ARCHIVED — Regulations Amending the Immigration and Refugee Protection Regulations

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Vol. 142, No. 10 — March 8, 2008

Statutory authority

Immigration and Refugee Protection Act

Sponsoring department

Department of Citizenship and Immigration

REGULATORY IMPACT
ANALYSIS STATEMENT

(This statement is not part of the Regulations.)

Description

Purpose of these provisions

The Immigration and Refugee Protection Regulations (IRPR) allow for a foreign national who intends to inject capital into an enterprise to be selected as a permanent resident if he or she meets the requirements of one of the following three classes: the Federal Immigrant Investor, Federal Entrepreneurs and some Provincial Nominees. These three categories are distinguished by the role that the foreign national will play with the enterprise and the financial contribution to be injected into the business.

The federal government has always recognized the importance of investment capital for provinces and territories. As a result, the federal Immigrant Investor Program (IIP) was created in 1986, was redesigned in 1999, and continues to be reviewed and improved (particularly in the areas of processing times and selection criteria) in order to meet the economic needs of participating provinces and territories.

The federal IIP brings to Canada individuals with successful business and/or management experience and a net worth of $800,000 who make an investment of $400,000 into Canadian economic development and job creation. Investments are allocated by Citizenship and Immigration Canada (CIC), in accordance with the Regulations, to participating provinces and territories, who use the allocations to foster economic growth and job creation. The investments are held for a period of five years, at which point they are returned, without interest, to the investors.

The Federal Entrepreneur Program brings to Canada individuals with significant successful business experience who have a minimum personal net worth of $300,000 and who intend to operate a business upon their arrival in Canada. The business in Canada must meet specific criteria (including active management of the business by the entrepreneur) within a period of three years after arrival in order for the entrepreneur and their family to remain in Canada.

Under the Provincial Nominee Program (PNP), provinces and territories can nominate individuals who they consider to be important to their economic development. Under the terms of the provincial nominee agreements, provinces and territories are responsible for designing the criteria for their respective nomination categories, which can include business immigrants. However, the intent of the entrepreneurial component within the PNPs was to permit provinces and territories to nominate businesspeople who would meet the specific demographic and economic objectives of that province or territory by settling in the nominating province or territory and opening or investing in a business which they would actively manage on a day-to-day basis. Selection on the basis of the ability to invest capital without involvement in the management of the recipient business/organization is exclusive to the federal IIP. It was never intended that provinces and territories select passive investors under their PNPs.

The problem that has been identified is that the current Regulations have proven to be worded in such a way that they allow the use of PNPs to attract passive investments in exchange for the promise of permanent residency. The current wording suggests that any involvement, however minor, would satisfy the exclusion. It does not define a minimum level of involvement in the active management of the business in which they invest under the PNP.

For a better understanding of the issue, it is important to distinguish the immigrant investors (federal IIP), who bring capital, from the business immigrants (PNP), who seek to come to Canada to become involved in the operation of a business. For example, a business immigrant is desirable for his/her entrepreneurial acumen and business know-how. The business immigrant will maintain equity ownership in the enterprise and will share in the successes and failures of the enterprise. In some cases, however, schemes have been devised whereby the immigrant might be given a nominal title in the enterprise (a directorship, for example), but has no direct and active involvement with respect to the active operation of the enterprise, in the broader management of the company, or in the ultimate success of the enterprise.

This distinction is extremely relevant to the objectives of the PNP. Nominees are expected, once they immigrate to Canada, to reside in the province that nominated them. The PNP is seen as a major tool in encouraging the settlement of immigrants in Canada to communities and regions outside the country’s three largest urban centres. Studies show that passive investors often move away from where they originally settle. A business immigrant, on the other hand, who is actively operating an enterprise in a particular community or region is strongly motivated to stay in that community or region to operate the business well, protect his/her investment, and ensure its success. The fact that a local business is being actively operated is also more likely to lead to job creation, which will provide further benefit to the community or region.

The proposed Regulations would amend subsections 87(5) and (6) of the IRPR, which set out excluded investment proposals under the PNP. The suggested amendments would strengthen and clarify existing rules regarding the PNP and the passive investment of capital in Canadian businesses. The purpose of these Regulations is to prevent abuse of the PNP via passive investment schemes (as well as circumvention of the federal IIP) while retaining flexibility so that a province can nominate a foreign national who makes an active investment in the province.

What has changed?

The proposed Regulations define more specifically the group of foreign nationals who cannot be considered as members of the PNP. A foreign national is precluded from being considered as a member of the Provincial Nominee Class if the nomination was based on the provision of capital by the foreign national or if the foreign national intends to participate in, or has participated in, an immigration-linked investment scheme. “Immigration-linked investment scheme” is defined to support the proposed revisions. It includes any strategy or plan where one of the objectives is to facilitate immigration to Canada and one of the objectives of the promoters of the strategy or plan is to raise capital, or where the agreement of arrangements was entered into primarily for the purpose of acquiring a status or privilege under the Act.

