The federal government has authority to legislate over personal property security in limited areas such as shipping, railways and certain security taken by Canadian banks. Although the federal intellectual property statutory schemes do not deal comprehensively with the taking of security interests, security agreements can generally be filed against intellectual property with the Canadian Intellectual Property Office. If a debtor’s intellectual property is of significant value, a lender will generally register security against it both provincially and federally. Securities Regulation In Canada, securities regulation is within provincial jurisdiction, and each province and territory has securities regulatory legislation that is, broadly speaking, comparable to that of the United States. The Supreme Court of Canada confirmed in 2011 that the day-to-day regulation of securities is under provincial jurisdiction, and struck down the Canadian federal government’s proposed federal securities legislation as unconstitutional. In response, the federal government and several provinces tried to establish a cooperative capital markets regulatory system (in which participating jurisdictions would agree to a common set of laws and regulations and use a single regulator). However, this initiative now seems to have been abandoned. The securities laws, regulations and rules, and the policies of the securities commissions across Canada are generally similar in most respects. The prospectus requirements, the exemptions from these requirements and continuous disclosure obligations of reporting issuers (that is, public companies) are substantially harmonized across Canadian jurisdictions and further harmonization initiatives are ongoing. However, the lack of complete consistency in securities regulation across
the Canadian jurisdictions can complicate securities offerings that are made in more than one jurisdiction, particularly where discretionary exemptive relief is required or novel issues are encountered. A “security” is broadly defined in most Canadian securities legislation to include any document evidencing title to or an interest in the capital, assets, profits or property of a person or company. A number of different types of agreements and instruments involving monetary consideration are typically expressly included in the definition of “security,” including notes, stocks, bonds, debentures, certificates of interest, transferable shares and options, or any option, subscription or other interest in or to a security. Depending on the circumstances, both equity and debt financing instruments may come within the definition of security and may therefore be subject to applicable provincial securities legislation. Generally, in each Canadian jurisdiction, a distribution of securities must be qualified by a prospectus that is cleared by the relevant provincial or territorial securities regulatory authority, unless an exemption from this requirement is available. A distribution of securities includes a trade by an issuer in previously unissued securities and a trade in securities from a person who is a “control person” in respect of the issuer. A person is presumed to be a “control person” in respect of an issuer if that person holds more than 20% of the voting rights attached to the securities of the issuer. In addition, certain trades in securities that were previously acquired under an exemption from the prospectus requirements are deemed to be distributions, but securities of a reporting issuer that were acquired under the two exemptions discussed below are, subject to “manner of sale” restrictions, generally freely tradable after a four- month hold period.
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Doing Business in Canada
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