Addressing Canadian business law requirements is a crucial consideration when entering the Canadian marketplace. That’s why founders of HotWifi Solutions had broad research to know the laws and legal requirements for doing business in Canada.

Canada is a popular country to do business in, whether as a Canadian company or a foreign investor. It regularly appears on Forbes’ list of the best countries for business, and is an interesting jurisdiction for IPOs. But, as with any other jurisdiction, doing business in Canada comes with its own legislation, regulations and requirements, especially when it comes to governance, risk and compliance.

Business executives, counsel, and potential investors from foreign countries must know several unique aspects of Canada’s legal and economic framework and key business legislation, as well as overlapping regulatory authority among various levels of government in certain areas of the law.

It should be noted that, Canadian board directors who fail to comply with national and local laws potentially liable in court for their actions, it’s imperative that anyone responsible for compliance and corporate governance understands their duties and responsibilities.

Here we look at some of the issues that businesses should be aware of around governance and compliance in Canada.

Forms of Business Structure in Canada

Entrepreneurs who want to activate on the Canadian market should, first of all, choose the type of business entity that suits their needs.

There are fundamentally four forms of business ownership in Canada, each with its own advantages and disadvantages.

• the sole proprietorship,
• the partnership,
• the corporation.
• the cooperative.

A foreign entity looking to do business in Canada should consider key factors, such as tax and liability issues, in selecting the appropriate entity.

• Sole proprietorship

One type of business structure is the sole proprietorship, and, as the name says, this is owned and controlled by a single person. Such business is subject to lower start-up costs and paperwork compared to the company structures mentioned above. A sole proprietor is in charge of the business management, responsibilities, and debts.

• Partnership

Partnerships in Canada are limited or general and they are registered with two or more individuals. When setting up a limited partnership, the entrepreneurs will agree on the responsibilities and rights of each partner. The extent of profit share and liability might vary, but all the details are mentioned in the agreement. As for a general partnership in Canada, each individual can manage the business, and he/she is responsible for the debts and obligations of the partnership.

• Corporation

From the beginning, it is good to know that a corporation is a separate legal entity from its proprietors. The stockholders are not responsible for the company’s obligations or debts, as the only interest regards the value of their investments. A private corporation in Canada can be registered by one or more individuals, but it is good to know that the majority of the directors should domiciliate in Canada. Such an entity cannot trade shares freely. As for the public corporation, this is subject to listed shares to the public, in accordance with the rules and regulations mentioned in the Ontario Securities Act.

 • Cooperative

A cooperative in Canada can be registered if certain rules are met. For instance, the owners can entirely manage the business, they have democratic control and limited liability. The revenues are distributed equally because the resources have also been gathered equally. Even though a cooperative is not a preferred type of entity among businessmen, one should know that it puts the accent on common needs, whether in investment matters or other important decisions, like employment or the sale of services and goods.

After choosing the type of business structure that suits your needs, you should be familiar with rules and regulations needed to run the business in Canada.

Federal versus Provincial Incorporation

The main differences between incorporating a business Federally compared to a provincial level is name selection and protection, business reach, annual filings, and cost.

If a foreign entity decides to incorporate a Canadian company, it could be incorporated as a federal corporation under Canadian law or as a provincial corporation under provincial laws.

The Canada Business Corporations Act (CBCA) applies to federally incorporated businesses. Canada’s provinces have comparable legislation, although their laws differ. Generally, a federal corporation has the capacity and power of a natural person and may do business anywhere in Canada and use its name in any province. All provinces regulate the corporate activities of federal corporations operating in their jurisdictions through laws of general application requiring registration, the filing of returns, and the payment of fees.

Federal Incorporation– in this case, stricter name selection is a challenge. However, this ensures that your corporate company name is protected across the country, its provinces, and territories. You are automatically assigned a Business Number by the Canada Revenue Agency, and you can run your business on a national level without restrictions on your location, company records or where the meeting of your business’ directors are held. It is to be noted that incorporating federally can be more expensive and requires more paperwork and fees to complete and pay for.

Provincial Incorporation– in this case, your corporate name is protected only within the province you are registered. The requirements for naming your company are less strict than when you federally incorporate your company, and it is a good option if you intend to remain a local business and do not have any other business, suppliers or customers in another province. If, at one point, you decide to do business in another province, you need to go through an extra-provincial registration process. Not only that, but you will need to have your name re-approved in the other provinces you wish to do business in. You are also required to file a combined Corporation Tax and Annual Return every year with the provincial government, usually within 60 days of the date on which you incorporated your company.

The Laws and Legal Requirements you Need to Comply with When Doing Business in Canada

As with any other jurisdiction, operating in Canada comes with its own country specific Laws and Legal Requirements.

The rules and regulations for carrying on business in Canada are as following:

• The Canadian constitutional system
• Forms of business organization
• Regulation of foreign investment
• Income tax considerations
• Commodity tax considerations
• Labor and employment law considerations
• Canada’s trading regime
• Import and export considerations
• Protection of intellectual property
• Privacy laws in Canada
• Environment law in Canada
• The Competition Act – Canada’s antitrust legislation
• Director and officer liability in Canada
• Financing Canadian operations
• Data analytics, artificial intelligence and autonomous tech
• Fintech
• Electronic commerce law
• Canadian immigration law and policies
• Land ownership in Canada
• Land use planning and development
• Federal consumer product and labelling standards
• French language requirements in the province of Québec
• Aboriginal law and Aboriginal community relations
• Security interests in personal property
• Corporate insolvency
• Civil litigation in Canada
• Energy law

In this article, we try to explain a few major rules and regulations which are common to every business structure.