A foreign national who is excluded from the class may still be considered a member of the Provincial Nominee Class if the capital provided to a business is not made primarily for the purpose of deriving interests, dividends, or capital gains; the foreign national controls or will control at least 33 1/3% of the equity in the business in which the money is invested, or has made a minimum $1 million equity investment in the business; the foreign national will participate actively, on an ongoing basis, in the management of the business; and the terms of investment in the business do not include a redemption option.

Under the proposed Regulations, to become a permanent resident of Canada, a provincial nominee must present their permanent resident visa to an officer at an office of CIC in the province or territory that nominated them. This provision is designed to encourage the applicant to settle in the province that nominated them and would provide more certainty for that province.

Spouses and dependent family members of a principal provincial nominee applicant would become permanent residents of Canada once the principal applicant has become a permanent resident of Canada. This provision is consistent with the requirements for dependents to become permanent residents of Canada in the Family Class category.

Alternatives

There are no alternatives to a regulatory framework for the prohibition of passive investors from being considered as members of the Provincial Nominee Class. The only way this situation can be effectively resolved is if the Regulations are amended so that visa officers can make consistent and defensible decisions that reject applications from provincial nominees who have handed over money in hopes of immigrating to Canada.

Amendments to the Regulations are required to ensure program integrity and consistency of application.

Benefits and costs

Benefits

The wording of the current Regulations has allowed some provinces to use provincial nominee powers to raise investment, which presents a competitive option to the federal IIP. Candidates selected by provinces and territories see significantly faster processing times, as the province/territory does the bulk of the selection work prior to nomination and CIC’s role is primarily that of verifying admissibility. These faster processing times make any provincial/territorial passive investment scenario a significantly more attractive option over waiting in the federal IIP queue.

Competition among the provinces and territories is also problematic. Should a larger number of provinces and territories begin engaging in passive investment schemes, the resulting competition among PNPs for the investment capital would result in the deterioration of the PNPs by encouraging less stringent selection processes and would undermine the regionalization and retention objectives of the PNPs. The proposed Regulations will help harmonize provincial practices in regard to the PNP, and the new wording should prevent this competitive activity between provinces and with the federal IIP.

Eliminating the possibility of passive investment through the PNP will help ensure that the original intent of the program is met and that genuine businesses are being actively operated by nominees in the nominating provinces and territories. This is more likely to lead to job creation and economic growth, which provides further benefit to the community or region. Similarly, investments made under the federal IIP can be utilized by provinces and territories in a wide range of ways to foster economic development and job creation. Reducing competition with the federal IIP results in a larger number of investors, which translates into more investment dollars being available for that purpose to all participating provinces.

The proposed Regulations improve the test (related to the intent to reside in the nominating province or territory and the identification of passive investment) that visa officers already apply when considering provincial nominee applications. They will make it easier for applicants to apply and they will improve the efficiency and quality of the decision.

They will provide greater certainty both for applicants and for visa officers applying the Regulations and will better protect the integrity of the federal IIP by improving its outcomes.

Costs

While there will be administrative costs associated with program redesign in those provinces currently operating passive investment schemes, they are expected to be minimal. The implementation strategy for these regulatory changes incorporates a period of time to allow for affected programs to be wound down/redesigned. CIC is also prepared to assist affected provinces in developing alternate streams within their PNPs, and it is anticipated that minimal costs, taken from existing resources, will be incurred at the federal level in providing this support.

Financial losses as a result of the cessation of incoming passive investment monies are expected to be offset via enhancements to the processing times and selection criteria of the federal IIP.

Consultation

Bilateral provincial nominee agreements outlining the parameters of their respective PNPs have been in place since March 1998. These agreements contain wording explicitly precluding passive investment schemes from forming part of PNPs.

Consultations on this proposal with the provinces and territories were conducted at meetings of the Federal/Provincial/Territorial Working Group on Provincial Nominees held in September 2003, September 2004, November 2005, November 2006, and May/June 2007. This group has a representative from each jurisdiction which has a provincial nominee agreement, as well as observers from Quebec. During the September 2003 meetings, the provincial and territorial representatives met separately (without CIC) and returned with a recommended change to the percentage ownership requirement of the amended Regulations (reducing it from 50% to 33 1/3%), which was accepted and incorporated by CIC.

After consultations with the provinces and territories, the majority of responses were positive and indicated continued support for the regulatory amendments.

Challenges related to the interpretation of the existing Regulations, as well as the development of the amendments, have had to be addressed on several occasions during the course of these consultations, resulting in the lengthy consultation period.

Although not unanimous in their opinion of the extent to which nominee powers should be used to attract investment capital, the vast majority of provinces and territories have indicated support for the proposed amendments. All provinces and territories recognize the need for clarity and consistency, and are hopeful that these provisions will meet those goals.

