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Canada Opens a New Immigration Category Pilot: The Start Up Business Class Immigration Program

“This innovative Start-Up Business Immigration Class allows up to 5 foreign families to immigrate to Canada based on 1 approved business plan/investment idea.”  – Jacqueline Bart, Principal of BartLaw
After announcing the creation of a new type of entrepreneur application process in 2012, on March 30, 2013, Citizenship and Immigration Canada ( “CIC”) changed the law and policy in Canada to implement the Start-Up Business Class, which is currently in a Pilot (ie. test) format subject to further CIC assessment. The main goal of this new business immigration class is to attract viable business projects, ideas, inventions and strategies to Canada.  The Pilot is not necessary about investment funds to Canada, but rather, it is aimed and designed specifically to attract entrepreneurial talent which is sufficiently concrete or desirable to draw sophisticated Canadian investors or venture capitalists.

Foreign nationals are members of the Start-Up Business Class if they:

  1. Have obtained a commitment from:
    • One or more designated angel investor groups, confirming that they are collectively investing a total of at least $75,000CAD in a qualifying business; or
    • One or more designated venture capital funds, confirming that they are collectively investing a total of at least $200,000CAD in a qualifying business;
  2. Are moderately or highly proficient in English or French (as determined by an objective language test based on a legislated formula) in the four language skill areas (reading, writing, listening, speaking);
  3. Have completed at least one year of post-secondary education during which the applicant was in good standing at the educational institution, irrespective of whether the applicant obtained an educational credential; and
  4. Have transferable and available funds ranging from approximately $12,000 to $30,000 depending on the number of family members accompanying them to Canada.

The regulations also introduce two distinct reasons for non-qualification under the Start-Up Business class:

1.      A foreign national will not be considered a member of the Start-Up Business Class if he or she intends to participate (or has participated) primarily for the purpose of acquiring a status or privilege under IRPA and not for the purpose of engaging in the business activity for which the commitment was intended; and
2.      The business venture must not exceed more than five national permanent residence applicants.

The most challenging aspect of this application is obtaining a commitment (which will take the form of a Commitment Certificate) from the angel investor groups and the venture capital funds groups which the Minister has designated for this pilot. A Commitment Certificate is a document which records important information regarding the agreement between the applicant and the investing entity.  The purpose of the Commitment Certificate is to summarize the relevant details of the commitment between the investing entity and the applicant for the purposes of the application for permanent residence.  The Commitment Certificate must be sent directly to CIC by the designated angel investor group or venture capital fund.  The applicant will also receive a letter of support from the designated entity, which he or she will submit with the application.  Upon receipt of the application, CIC will verify that the corresponding Commitment Certificate has been received from the designated investing entity, and that it is still valid. There is no limit to the number of angel investor groups or venture capital funds that can support a commitment.  If there are multiple designated entities acting in syndication, only one Commitment Certificate will be issued containing all the details and requirements of all participating designated entities.  The syndicate will choose a lead designated entity that will be responsible for compiling and submitting the Commitment Certificate.   A list all of the entities that qualify as designated angel investor groups or venture capital funds, for the purposes of the Start-Up Business Class, can be provided to interested parties by our office.

In addition to the rules concerning the commitment, there are rules concerning the ownership of the corporation (whether or not the incorporation is conditional upon the issuance of a permanent resident visa to one or more applicants in respect of that business):

  1. The permanent residence applicant holds at least 10% of the voting rights attached to all outstanding shares of the corporation; and
  2. No person or entities, hold 50% or more of the voting rights attached to all outstanding shares of the corporation, other than the qualified participants (ie. (a) applicant in respect of the business; (b) a foreign national who has been issued a permanent resident visa as a member of the Start-Up Business Class in respect of the business; (c) a designated angel investor group; or (d) a designated venture capital fund).

The law distinguishes essential permanent residence Start-Up Business applicants and non-essential permanent residence Start-Up Business applicants for the business. Essential applicants  to the business must be named on the Commitment Certificate.  If the essential applicant is refused for any reason, all other applications related to that commitment will also be refused.

A peer review of the proposal may be required randomly by CIC  or may be required in specific cases where the assessing visa officer is of the opinion that such an assessment would assist in making a decision to verify if the investing entity has conducted the proper checks and investigations according to industry standards.  A peer assessment must be considered by the immigration officer when making his or her decision but will not be considered binding on the officer.

The new regulations also authorize immigration officers to substitute their own evaluation if the criteria under the Start-Up Business Pilot are not a sufficient indicator of whether the applicant will become economically established in Canada.  All substituted evaluation decisions require the written concurrence of a second immigration officer and can be negative or positive.   These determinations are highly discretionary, however, they enable an immigration officer to approve an applicant even if he or she is unable to satisfy one or more requirements of the Start-Up Business Class.  This substituted discretion does not extend to the requirement for a commitment from a designated angel investor group or venture capital fund.  For example, an otherwise eligible applicant who does not possess sufficient language proficiency, post-secondary education, or available funds may still be approved under substituted evaluation.

The cap on Start-Up Business applications is 2,750 applications per year and will be valid until April 1, 2018, pursuant to current law and policy.  However, if the pilot program proves successful, the Canadian Government may revise IRPA to establish a permanent Start-Up Business Class at some point.  In all likelihood, however, we can expect changes well in advance of 2018 which would further refine the law and policy concerning this project.

Ultimately, the government aims to attract immigrants to Canada who are able to integrate into our economy.  This program is a departure from other immigrant programs requiring employment in Canada.  Instead, it emphasizes economic integration through investor partnership between the foreign worker and Canada.  It is anticipated, however, that this program will prove more advantageous to older permanent residence applicants who have substantial funds and a sellable business idea. In addition, given the potential for five families to qualify for immigration to Canada, based on one Commitment Certificate, this program could prove attractive to many foreign investors seeking to make Canada their home.

For more information on qualification and the legal requirements of this immigration category please contact Jacqueline Bart & Associates.