and promotions 108 The Foreign Extraterritorial Measures Act 76 6. “Sale” claims 108 7. Proactive trade compliance 76 7. Puffery and hyperbole 108 8. Canadiana issues 109 9. Advertising in Québec 109 L. ENVIRONMENTAL PROTECTION 77 10. Penalties for false and misleading 1. Federal environmental laws 78 advertising 109 2. Provincial environmental laws 79 11. Private remedies for false and 3. Municipal measures 82 misleading advertising 109 4. Common law and civil law 82 12. Canada’s Anti-Spam Legislation 110 13. Digital marketing 110 M. REAL ESTATE & URBAN DEVELOPMENT 83 1. Foreign investment 84 Q. CANADA’S ANTI-SPAM LEGISLATION 111 2. Investment vehicles 84 1. Overview 112 3. Acquisitions and dispositions 85 2. Commercial electronic messages (CEMs) 112 4. Due diligence 86 3. Installation of computer programs 116 5. Title insurance 86 6. Land-use planning 86 R. BANKRUPTCY & RESTRUCTURING 119 7. Leasing 87 8. Financing 87 1. Legislation and court system 120 9. Environmental concerns 88 2. Restructuring 120 10. Environmental risk assessment 88 3. Receiverships 122 11. Development controls 88 4. Bankruptcy 123 12. Real estate broker and mortgage broker legislation 88 6 | Doing Business in Canada S. LOBBYING 125 1. Registrable communications 126 2. Lobbying 127 T. FRANCHISE LAW 129 1. Franchise disclosure legislation 130 2. The disclosure obligation 130 3. The duty of fair dealing 131 4. The right of association 132 5. Rights cannot be waived 132 6. Province of Québec 132 U. OIL & GAS 133 1. Land ownership in Canada 134 2. Federal and provincial regulators 135 3. Typical agreements used in the Canadian oil and gas industry 137 4. Protecting your interest 137 5. Project development 138 V. MINING 139 1. Exploration and mining rights 140 2. Foreign investment 140 3. Tax considerations 141 4. Capital raising 141 5. Environmental, health and safety regulations 142 6. Indigenous considerations 142 W. DISPUTE RESOLUTION & LITIGATION 143 1. The court system in Canada 144 2. Civil litigation (including alternative dispute resolution) 144 3. Class proceedings 147 4. Product liability 149 X. WHITE COLLAR CRIME/CORRUPTION 151 1. Foreign corruption 152 2. Antitrust/competition law 152 3. Securities prosecutions 152 4. Fraud 152 5. Corporate criminal liability 153 6. Regulatory prosecutions 153 7. Anti-money laundering & terrorist financing 153 PARLIAMENT BUILDINGS, OTTAWA The Centre Block and Peace Tower were rebuilt after a fire destroyed all but the Library of Parlaiment in 1916. 8 | Doing Business in Canada A: INTRODUCTION TO THE LEGAL STRUCTURE OF CANADA HISTORICAL BACKGROUND Unlike the United States, Canada was not created by a unilateral declaration of independence from the colonial occupation of England. HERITAGE There was no “Canadian revolution” or other similar act that dramatically gave birth to an autonomous and independent At the entrance to Canada’s Canada. Rather, Canada gained independence from England Parliament, carvings of a lion and a unicorn stand guard either side of the through a gradual legislative and political process. Canada’s archway. The lion carries a Union flag and supports the Royal Arms while the principal constitutional document is the Constitution Act, unicorn holds the royal flag of France and represents the Arms of Canada. which includes the Canadian Charter of Rights and Freedoms. Doing Business in Canada | 9 1. FEDERAL AND PROVINCIAL 2. BRANCHES OF GOVERNMENT JURISDICTION The government’s power in Canada is separated into three Canada is a federal state with a federal government based branches: legislative, executive and judicial. in the capital city of Ottawa, Ontario. There are 10 provinces and three territories, and, accordingly, 10 provincial a. Legislative power governments and three territorial governments — each based in the various provincial and territorial capitals. Federally, the legislative branch is the Parliament of Canada. Parliament consists of two houses: the House of Commons The powers of both levels of government are outlined in the and the Senate. The Senate, like the British House of Lords, Constitution Act, 1867. In summary, the federal government has effectively lost all legislative power. The result is that the is empowered to deal with issues concerning the “peace, House of Commons is effectively the sole source of federal order and good government of Canada,” which, for the most legislative authority in Canada. Members of the House of part, means issues of national importance that transcend Commons (known as members of Parliament or “MPs”) provincial borders. These matters include national defence, are elected for a term of five years, but are eligible for foreign affairs, criminal law, immigration, banking, the re-election. national currency, international trade and intellectual property. The political party with a majority of seats in the House of The provinces are empowered to deal with issues that are Commons forms the Government of Canada, and the leader more regional in nature, such as direct taxation within the of this party is the prime minister of Canada.