Invest West – Doing business in Western Canada
While investors considering cross-border investment or expansion into British Columbia, Alberta, Saskatchewan and/or Manitoba may be somewhat familiar with doing business in Western Canada, there are many unique differences that may exist among the federal and provincial legal systems that investors should be aware of.
The following offers a high-level summary of some of the legal issues that organizations should consider when investing in the Western Canadian market.
ONE – BUSINESS STRUCTURE
There are numerous avenues for foreign investors to expand their business interests into Western Canada. The most common approach is incorporating a federal or provincial business corporation. Other options include unlimited liability corporations, partnerships (general, limited and limited liability) and joint ventures. Each option may have significant effects on an entity’s regulatory requirements and tax obligations, as well as liability exposure for its investors.
A.??? Corporations and Unlimited Liability Corporations
A corporation may be incorporated under the federal Canada Business Corporations Act (“CBCA”) or the equivalent provincial corporate statute of one of the Western Canadian provinces. The CBCA and the equivalent corporate statute of each province generally impose similar requirements with respect to a corporation. However, there are differences which may make certain jurisdictions more attractive than others. A few of the key distinctions that foreign investors may want to keep in mind when considering doing business in Western Canada through a business corporation are:
B.???? Partnerships
In Western Canada, partnerships are governed by provincial law. A partnership is not considered a separate legal entity – that is, the income and losses of a partnership are considered to flow through directly to the partners for tax purposes. There are three types of partnerships recognized under provincial law in each province:
General Partnership – features unlimited personal liability of each partner for the liabilities of the partnership, and the exposure of each partner’s personal assets in the event the partnership’s assets are insufficient to cover its obligations. A general partnership is not required to be registered.
Limited Partnership – are structurally similar to limited partnerships in the U.S. They feature both limited and general partners and are required to be registered under applicable provincial legislation. General partners are responsible for the management of the business and face unlimited personal liability just as they would in a general partnership. A limited partner’s liability is generally limited to its investment in the partnership, provided that the limited partner is not actively involved in the management of the partnership (although Manitoba’s Partnership Act is considered more favourable to limited partners than the equivalent legislation in the other Western Canadian provinces, as it includes knowledge-based qualifications to the potential liability of a limited partner that takes an active part in the business of the partnership).?
Limited Liability Partnership (LLPs) – this form of partnership generally limits a partner’s exposure by protecting partners from liabilities arising from the acts of another partner (or an employee, agent or representative of the partnership) that is not directly under their duty of care or supervision. LLPs must be registered under applicable provincial legislation, in the same fashion as a Limited Partnership. ?LLPs have many of the same advantages as limited partnerships, although they do not require the appointment of a general partner and they provide the added benefit that partners of the LLP can take an active role in the business of the partnership without exposing themselves to personal liability for the acts of other partners (beyond the value of their investment in the partnership). Except for B.C., provincial legislation in Western Canada only permits LLPs to be utilized by eligible professionals. In B.C. the LLP structure may be used for any business and, therefore, offers foreign investors another option for structuring their investment in Western Canada.
领英推荐
C.??? Joint Ventures
A joint venture generally denotes an association of two or more persons for the purpose of carrying out a specific undertaking, and may be conducted by separate corporations, general or limited partnerships, or simply by parties engaging in the joint ownership of assets. The parties may pool capital, property, knowledge, skills and other resources for the purpose of carrying out a specific undertaking, typically agreeing to share the profits and losses, with each party having some degree of control over the venture. There is no specific statutory definition or regulatory regime for joint ventures at either the provincial or federal level, rather a joint venture is typically governed by a contract between the parties. Parties to a joint venture arrangement should take care to ensure that the joint venture agreement and relationship is properly structured to avoid a presumption that a partnership has been formed by the parties.
TWO – OTHER CONSIDERATIONS
In addition to structuring considerations, foreign investors looking to expand their business interests into Western Canada should be mindful of the various federal and/or provincial laws and regulations that may impact the conduct of business. Additional legal considerations that may be relevant to a foreign investor’s decision include:
D.??? Securities Laws
E.???? Taxation
F.???? Employment
MLT Aikins is a full-service law firm with extensive experience in various legal service areas. With offices in Winnipeg, Regina, Saskatoon, Calgary, Edmonton and Vancouver, we provide a one-stop service for all your legal needs in Western Canada, regardless of the scale or structure of your potential investment. Contact our private equity and venture capital practice area for more information about investing in Western Canada.
Note: This summary was developed to provide potential foreign investors with a high-level overview of some the legal aspects of Western Canadian business operations. The information in this summary is current as of April 16, 2024, and is for general information purposes only. It does not constitute a legal opinion or other professional advice. This article is of a general nature only and is not exhaustive of all possible legal rights or remedies. In addition, laws may change over time and should be interpreted only in the context of particular circumstances such that these materials are not intended to be relied upon or taken as legal advice or opinion. Readers should consult a legal professional for specific advice in any particular situation.
Authors: Sean MacLachlan, Ryan Holfeld, Adam Bendig