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Print articleDoing Business in Canada in Quebec
November, 2005 - Diane Bellavance
You intend to take on the North-American market? The Province of Quebec is amongst the best place to do so because of the bilinguism (English and French), important business with the United States of America, tax credits, etc. Here are a few practical issues you should consider.
The Corporate Form
In Canada, there are many legal forms under which a company can do business. The majority of business people choose an incorporation. One of the benefits of incorporation is to limit the personal liability of its shareholders. A company can be incorporated under Provincial law, namely the Companies Act of Quebec, or under Federal law, namely the Canada Business Corporations Act.
The choice of jurisdiction must be carefully considered. Provincial and Federal jurisdictions each offer benefits and drawbacks.
If the corporation is controlled by non-Canadian residents who will be on the Board of Directors, it is preferable to incorporate under the Provincial law.
When the corporation includes a large number of shareholders and it wishes to protect its minority shareholders, incorporating under the Federal jurisdiction is preferable.
A company may have only one administrator, one shareholder and a minimal investment to start up.
Investment Canada Act
Non-Canadians who acquire control of an existing Canadian business or who wish to establish a new unrelated Canadian business are subject to the Investment Canada Act, and must submit either a Notification or an Application for Review to the Investment Review Division of Industry Canada.
Recognizing that increased capital and technology would benefit Canada, the purpose of the Investment Canada Act is to encourage investment in Canada by Canadians and non-Canadians that contributes to economic growth and employment opportunities and to provide for the review of significant investments in Canada by non-Canadians in order to ensure such benefit to Canada.
A proposed investment in Canada by a non-Canadian is categorized as either a “reviewable transaction” or a “notifiable transaction”.
A reviewable transaction, when the investor is based in one of the 148 member-countries of the World Trade Organization (WTO), other than Canada, is a transaction having a value that exceeds a monetary threshold, which is determined annually by the Minister of Industry. For 2005, this threshold has been set at $250 million. Proposed investments emanating from non-WTO countries are subject to a much lower review threshold, namely $5 million in the case of a direct investment.
Also, if the target of the acquisition is active in certain sectors, such as uranium, financial services, transportation services and cultural businesses, the transaction is considered reviewable, regardless of its value.
A transaction that is not reviewable is notifiable.
For a notifiable transaction, a Notification must be filed, at the latest, 30 days following the closing of the transaction, whereas for a reviewable transaction, an Application for Review must be filed with, and cleared by, Industry Canada prior to the closing.
Innovation, Creation
If your business has innovations, inventions or creations, it would be well advised to protect its intellectual property rights. In Canada, as well as in the United States, trademarks, copyrights (including moral rights), patents, designs, integrated circuit topographies and Plant Breeder’s Rights are each covered by their own law. These laws constitute the protection given to intellectual property as a whole in Canada and are under Federal jurisdiction. These laws can interact with each other; for example, it is possible in Canada to protect a software program under the Patent Act, as well as under the Copyright Act. The latter, for that matter, also protects multimedia works.
Taxation
Companies in Canada are taxed on the Federal and Canadian levels and taxation rates vary. Provincial and Federal laws have a significant impact on deciding whether or not to
implement a business in Quebec. “Control” by Canadian non-residents can decrease certain tax benefits normally given to a Canadiancontrolled business (for example: Research and Development tax credit).
Other Laws
Other laws may need to be considered by a non-resident wishing to do business in Canada. For example, the Customs Act, labor laws, consumer protection laws and the Securities Acts
of the various provinces. It would also be useful to verify with your Canadian legal counsel whether particular laws apply to your industry.
Link to article
The Corporate Form
In Canada, there are many legal forms under which a company can do business. The majority of business people choose an incorporation. One of the benefits of incorporation is to limit the personal liability of its shareholders. A company can be incorporated under Provincial law, namely the Companies Act of Quebec, or under Federal law, namely the Canada Business Corporations Act.
The choice of jurisdiction must be carefully considered. Provincial and Federal jurisdictions each offer benefits and drawbacks.
If the corporation is controlled by non-Canadian residents who will be on the Board of Directors, it is preferable to incorporate under the Provincial law.
When the corporation includes a large number of shareholders and it wishes to protect its minority shareholders, incorporating under the Federal jurisdiction is preferable.
A company may have only one administrator, one shareholder and a minimal investment to start up.
Investment Canada Act
Non-Canadians who acquire control of an existing Canadian business or who wish to establish a new unrelated Canadian business are subject to the Investment Canada Act, and must submit either a Notification or an Application for Review to the Investment Review Division of Industry Canada.
Recognizing that increased capital and technology would benefit Canada, the purpose of the Investment Canada Act is to encourage investment in Canada by Canadians and non-Canadians that contributes to economic growth and employment opportunities and to provide for the review of significant investments in Canada by non-Canadians in order to ensure such benefit to Canada.
A proposed investment in Canada by a non-Canadian is categorized as either a “reviewable transaction” or a “notifiable transaction”.
A reviewable transaction, when the investor is based in one of the 148 member-countries of the World Trade Organization (WTO), other than Canada, is a transaction having a value that exceeds a monetary threshold, which is determined annually by the Minister of Industry. For 2005, this threshold has been set at $250 million. Proposed investments emanating from non-WTO countries are subject to a much lower review threshold, namely $5 million in the case of a direct investment.
Also, if the target of the acquisition is active in certain sectors, such as uranium, financial services, transportation services and cultural businesses, the transaction is considered reviewable, regardless of its value.
A transaction that is not reviewable is notifiable.
For a notifiable transaction, a Notification must be filed, at the latest, 30 days following the closing of the transaction, whereas for a reviewable transaction, an Application for Review must be filed with, and cleared by, Industry Canada prior to the closing.
Innovation, Creation
If your business has innovations, inventions or creations, it would be well advised to protect its intellectual property rights. In Canada, as well as in the United States, trademarks, copyrights (including moral rights), patents, designs, integrated circuit topographies and Plant Breeder’s Rights are each covered by their own law. These laws constitute the protection given to intellectual property as a whole in Canada and are under Federal jurisdiction. These laws can interact with each other; for example, it is possible in Canada to protect a software program under the Patent Act, as well as under the Copyright Act. The latter, for that matter, also protects multimedia works.
Taxation
Companies in Canada are taxed on the Federal and Canadian levels and taxation rates vary. Provincial and Federal laws have a significant impact on deciding whether or not to
implement a business in Quebec. “Control” by Canadian non-residents can decrease certain tax benefits normally given to a Canadiancontrolled business (for example: Research and Development tax credit).
Other Laws
Other laws may need to be considered by a non-resident wishing to do business in Canada. For example, the Customs Act, labor laws, consumer protection laws and the Securities Acts
of the various provinces. It would also be useful to verify with your Canadian legal counsel whether particular laws apply to your industry.
Link to article
