Owner/ Operator LMIA-Based Work Permit

OVERVIEW

Any Canadian employer who wishes to employ a temporary foreign worker must first go through the Labour Market Impact Assessment (LMIA) process. Through this process, an employer obtains an authorization from the Government to bring a foreign worker to Canada.

The purpose of LMIA is to make sure that before hiring a temporary foreign worker every effort was made to hire a Canadian citizen or a Canadian permanent resident.

One of the most important requirements of the LMIA process is advertising. The position has to be advertised in various online resources to provide proof that the recruiting effort took place, was extensive and covered many potential applicants from Canada.

However, some LMIA applications are exempt from advertising requirements, one such example being the Owner/Operator LMIA.

This specific category has been created for foreign businessmen who wish to either establish or purchase a business in Canada and manage it from Canada. The role of the simplified procedure is to attract business people to the country and make the transition process smooth, easy, and quick.

If you are a business person who runs a business or wants to purchase a business in Canada, look into the below criteria to see if you qualify. You must:

  1. Be a sole or majority shareholder, i.e. demonstrate that you have controlling interest in the business.
  2. Verifiable, transferable management experience.
  3. Sufficient assets to purchase the targeted business in Canada.
  4. Sufficient language abilities in either English or French to actively work as a manager in the business.
  5. Controlling interest in the business: own more than 50% of the shares and cannot be dismissed 
  6. Demonstrate that your entry into Canada will result in the creation or retention of jobs for Canadian permanent residents / citizens.
  7. Be independent from any senior management. You must occupy the highest position of power in the company and not be answerable to any superiors.

PROCESS

  1. The foreign investor identifies a Canadian business to purchase.
  2. A business plan.
    You must show in detail how you will fund the business and create/maintain employment. The business plan must be elaborate and convincing. You must convince the officer of Employment and Social Development Canada (ESDC) that you know what you are doing.
  3. A Labour Market Impact Assessment (LMIA) application is submitted along with a suitable business plan.
  4. In your business plan, show an intention to hire Canadian citizens or permanent residents (ideally, in the first year of the business).
  5. Once a positive LMIA opinion is issued, the foreign investor applies for a 12-24 months, renewable temporary work permit at the management level.
  6. You must be actively involved in the business. You should show that you are not making a passive investment. Instead, you intend to run and develop your business further. You are the architect behind your project.

How long does this process take?
Once a suitable business is found, it will take 2-3 months to complete the LMIA application process.  It will take less than 3-months in most jurisdictions to receive a work permit.

When can the work permit holder apply for Canadian permanent residence?
There is no minimum wait time.

During the first year of working in Canada, the foreign investor along with immediate family members can apply for permanent residence if they qualify under a suitable program, either the federal Express Entry or a provincial nomination program. In most cases, the process can be completed in less than 12 months.

Foreign investor entrepreneurs wishing to relocate to Canada, should consider acquiring an established business or launch a new business in Canada, and apply for a work visa as a management employee. Revised federal policies governing new business owners under the Temporary Foreign Worker (TFW) program is gaining considerable attention.  After a period of less than 1 year, successful temporary work visa holders can transition to permanent residence under a provincial program or as a federal skilled worker under Express Entry.

The rules are complex but navigable.  A foreign employee-investor can create a new business, acquire an existing Canadian business, or invest substantially in an enterprise and qualify for a work permit as a TFW.  The acquisition of the business by the foreign national must, among other conditions discussed below, result in the creation or retention of Canadian jobs and there must be knowledge transfer to Canadians.

How Is an Owner-Operator Defined?
First and foremost, an employer must be an entity (person, business, corporation, or organization) that makes an offer of employment to a foreign national to perform work for compensation, and for an identifiable term, in Canada.   The employer is generally the entity that hires, controls working conditions and remunerates the foreign national. It must be an identifiable entity that will enable government authorities the necessary scope to fulfill its regulatory responsibilities attendant to the administration and enforcement of the Temporary Foreign Worker TFW Program.

To qualify as an owner-operator the foreign employee-investor should be able to establish a level of controlling interest in the business (e.g. a majority or plurality of shares, is not able to be fired) and be actively involved in its operation. Foreigners who do not meet this definition would not qualify for the program exemptions under owner-operator.

In all instances, the transaction must be genuine.  To meet such determination, the offer must be made by a foreign employee-investor that will be actively engaged in the management of the business.  This will be assessed by reviewing the foreign national’s intention to operate the business as well as prior experience in managing or operating a business.

Ownership of shares does not by itself guarantee that a foreign national qualifies as an owner-operator.  Additionally, the sale and purchase of shares in an existing Canadian entity by a foreign national will require immigration approvals and will likely be conditional to the issuance of the work permit. The transaction will often therefore be strategically carried out in stages to meet both immigration and commercial practices. Consideration must therefore be given to a variety of instances, including fully completed purchases, pending complete purchases and partial purchases of the Canadian enterprise by the foreign employee-investor.

