Last updated on May 16th, 2019

Last Updated on May 16, 2019 by Steven Meurrens

On April 11, 2018, regulations for the Start-Up Business Class (the “Start-Up Business Class”) came into effect.  The regulations slightly modify the program that has been in effect since April 1, 2013.  Both applicants as well as designated entities should be aware of the changes.

The goal of the Start-Up Business Class is to foster innovation, attract investment and support economic growth. It is part of a shift toward lower-volume programs aimed at attracting innovative business people. In brief, the Start-Up Business Class leverages partnerships with venture capital funds, business incubators and angel investor groups to identify promising entrepreneurs.

Program Requirements

A foreign national will be eligible to apply to the Start-Up Business Class if they meet all of the following requirements:

  1. The foreign national has obtained a commitment from a Designated Angel Investor Group of at least $75,000 in a “qualifying business” or two or more Designated Angel Investor Groups that together will be investing a total of at least $75,000 in a business.  Alternatively, a foreign national will meet this first criteria if he/she obtains a commitment from a Designated Venture Capital Fund of at least $200,000 or two or more designated venture capital funds that together will be investing a total of at least $200,000 in the qualifying business. Finally, a foreign national will meet this criteria if he/she is welcomed into a Designated Business Incubator’s incubation program. 
  2. The foreign national has taken an English or French language test and obtained a minimum of Canadian Benchmark Level 5 in Speaking, Listening, Reading, and Writing.
  3. The foreign national has in the form of transferable and available funds, unencumbered by debt and other obligations, an amount that is equal to one half of the Statistics Canada low-income cut off for the geographic area that they will be residing in.

An applicant who does not meet the second two requirements above may nonetheless argue that their application should still be approved because they will likely be able to establish themselves in Canada.  Conversely, an officer could refuse a Start-Up Business Class application despite meeting all program requirements if the officer determines that an applicant is unlikely to economically establish themselves in Canada. This process is referred to as substituted evaluation.

As well, a Start-Up Business Class application will only be approved if:

  1. the applicant provides active and ongoing management from within Canada;
  2. an essential part of its operations is conducted inside Canada (such operations include, but are not limited to, warehouse, inventory, equipment, staff, management information systems, physical premise);
  3. the business is incorporate inside Canada; and
  4. the business complies with prescribed ownership requirements.

As it is not necessary for Start-Up Business Class applicants to obtain work permits and start working in Canada before a permanent resident visa is issued, officers must be satisfied that the first three requirements above will be met after the permanent resident visa is issued.

Artificial Transactions

A Start-Up Business Class application will be refused if an officer determines that the foreign national entered into an commitment with a designated entity primarily for the purpose of immigrating to Canada rather than for the purpose of engaging in the business activity for which the commitment was entered into.

For example, as the Federal Court of Canada found in Yang v. Canada (Citizenship and Immigration), 2019 FC 130, a lack of seriousness in due diligence and research, and a lack of evidence by either an applicant or a designated entity can be found to demonstrate that an applicant’s primary intention was immigration. As well, as the Federal Court of Canada noted in Kwan v. Canada (Citizenship and Immigration), 2019 FC 92, while applicants are legislatively permitted to not start their businesses until after they obtain permanent residency, if they do obtain a work permit and start their business prior to them obtaining permanent residency, then the progress that they make, and their involvement in, their business can be used to ascertain their primary intention.

As well, if an officer is not satisfied that the entity assessed the applicant and the applicant’s business in a manner consistent with industry standards or is not satisfied that the terms of the commitment are consistent with industry standards, the officer may refuse to issue the permanent resident visa.  This requirement could be potentially problematic for applicants, as they will have to apprise themselves of what industry standards are and whether the designated entity that they are working with complies with them.

Officers may refer applications to peer review panels to help assess applications, although the officers are not bound by the peer review panels recommendations.  Applicants should know that the Federal Court of Canada in Bui v. Canada, 2019 FC 440 determined that it is not a breach of procedural fairness for applicants to be excluded from the peer review process.

Rules for Designated Entities

Business incubators, angel investor groups and venture capital funds may only participate in the Start-Up Business Class if they are recognized for their expertise in assessing the potential for and assisting in the success of start-up business opportunities in Canada and if they have the ability to assess for and assist in the success of start-up business opportunities in Canada.

Some specific rules that designated entities must follow include that they:

  1. must not submit false, misleading or inaccurate information to IRCC;
  2. must not charge a fee to review and assess business proposals put forward by potential applicants;
  3. must agree to be inspected by IRCC officers to determine their compliance with program requirements;
  4. during an inspection provide any documents as required;
  5. during an inspection allow IRCC officers to enter their premise, including if it is on private property;
  6. when an officer is on their premise and requires a document that they use copying equipment to provide the officer with copies of the document, take photographs and access and review computer files of the designated entity.

Officers may also inspect third parties affiliated with the designated entity if inspecting the third party is necessary to ensure that the designated entity is complying with program requirements.  Officers may request warrants to enter private residences if they determine that doing so is necessary.

If IRCC determines that a designated entity is not complying with its obligations then IRCC can either suspend or revoke their ability to participate in the program. If that entity has supported applications that are in processing, then IRCC will either put the applications on old or refuse them, depending on the circumstances.  In such instances, officers may consider using positive substituted evaluation, as identified above.

More information about the Start-Up Business Class can be found here.