Doing Business in Canada Guide

As its roots might suggest, Canada is a parliamentary democracy based closely on the British form of government. It has established two levels of government — a federal authority that governs matters of national interest, and the 10 provinces that govern matters of a more local interest.

A consideration of the different forms of business enterprises available under federal and provincial law will assist the investor in determining the most suitable arrangement for conducting business in Canada. Provincial law generally governs the forms of business organization although corporations may also be incorporated federally under the laws of Canada.

The Investment Canada Act (ICA) is a federal statute of broad application regulating investments in Canadian businesses by non-Canadians. Except with respect to cultural businesses, the Foreign Investment Review and Economic Security branch (Investment Canada) administers the ICA under the direction of the Minister of Innovation, Science and Economic Development Canada (the ISED Minister). 

Organizations that are either conducting competitive procurement processes in Canada or seeking business opportunities by participating in competitive procurement processes need to understand some basic principles about how procurement law in Canada differs from other jurisdictions.

This Chapter is intended to provide a high-level introduction to the key legal considerations in acquiring a Canadian business. These will vary depending on whether the transaction is an acquisition of a public company (a public M&A transaction) or an acquisition of a privately held company or a subsidiary or division of a public company (a private M&A transaction).

While there are some similarities in the basic rules for the computation of income subject to taxation under these possible forms of organization, it is most common for a substantial business undertaking to be organized using a Canadian-incorporated subsidiary.
 

Employment and labour/benefits law in Canada is designed to regulate both the conditions of employment and the relations between employers and employees. To understand Canadian labour and employment law, it is necessary to know about the constitutional division of power between the federal government of Canada and the governments of Canada’s 10 provinces and three territories.

Canada has comprehensive federal privacy legislation that applies to the private sector. In addition, certain provinces have enacted both comprehensive and sector-specific private-sector privacy legislation.

Almost all business transactions and new product launches have intellectual property implications. Many products and services have aspects that may benefit from intellectual property protection. Patents protect inventive functional features of a product or process.

Information technology law in Canada covers a wide range of legal rules and practices, many of which are discussed elsewhere in this Guide, related to activities and transactions involving software, hardware, databases, electronic communications, the internet and other information technologies.

The laws relating to the acquisition of real property in any particular province of Canada are, as a rule, those of the province itself. With the exception of the Prohibition on the Purchase of Residential Property by Non-Canadians Act and related regulations, the federal government imposes relatively few regulations or restrictions in the field.

The infrastructure market continues to be robust in Canada with all three levels of government — federal, provincial/territorial and municipal — engaged in infrastructure development and implementation. Each level of government utilizes various affiliated entities for public service delivery in addition to the direct delivery of such services. Large-scale and high-value capital projects for public infrastructure development are the focus of this review.

All levels of government across Canada have enacted legislation to regulate the impact of business activities on the environment. The environment is not named specifically in the Canadian Constitution, which means that neither the federal nor provincial governments have exclusive jurisdiction over it. 

An understanding of Indigenous law and its history is important to many entities conducting business in Canada. Building respectful business relationships with Indigenous Peoples is an important part of advancing reconciliation and ensuring Indigenous Peoples are involved in Canada's economic development and growth. 

The generation, distribution and transmission of electric power is primarily governed by the laws of the individual provinces, with each province selecting its method of regulation, such as rate-regulated government-owned utilities or open markets with private utility providers, and supply mix based on each province’s policy considerations and available resources.

Commercial restructuring and insolvency law in Canada is not memorialized in any single statute. Canadian restructuring and insolvency law refers to the complex matrix of statutory, common law and equitable rules that govern the rights and responsibilities of creditors and debtors in situations where the debtors are in financial distress.

Like the United States and the United Kingdom, Canada has two parallel court systems — federal and provincial. Accordingly, Canada’s 10 provinces and three territories have both federal and provincial (or territorial) courts. The province of Quebec is unique in that it administers the civil law of Quebec for private law matters, while the courts of the remaining provinces and territories administer the common law.