DOING BUSINESS AND RAISING CAPITAL IN CANADA Whether investing or starting a business, our all-in-one guide covers what you need to know to navigate the Canadian marketplace. A Business Law Guide DOING BUSINESS AND RAISING CAPITAL IN CANADA A Business Law Guide This guide is a general discussion of certain legal matters and should not be relied upon as legal advice. If you require legal advice, we would be pleased to discuss the matters in this guide with you, in the context of your particular circumstances. © 2019 Torys LLP.www.torys.com All rights reserved. i THE PURPOSE AND SCOPE OF THIS GUIDE This business law guide is a general overview of certain legal and business matters that may be relevant to a decision to establish or invest in a business in Canada. Parts 10 and 11 summarize some of the ways in which foreign issuers can raise money in Canadian capital markets and some of the activities that may be carried on in Canada by foreign securities dealers and advisers and investment fund managers. It is important to note that the information contained in this guide is accurate as of the date shown below. Because the laws and policies of governments and regulatory authorities may change from time to time, some of the information may no longer be accurate when you read this. In this guide, unless the context suggests otherwise, the term “a province” or “provinces” of Canada indicates also “a territory” or “territories” of Canada. This guide of course does not encompass all the possible legal, business and other issues that may have an impact on or be relevant to establishing or investing in a business in Canada. And since it is a general overview, this guide should not be regarded as either exhaustive in subject matter or comprehensive in discussion. It is not, therefore, a substitute for qualified, professional advice, which should be sought before establishing or investing in a business in Canada or otherwise undertaking the activities in Canada described in more detail throughout this guide. July 2019 www.torys.com iii CONTENTS 1 CANADA AS A PLACE TO DO BUSINESS, INVEST AND LIVE .............................................................................. 3 Canada’s Economy ............................................................................................ 3 Geography and Population ................................................................................ 3 Quality of Life ...................................................................................................... 4 2 CANADA’S SYSTEM OF GOVERNMENT ........................ 7 Division Of Legislative Authority ........................................................................ 7 Common and Civil Law ...................................................................................... 7 Regulatory Bodies .............................................................................................. 7 3 BUSINESS CORPORATIONS .................................................. 11 Choice of Jurisdiction of Incorporation ........................................................... 11 The Incorporation Process .............................................................................. 12 Duties and Liabilities of Directors .................................................................. 12 4 STANDARDS OF BUSINESS CONDUCT AND CONSUMER PROTECTION ....................................................... 15 Corruption of Foreign Officials ........................................................................ 15 Legislation for the Protection of Privacy ......................................................... 16 Anti-spam Law .................................................................................................. 17 5 TAX ................................................................................................................. 19 Income Tax ....................................................................................................... 19 Sales Tax ........................................................................................................... 24 Exportation and Importation of Goods ........................................................... 25 www.torys.com v 6 EMPLOYMENT ........................................................................................ 27 Employment Laws ................................................................................................ 27 Employer Health Tax ............................................................................................ 30 Employee Benefits ............................................................................................... 30 Employee Transfers, Foreign Workers and Business Immigrants ..................... 32 7 WORKPLACE HEALTH AND SAFETY LAWS ................. 35 Federal ................................................................................................................. 35 Provincial .............................................................................................................. 35 Common Law ....................................................................................................... 36 8 LANGUAGE LAWS ................................................................................ 39 9 SECURITIES LAWS .............................................................................. 43 The Legislative Framework ................................................................................. 43 A Note About Aggregation .................................................................................. 44 Aggregation Relief for “Eligible Institutional Investors” .................................... 44 Takeover Bids ...................................................................................................... 44 Exempt Takeover Bids ......................................................................................... 45 Early Warning Reporting ..................................................................................... 45 Alternative Monthly Early Warning Reporting for Passive Eligible Institutional Investors ......................................................................................... 46 Issuer Bids ........................................................................................................... 46 Insider Reporting ................................................................................................. 47 Insider Trading and Tipping ................................................................................ 48 Procedural and Substantive Fairness Requirements ....................................... 48 vi Doing Business in Canada 10 ACCESSING CANADIAN CAPITAL MARKETS ......... 51 Public Offerings ............................................................................................... 51 Private Placements ......................................................................................... 52 Accredited Investors ........................................................................................ 53 Other Exemptions ............................................................................................ 53 Offering Memorandum ................................................................................... 54 Rights of Action and Other Disclosure ........................................................... 54 Resale Restrictions ......................................................................................... 55 Continuous Disclosure .................................................................................... 55 Concurrent Private Placement and Foreign Offering .................................... 55 Selling Restriction Language ......................................................................... 56 Use of the Multijurisdictional Disclosure System by U.S. Issuers ................ 56 Eligibility ........................................................................................................... 56 Public Offerings ............................................................................................... 57 Rights Offerings ............................................................................................... 58 Tender Offers (Cash Takeover Bids and Issuer Bids) ................................... 58 Exchange Offers (Securities Exchange Takeover Bids and Issuer Bids) ..... 58 Special Accommodation for Cross-Border Tender and Exchange Offers ...... 59 Business Combinations ................................................................................. 59 11 ACTIVITIES THAT FOREIGN SECURITIES DEALERS AND ADVISERS MAY CARRY ON IN CANADA .................................................................................. 61 Foreign Securities Dealers ............................................................................. 61 Registration as a Non-Resident Exempt Market Dealer .............................. 62 Exemption from Registration for U.S. Broker-Dealers and Their Agents ...... 62 Exemption from Registration for U.S. Broker-Dealers Trading Securities with U.S. Residents from a Canadian Location ............................................. 63 Foreign Securities Advisers ............................................................................ 63 International Sub-Adviser Registration Exemption ....................................... 64 Exemption from Registration for U.S. Advisers Providing Securities Advice to U.S. Residents from a Canadian Location ...................................