What Constitutes an Employer?
Current policy requires that “an employer/employee relationship must be clearly identified to permit regulatory responsibilities in the administration of the Temporary Foreign Worker Program.

In cases where a self-employed individual intends to enter Canada to establish or purchase a business and be involved in its day-to-day operations, the business plan and contract to purchase shares in the business must establish an employer/employee relationship with an offer of employment.

Therefore, in the absence of a job offer as in most TFWP cases, the case officer looks at the foreign worker’s business plan or share purchase contract to assess the strength of the case. The factors being considered during this evaluation are those mentioned above, i.e. will the foreign worker’s presence in Canada create or retain jobs for Canadians, or transfer skills or knowledge to Canadians.

Existing Businesses

Where the foreign employee-investor acquires or intends to acquire 100% or substantial interest of an existing Canadian business, the following considerations will apply for the assessment of an LMIA.

1) Complete Purchases
Where a 100% purchase has been completed and documentary evidence is provided (share purchase agreement, share certificate, notice of articles, central securities register, CRA#), reflecting purchase/ownership change application, the burden of proof is less onerous. However, the requirement on creation or retention of Canadian jobs and knowledge transfer to Canadians in the form of a transition plan, still needs to be satisfied.

The new owner as employer, will apply for a Labour Market Impact Assessment (LMIA), to support an owner-operator management based work visa.

2) Pending Complete Purchases
Where the transaction is pending, and contingent on an LMIA and WP, immigration authorities will broadly assess if the anticipatory project is genuine. Key factors include how advanced the transaction is, (signed share purchase agreement, monies in escrow), how sound the foreign employee-investor’s business plan to acquire 100% ownership in the shares of the business as principal owner is and whether the intent to hire or retain Canadian workers can be established.

The existing or incoming owner as employer, will apply for a Labour Market Impact Assessment (LMIA).

The existing owner could also submit the LMIA to hire the foreign employee-investor into a specific management position in the business, in which case the usual program requirements will apply.  Once the purchase takes place in the future, the new owner as employer will submit a new LMIA to support an owner operator management based work visa.

3) Partial Purchases
Where the transaction is pending and contingent on an LMIA and WP, once again immigration authorities will broadly assess if the anticipatory project is genuine. Key factors include how advanced the transaction is, (signed share purchase agreement, monies in escrow), how sound the foreign employee investor’s business plan to acquire a substantial ownership in the shares of the business as principal owner or co-owner is, what percentage of the business is being transferred and whether the intent to hire or retain Canadian workers can be established.

Other considerations here include establishing who owns the largest part of the business, and whether existing shareholders will continue to play an active role. Depending on this assessment, the foreign national may be treated as a new management employee.  In such instance, an evaluation on the prognosis of continuing employment is required.  The business must have sufficient profitability in the form of retained earnings, to incur the salary of the foreign employee-investor, without taking into consideration, the injection of new capital into the business.  The structure of the overall commercial transaction and the role the new employee will take on, is paramount to this determination.

The existing owner as Employer, will hire the foreign national and apply for a Labour Market Impact Assessment (LMIA), to support a management visa, if one does not exist.

New Businesses

Where the foreign investor plans to start a new business that is contingent on a positive LMIA and work permit, the business should be in “operation”, providing goods or services.  The following considerations will apply for the assessment of an LMIA under the Owner-Operator guidelines:

  • Preparation efforts made towards opening the business (incorporating the business, applying for business licenses, executing a lease agreement, securing new contracts, etc.).
  • The presence of a viable business plan.
  • Hiring intentions: whether the company intends to hire Canadians/permanent residents.
  • Role of foreign-employee investor to become sole owner and actively engaged and carry out anticipatory work on behalf of the business as a TFW.
  • the business as a TFW.

Conclusion

The TFW program is a suitable vehicle to facilitate the admission to Canada of a foreign owner, following the sale of a Canadian business or the launch of a new entity.

With baby boomers reaching retirement age in Canada, thousands of small and medium sized business owners within this large demographic, are looking to sell.  With second generation children, often not an option to take over a family business, this creates the need for buyers.  That buyer need not come from within Canada.  Canadian businesses and their owners can readily consider the international investment market for viable transition strategies.   For many foreign investors, the pathway to Canada is 2-staged, beginning with a temporary work permit under the federal Owner-Operator rules.  These policies will apply for the sale and transfer of a significant portion of ownership in a Canadian business to a foreign national.  Once admitted on a work permit, successful candidates can at a later stage, apply for permanent residence to Canada under one of the programs serviced by the Express Entry system or under a suitable provincial business immigration stream.

Although the burden of proof can be onerous, the issuance of a positive LMIA and work permit to a foreign national, pursuant to the transfer of ownership of a successful Canadian business, is feasible. Above all, the project must be genuine and carried out with the foregoing considerations.

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