In recent years, Canada has developed an increasingly strong reputation as one of the best places in the world to do business. The World Economic Forum’s Global Competitive Index 2017-2018 ranks Canada as having the second-most “sound” banking system in the world, a step up from the number three position it held the previous year. U.S. News & World Report ranks Canada number seven in the world for entrepreneurship, citing well-developed infrastructure and transparent business practices as assets. High ethics and rule abidance are a top priority for Canada-based businesses and those they work with.
For United States-based businesses, setting up and doing business in Canada makes sense. But like any global business operations, there are regulations that must be followed to stay legal. Here are five Canadian business regulations to be aware of.
1. “Federal” Businesses Setting up and Doing Business in Canada Are Governed by a Federal Labor Code
Businesses that aren’t necessarily sponsored by the Canadian government may still be considered “federal.” The Canadian Government lists some of these as:
- Banking enterprises
- Shipping and ferry services
- Air transportation
- Rail and road transportation that involves border crossing
Federal labor standards in Canada stipulate certain hours of work regulations, overtime rules, vacation and general holidays rules, and more. Not following these means a business that is considered federal is breaking Canadian law.
2. Business Must Abide by the International Financial Reporting Standards
Canada requires that foreign companies follow International Financial Reporting Standards (IFRS). This is a set of international accounting standards that specify how certain transactions and financial events must be reported in statements.
These standards are accepted throughout the world, including in the European Union and in countries in South America and Asia, but the United States does not follow them. Instead, the U.S. abides by generally accepted accounting principles (GAAP). GAAP includes properly organizing financial information, summarizing accounting records into financial statements, and disclosing certain supporting information.
The U.S. may move to the IFRS in the future, but the possibility is unknown. Canada allows that if a foreign company is also a U.S. Securities and Exchange Commission issuer, it may use U.S. GAAP. Otherwise, IFRS standards must be followed.
3. Non-Canadian Businesses Must Abide by the Investment Canada Act
The Investment Canada Act stipulates that all non-Canadians who obtain control of a business already in Canada or who want to create a new Canadian business must submit a notification or application for review to do business in Canada. The purpose of the Investment Canada Act is to ensure that businesses in Canada contribute to economic growth and employment opportunities.
In order to be considered legally acceptable to do business in Canada, all non-Canadian businesses must prove a “net benefit to Canada.” Net benefit factors include:
- The effect the business has on the economy in Canada
- How much participation by Canadians there is in the business
- The effect on productivity, technological development and product innovation in Canada
- How the business affects Canada’s ability to compete in global markets
A lack of initial approval may mean the investor can still evolve the business and re-apply for approval. Businesses that are not approved will be prohibited from operating or will be required to divest themselves.
4. Businesses Must Abide by PIPEDA Principles in Most Provinces
PIPEDA stands for the Personal Information Protection and Electronic Documents Act, which are referred to as “fair information principles.” PIPEDA is Canada’s federal privacy law that applies to how personal information is collected during business activities. Businesses must follow PIPEDA if they fall under the legislative authority of the Parliament of Canada, or operate in:
- Northwest Territories
- All provinces other than Quebec, Alberta and British Columbia
- Anywhere information is crossing provincial or national borders
Quebec, Alberta and British Columbia have enacted privacy laws that are similar to PIPEDA, and if information is crossing borders, PIPEDA still applies. Some of PIPEDA’s principles include:
- There is a designation of someone who is responsible for the management of personal information
- Individuals must have knowledge and provide consent before an organization collects or uses personal information
- Organizations must identify the purpose for collecting information before or at the time of collection
These are just a few of the 10 privacy principles of PIPEDA. All businesses must disclose adherence to PIPEDA in their privacy policies. Businesses who are interested in adhering to PIPEDA compliance can use Lyons commercial data security services to stay compliant.
5. Violating Canada’s Anti-Spam Legislation Is Costly
Spam, in the digital sense, is the use of email addresses or other personal information to contact an individual without permission, such as in the case of junk mail. Canada has Anti-Spam legislation to protect consumers from this type of business digital harassment, and the laws go far beyond junk mail. Some spam-related Canadian business regulations include:
- Companies may not send emails, text messages or social network messages to an account without the user’s consent
- Computer programs may not be installed without the computer user’s consent
- Products and services may not be promoted online using misleading representations
Fines for spam violations are significant, costing a maximum of $1 million per violation in the case of an individual and $10 million per violation for organizations.
Protect Your Business Bottom Line in Canada
There’s amazing opportunity to grow your business in Canada, but only if you follow all Canadian laws that are in place to benefit citizens and protect businesses throughout the country. From abiding by business laws and finance reporting standards, to protecting consumer data and privacy, many of Canada’s business regulations are best business practices to follow anywhere in the world.
One of the safest ways to stay compliant is to use commercial data software that ensures you’re not illegally using customer information. Lyons can help. Contact us today for a free demonstration.