While Canada’s legal system will be familiar to many foreign investors and companies, the Canadian legal system and laws have a number of unique aspects that might surprise you. Understanding these unique aspects of Canadian law is critical to your business success in Canada. As one of Canada’s leading law firms, Gowling WLG understands the challenges of establishing and conducting business in this country.

 

  1. Most of the Canadian laws that affect day-to-day business operations are made by the 13 provinces and territories and there are some unique differences to be aware of if you intend to operate in multiple provinces/territories.
  2. Unlike the common law system in place throughout Canada, the province of Quebec is a civil law jurisdiction. In addition, the majority of its population of over 8 million people speak French. The Quebec Charter of the French Language mandates French as the official language of business and commerce in Quebec and, among many other things, requires all working documents be available to employees in French, including software.
  3. In Canada, an amalgamation is a statutory means of combining two or more corporations into one continuing amalgamated corporation possessing all of the property, assets, rights and liabilities of each of the amalgamating corporations. Unlike a U.S. merger, a Canadian amalgamation does not include the concept of a surviving corporation, nor do any of the amalgamating entities cease to exist on amalgamation.
  4. Income taxes in Canada are based on residency of the taxpayer and not the taxpayer’s citizenship. Also, while there are a few jurisdictions that allow the incorporation of an unlimited liability corporation (ULC), which can be taxed as a flow through entity in the US, ULCs are not flow through entities for Canadian tax purposes.
  5. The transfer or storage of personal information outside of Canada is generally permissible in the private sector. However there are varying restrictions imposed by some provincial privacy laws. For example, you may be required to ensure appropriate security of the personal information before it is sent outside of Canada and certain types of personal information (i.e. personal health information) have specific restrictions on disclosure outside of Canada.
  6. As a general rule, damages awards in Canada are considerably more modest than in the United States. Jury trials are also much less common in civil matters. The losing party in a civil matter is usually required to pay some (and in some cases, all) of the winning party’s legal costs.
  7. Canada does not have employment “at will”. Most employer-initiated terminations require the employer to give working notice or pay in lieu of notice. The length of notice required will depend on a number of factors but older employees with very long term service have been awarded as much as 24 months. Also, business practices common in some jurisdictions can be difficult in Canada. For example, non-competition agreements are prima facie unenforceable on public policy grounds, drug and alcohol testing are severely restricted and reliance on criminal background checks is limited.
  8. Outside of a true employer/employee relationship, the concept of “work for hire” does not exist. An independent contractor is the first owner of copyright in works that they create, even if the works are commissioned and paid for by another party.
  9. Canada has some of the most prescriptive and punitive anti-spam laws (CASL) anywhere in the world that specifically prohibit the sending of unsolicited commercial electronic messages. Before sending any promotional or advertising emails, the recipient must have given consent in advance (subject to specific exemptions). CASL also requires all messages to include specific disclosures and an unsubscribe mechanism. CASL applies to any messages accessed by a computer in Canada. Therefore, the residence of the sender is not relevant.
  10. For use of a trademark by a licensee to accrue to the benefit of the owner, the owner must be able to show that there is a license and, pursuant to the license, control is exercised over the character or quality of the goods/services offered in association with the trademark. Unlike in the US, control will not be assumed simply because the licensor and licensee are related companies.