Despite strong competition from neighboring USA, Canada remains a land of hospitality and multiculturalism where anyone can find his place. The country is blessed with a bilingual and notoriously warm-hearted population and is also the 2nd largest country worldwide while counting only 2 inhabitants per square kilometer. How do these factors affect the conduct of business in Canada? During our last Breakfast Talk, Frederic Letendre (Attorney and Partner at Yulex, Canada) told us more about the country’s business attraction…
As part of the Interlegal Network of lawyers, YULEX is a Montreal law firm offering entrepreneurs and their businesses legal services in business law, intellectual property and technology law. They are bilingual (French and English) lawyers with an Anglo-Saxon mindset!
In answer to Customers’ demand for a different approach to legal services, YULEX innovated their value propositions:
- A frame of collaboration with clients inspired from Project Management Theory;
- A more detailed breakdown of commercial offers;
- A modern work environment, in contrast with the precious wooden furniture traditionally found in Law Firms;
- A Web Platform allowing clients to store and download all their legal documents;
- Techno breakfasts, webinars…
Canada is the 2nd largest country in the world but counts only 2 inhabitants per square Km. The consequences for firms involved in distribution or logistics are massive, since they must take into account the huge travel distances to cover the national market. It is, though, an interesting hub, due to its location between the Atlantic and Pacific oceans and the USA.
The country is officially bilingual (English & French) but the language skills of the population vary depending on the province. Outside of Quebec (the main French-speaking province), most people only speak English but there are other parts where people only speak French ! Therefore, bilingual packaging is mandatory in order to cover the national market. In Quebec, there’s even a law protecting the use of French and companies that couldn’t comply with it decided not to distribute their products.
Canada is a federal state. Consequently, there are legal matters that fall under federal Law and others, provincial Law.
Amongst those that are under federal jurisdiction, you’ll find intellectual property and criminal laws, for instance.
In matters that concern the provincial level, you’ll find business matters and land ownership (although you are also able to create a company on federal level).
To simplify things, some matters are under the federal jurisdiction AND the provincial jurisdiction, such as immigration law, some parts of the incorporation of businesses, etc.
CREATING YOUR COMPANY
It is very easy to create a company in Canada. A variety of options are available but the main two corporate structures are corporations and partnerships. Both are very easy to incorporate or dissolve and enjoy low legal fees.
An important point: companies created under Quebec law are not subject to the mandatory presence of a Canadian resident on the board of directors, unlike companies incorporated under federal jurisdiction!
Legal liability of Directors & shareholders is very limited in Canada, since the country is of liberal tradition. Directors enjoy limited liability regarding the obligations of the corporation. There is also a corporate veil between the shareholders and the corporation which limits their liability, with exceptions such as but not limited to: unpaid taxes, salaries or social charges, environmental responsibility, anti-spam laws and menace to public order. In the end, there is no liability regarding the commercial activities of the company.
There are, however, some downsides to Canada’s liberal business tradition. Since shareholders have limited liability, it is generally required to write a shareholders’ agreement when raising funds. This agreement might include a number of clauses ranging from shares transfer terms to arbitration clauses, events of death and requirements for life insurance.
There is however a tendency towards the disappearance of non-compete clauses, as is already the case in Silicon Valley. The reason comes from the fact that the definition of “Territory” in such clauses is becoming more and more challenging in today’s internet-dominated economy.
In a nutshell, there is complete freedom to define the shareholders’ agreement clauses, within the limits of the law. In the event of a dispute between the shareholders, if the shareholders defer their case to the court, all the information contained in their shareholder’s agreement is made publicly available for anyone to read. However, the information is kept private if the shareholders opt for arbitration instead.
THE CANADIAN ECOSYSTEM
In Canada, you will get little support from public authorities in your business. You must therefore plan for everything and work in a “close-knit guard” mindset.
Evaluation of clients, suppliers or competitors is made more difficult by the fact that there is no legal obligation to publish corporate accounts. One can only obtain this information through an investigation, for which the assessed company has to give its authorization. It is therefore not a usual procedure. In exchange, companies often ask for legal reassurances.
Lawyers in Canada often take the role of the business partner, in contrast with France, where meeting your lawyer doesn’t happen often.
Montreal is a great start-Up ecosystem. Several dedicated hubs also exist in the city Montreal, and the Greater Montreal Region, dedicated to different industries.
Want to contact YULEX? Tell us about your project through the Smart Connector and we’ll take care of the introductions!