Canada is a popular place to do business. Many people outside Canada are drawn to do business here and raise families here.
For people who have successful and established businesses outside of Canada, the intra-company transfer (ICT) program provides an avenue for expanding their business into the Canadian market. The ICT program creates a pathway for established businesses outside of Canada to open up an affiliated company in Canada and have some of its employees obtain a work permit in Canada to help establish and grow the new company in Canada.
You can read more about the ICT program here.
If you do not already have a company formed in Canada, then you will need to form one in order to become eligible for the ICT program.
This article provides information about the process for forming a company in Canada for foreign businesses wishing to expand their operations into Canada using the ICT program.
Requirements
Shareholding requirements
When establishing your new corporation in Canada, you will need to be very thoughtful about the ownership of the new company. In order to qualify for the ICT program, the new company needs to be controlled by the same people who control the foreign corporation expanding its operations into Canada.
There are a couple of ways of doing this:
- The new company in Canada can be owned and controlled by the foreign company. The foreign company must own at least 51% of the shares in the company (and those shares must give the foreign company control, for example, with voting rights). In this case, the new company in Canada would be considered a “subsidiary” of the foreign corporation. If the new company in Canada becomes profitable, then it could dividend excess profits to the foreign corporation.
- The new company in Canada can be owned and controlled by the individuals who control the foreign company. For example, if a person owns 80% of a company in Dubai, then she could form a company in Canada and personally own at least 51% of the new Canadian company’s shares to qualify for the ICT program. If the new company in Canada becomes profitable, then it could dividend excess profits to that person individually.
There can be blended ownership as well. For example, the foreign corporation owning 51%, and the key employee in Canada owning 49% personally. When there is blended ownership, another option is to create multiple classes of shares so that there is more flexibility in the future to issue dividends to some shareholders but not others (provided that the above requirement of about 51%+ is met).
Regardless of the chosen ownership structure, it is best for companies to speak with financial advisors and tax accountants when deciding how to structure ownership.
Jurisdiction
In Canada, you can choose to incorporate under the laws of any province or territory as well as the federal law of Canada. Some factors for deciding which jurisdiction to choose for the purposes of setting up a company and applying for work permits under the ICT program are:
- Director Residency Requirements: Will any resident Canadians be involved in the business? If not, you will need to incorporate in a province with no director residency requirements. In order to incorporate under the federal Canada Business Corporations Act, you need at least one director to be a resident of Canada, and the same is true for most provinces. However, Ontario, British Columbia, New Brunswick, and a couple of other jurisdictions do not have a residency requirement for directors. That means that you can incorporate a company in those provinces without involving a resident in Canada as a director (or officer or shareholder).
- Market Location: Another consideration is the location of the market for your particular business. Canada is a large country with long distances between major business centres; often, American markets are physically closer than other Canadian markets. You should consider what location will give you the best chances of connecting with your target market. You may also want to consider factors such as the labour market, livability, and existing community connections.
Financing requirements
There are no minimum financing requirements when first setting up a corporation in Canada. However, down the road, you may need to meet certain financing requirements, for example, to submit a successful ICT application.
Specifying business activity
At the time of incorporation, there is no need to specify the exact business activity that your company will engage in. This differs from other parts of the world, where companies must specify exactly what type of business they will engage in at the time of incorporation.
Some provinces are now collecting data about what industry or sector your business operates in. For example, you might be asked to classify your business using the North American Industry Classification System (NAICS). However, that information is collected solely for statistical purposes and will not constrain the type(s) of business that you can engage in with your company.
Office address requirements
Every corporation needs an office address in the province in which it is incorporated in. If the company is incorporated under the federal laws of Canada, then it also needs to register in a province extra-provincially.
The address cannot be a P.O. Box. It must be a physical address where someone can receive mail and personal service (i.e. hand-delivered documents) on behalf of the corporation.
For foreign businesses expanding operations into Canada, it is most common to start by renting an office address from a virtual office provider, such as Regus or Anytime Mailbox.
Officers and directors
Every corporation in Canada is required to elect directors and appoint officers. You can read more about the different roles here.
Process
The process has many steps. The first is a name search and reservation, which secures your desired corporate name. You can also choose to use a numbered name, eliminating the need for the name search and reservation.
Second, the incorporation application is submitted to the government of the jurisdiction that you choose to incorporate. The incorporation application sets out the registered office address of the corporation, the names of the incorporators and first directors, the share terms (e.g. how many classes of shares, what rights are associated with each class, etc.), and other terms.
Once the governing jurisdiction approves the incorporation application, a package of documents is received confirming that the incorporation is complete. But the process does not end there! There are post-incorporation steps that need to be taken to pass all of the necessary resolutions and to properly create the records for the new corporation. Once completed, a minute book is created for the corporation and all of the records for the corporation are stored in the minute book.
With the Tobuso platform, the process is automated and easy to follow. At the end of the process, you have a digital minute book that is well-organized and easy to use.
Post-Incorporation
After you have set up your corporation, there are a number of steps that you should take immediately. Some of the most common steps people take after forming a corporation as part of the ICT application process are opening a bank account and tax accounts.
There are also many ongoing obligations to be aware of. One of the most consistent is the annual maintenance requirement. You can also review our article about the expected costs to maintain your corporation after it is formed.
We hope this article gives you a better understanding of what is involved in incorporating a business in Canada that qualifies for the ICT program.
You can rely on the Tobuso platform for fast and simple incorporations for all your needs. Simply follow the prompts on our site, and you will soon have a company formed in Canada with an organized digital minute book to get you started!