Labor and employment law consideration

Canadian Workplace Standards contain requirements around labor laws, workplace standards, health and safety standards and labor relations programs.

Canada covers common issues in employment and labor laws and regulations, including:

• Terms and conditions of employment
• employee representation and industrial relations
• discrimination
• maternity and family leave rights
• business sales
• termination of employment
• protecting business interests following termination
• data protection and employee privacy
• court practice and procedure
• response to covid-19

while labor relations and employment largely fall under provincial jurisdiction, some industries are governed by federal regulations.

This can cause complexity for organizations operating across a number of provinces. Business managers must ensure that they are aware of, and meet, the various requirements they are subject to. Conditions around issues such as wages, working hours and time off, pregnancy and parental leave can be subject to both federal and provincial rules.

Environmental Laws

Companies doing business in Canada are subject to environmental regulation by federal, provincial or territorial, and municipal governments. Directors and officers of Canadian corporations can be personally liable to charges, fines, and, in extreme cases, imprisonment for causing or permitting damage to the environment, regardless of whether the corporation has been prosecuted or convicted.

Federally-instituted laws include the Canadian Environmental Protection Act, the Canada Shipping Act, the Arctic Waters Pollution Prevention Act and the Fisheries Act. Meanwhile, issues such as agriculture, forestry, mining and hydroelectric development primarily fall under provincial governance, meaning that the provinces are also responsible for passing a significant number of environmentally-focused laws.

The government’s increased attention to environmental issues in recent years has brought these laws into sharp focus.

This complexity and subjectivity add another layer of complication to organizations trying to manage, record and evidence environmental credentials across their Canadian operations.

Data and Privacy Laws

Every business is now surely familiar with GDPR, the General Data Protection Regulation governing how EU citizens’ data is controlled.

Those operating in Canada are also subject to additional requirements such as “the Personal Information Protection and Electronic Documents Act (PIPEDA) and CASL, Canada’s Anti-Spam Legislation, which is ‘one of the toughest laws of its kind in the world.”

Federal and provincial privacy protection legislation profoundly affects how virtually all organizations do business across the country. Canadian businesses and private-sector organizations are subject to federal or provincial privacy protection legislation governing the collection, use, and disclosure of information about an identifiable individual. Additionally, Canada’s anti-spam and anti-spyware legislation creates a stringent set of rules with meaningful penalties. Public-sector privacy laws require virtually all levels of government, including departments, agencies, and most Crown corporations, to restrict what they collect and to provide individuals a right of access to personal information being held about them. In some provinces, the public- sector laws also place geographic restrictions on where personal information may be lawfully stored or accessed. These rules extend to service providers of public bodies.

Tax Considerations

Canada’s tax regime for businesses and individuals is largely governed by the regulations of the federal Income Tax Act (ITA) and the federal Excise Tax Act (ETA). The ETA imposes the federal “goods and services tax” or “harmonized sales tax” (GST/HST).

Most businesses operating in Canada are required to register for GST/HST purposes and to collect GST/HST on the provision of taxable goods and services.

The corporate taxes and other laws of the provinces and territories also govern Canada’s tax regime, including, in some provinces, provincial retail sales tax laws.

General considerations include capital taxes, the taxation of individuals, tax matters for partnerships and joint ventures, and sales and commodity taxes.

In addition to filing annual income tax returns, corporations are subject to ITA reporting requirements. GST/HST-registered businesses, whatever their structure, must file regular GST/HST returns. Under both the income tax and the GST/HST system, severe penalties can be levied for failing to file an information return, or for providing incorrect or incomplete information on a return.

Regulation of Foreign Investment in Canada

Certain acquisitions of control of Canadian businesses by non-Canadians are reviewable by the Canadian government under the Investment Canada Act (ICA) and must be of “net benefit to Canada” and not “injurious to national security” to secure approval. Although Canada’s foreign investment rules do not affect many transactions, those transactions which are affected may be subject to delay while the foreign buyer negotiates undertakings with the Canadian government as a condition of securing approval.

Under the ICA, the Canadian government reviews a foreign acquisition of a business in Canada where its value exceeds specified thresholds. The ICA applies whether or not the business being acquired is Canadian-controlled. The requirement for government review and approval is generally limited to direct acquisitions of control of large Canadian businesses by non-Canadians.

In general, a “non-Canadian” means an individual who is neither a Canadian citizen nor a permanent resident of Canada, or an entity that is controlled or deemed to be controlled by one or more non-Canadians.

A review may be required in the case of smaller acquisitions and the establishment of new businesses by non-Canadians in prescribed “cultural” industries.

Also, pursuant to a new provision of the ICA, a review may be required for any investment by a non-Canadian that is potentially injurious to national security. There are guidelines for the review of acquisitions of control by investors that are owned or controlled, either directly or indirectly, by a foreign government. While investments by state-owned enterprises are not prohibited, they are subject to additional scrutiny in determining whether their investments meet “net benefit to Canada.”

Competition & Antitrust Law

The Commissioner of Competition may require approval before completion of significant acquisitions of Canadian businesses. The need to obtain pre-closing approval from a competition authority is common around the world.

Competition law in Canada is set out in a single federal statute, the Competition Act. Related regulations, guidelines, interpretation bulletins and case law all provide guidance on how the Competition Act is administered and enforced. The Act is primarily administered and enforced by the Competition Bureau (the Bureau) and the Public Prosecutions Service of Canada. Certain provisions of the Competition Act also allow private parties to initiate enforcement proceedings.

The purpose of the Act is to maintain and encourage competition in Canada, and it addresses three categories of conduct: mergers, criminal matters and reviewable practices.