CORPORATE STRUCTURING AND

BASIC TAX CONSIDERATIONS

Can I use the same kind of entity to carry on my business in Canada?

• federal corporation as well as provincial and territorial corporations

• no LLC equivalent

• unlimited liability company available in Nova Scotia and Alberta; proposed legislation in B.C.

Do I need to have Canadian directors?• depends on jurisdiction

• “resident Canadian”

• unanimous shareholder declaration

• director liability

What are some of the taxes, government levies I need to think about if I am starting up a business?

• federal and provincial income taxes

• goods and services tax, harmonized sales taxes and retail sales taxes

• Canada Pension Plan, employment insurance, employer health tax, workers’ compensation premiums

Three tax considerations that might be a surprise• LLCs not entitled to the benefits of the

Canada-U.S. tax treaty

• no consolidated tax reporting in Canada

• contributions to capital produce a different result than subscribing for shares

How difficult is it to repatriate earnings from Canada?• withholding tax

• return of capital

• management and similar fees

EMPLOYMENT MATTERS

Can I do pre-employment tests and background checks?• human rights legislation prohibits drug

testing

• background checks are subject to compliance with privacy legislation

• criminal records checks are permissible, but there are restrictions on the use of results

Can I introduce background checks during employment?• employee consent cannot be coerced

• requiring consent and use of results is subject to constructive dismissal issues

• termination for failure to pass check would not be for cause

What about human rights complaints?• prohibited grounds under provincial human

rights legislation are different

• generally, administrative tribunals have exclusive jurisdiction over such complaints

• tribunals have broad powers, including reinstatement power

How do I terminate employees in Canada?• high standard of just cause

• without cause terminations governed by statute, common law and/or contract

• statutory minimums must be complied with

• reasonable notice of termination assessed on a case by case basis

PRIVACY MATTERS

How do privacy laws work in Canada?• PIPEDA: Federal legislation

• need to consider provincial legislation in several provinces

• generally, consent is required to collect, use and disclose personal information

• consent must be informed – purpose for collection is disclosed

SECURITIES REGULATION

How is trading in securities regulated in Canada?• no federal securities regulation

• regulated on a province by province basis

• national instruments

What do I need to do to permit employees in Canada to participate in our US stock plans?

• no concept of incentive stock options• employees can receive capital gains treatment

upon exercise if conditions met• broadly, trades to employees, executive officers,

directors and consultants of the issuer and related entities (controlled subsidiaries) of the issuer will be exempt if participation is voluntary

• resale over off-shore exchange assuming conditions met

BUYING A BUSINESS

What regulatory approvals do I need to think about?• Competition Act

• Investment Canada Act

• regulated industries

Can I issue stock of the US parent without worrying about prospectus and registration requirements?

• trade must be made in reliance on an exemption. Available exemptions include accredited investor, private issuer, business combination, take-over bid

• resale over off-shore exchange assuming conditions met

What obligations do I have to unionized and non-unionized employees if I buy a business in Canada?

• share purchase: employment obligations unaffected by the transaction. Employment continues on the same terms

• asset purchase – purchaser is successor employer under collective agreement

• asset purchase – no obligation to offer employment to non-unionized employees

LITIGATION MATTERS

What is the litigation environment like in Canada?• fewer jury trials (no “right” in civil cases)

• punitive damages rarely awarded

• increased case management and mediation

What’s different about class actions in Canada?• lower threshold for certification in Canada

• no jury trials in class actions

• more court control on plaintiff’s counsels fees