CIC made a commitment to increase the processing of federal IIP applications, setting a target of a minimum of 1 000 federal investor cases per year. This initiative has resulted in substantially increased investment capital to participating provinces. In 2007, CIC increased this processing commitment to 2 000 federal investor cases per year.

Compliance and enforcement

These provisions are in compliance with the Canadian Charter of Rights and Freedoms.

Mobility Rights under section 6 of the Charter protects the right of permanent residents and Canadian citizens to move from place to place and ensures that all Canadian citizens are free to enter, remain in, and leave Canada within the limits of the law. Subsection 6(2) of the Charter gives all Canadian citizens and permanent residents the right to move to, and live in, any province or territory where they may also look for work or set up a business.

When a foreign national makes an application under the PNP, the province is responsible for issuing a nomination certificate. The foreign national named in the certificate must then meet all the federal statutory requirements to be considered a member of the class and must satisfy the visa officer reviewing the application that they will become economically established in Canada and that they intend to reside in the province that nominated them.

Applicants who do not meet the requirements of these Regulations will be excluded from the provincial nominee class, even if they have been nominated by a province or they hold a nomination certificate from that province.

Misrepresentation by the applicant as well as arrangements and agreements made in bad faith could lead to the loss of their status in Canada. As with all other permanent residents, such a determination is done through examination when a need is identified, and is subject to review.

To ensure general understanding among officers of these new rules, guidelines will be used and training will be provided.

Gender-based analysis

There are a disproportionate number of male principal applicants in both the PNP and the federal IIP. In 2006, the PNP had 76.4% male principal applicants and 23.6% female principal applicants. The federal IIP had 84.8% male principal applicants compared to 15.2% female principal applicants. The proportion of females to males in the PNP increased by 2.2% since 2004, while the federal IIP has seen female principal applicants increase by only 0.1%.

Monitoring by sex and gender variables such as family status, dependants, education, income and assets will assist in carrying out a gender-based analysis of the impact of the Regulations on both programs. It will also assist in better understanding these programs from a gender perspective.

Contact

Heidi Smith
Director, Permanent Resident Policy and Programs Division
Immigration Branch
365 Laurier Avenue W, 8th Floor
Ottawa, Ontario
K1A 1L1
Telephone: 613-954-4214
Fax: 613-954-0850
Email: heidi.smith@cic.gc.ca

PROPOSED REGULATORY TEXT

Notice is hereby given that the Governor in Council, pursuant to subsection 5(1) and sections 14 and 26 of the Immigration and Refugee Protection Act (see footnote a), proposes to make the annexed Regulations Amending the Immigration and Refugee Protection Regulations.

Interested persons may make representations with respect to the proposed Regulations within 30 days after the date of publication of this notice. All such representations must cite the Canada Gazette,
Part I, and the date of publication of this notice and be addressed to Heidi Smith, Director, Permanent Resident Policy and Programs, Immigration Branch, Department of Citizenship and Immigration, Jean Edmonds Tower South, 8th Floor, 365 Laurier Avenue West, Ottawa, Ontario K1A 1L1 (Fax: 613-954-0850).

Ottawa, February 28, 2008

MARY PICHETTE
Assistant Clerk of the Privy Council

REGULATIONS AMENDING THE IMMIGRATION AND REFUGEE PROTECTION REGULATIONS

 

AMENDMENTS

 

1. Sections 84 and 85 of the Immigration and Refugee Protection Regulations (see footnote 1) are replaced by the following:

Permanent resident status

85. A foreign national who is an accompanying family member of a person who makes an application as a member of the federal skilled worker class shall become a permanent resident if, following an examination, it is established that

(a) the person who made the application has become a permanent resident; and

(b) the foreign national is not inadmissible.

 

2. Section 85.5 of the Regulations is repealed.

 

3. Section 86 of the Regulations is amended by adding the following after subsection (4):

Requirements for accompanying family members

(5) A foreign national who is an accompanying family member of a person who makes an application as a member of the Quebec skilled worker class shall become a permanent resident if, following an examination, it is established that

(a) the person who made the application has become a permanent resident; and

(b) the foreign national is not inadmissible.

 

4. (1) Subsections 87(5) and (6) of the Regulations are replaced by the following:

Exclusion

(5) Subject to subsection (6), a foreign national who is named in a certificate referred to in paragraph (2)(a) shall not be considered a member of the provincial nominee class if

(a) the nomination was based on the provision of capital by the foreign national; or

(b) the foreign national intends to participate in, or has participated in, an immigration-linked investment scheme.

Exception

(6) Subsection (5) does not apply if

(a) the capital is provided by the foreign national to a business in the province that nominated them, other than a business operated primarily for the purpose of deriving investment income such as interest, dividends or capital gains;

(b) the foreign national controls or will control

(i) a percentage of equity in the business equal to or greater than 33 1/3 per cent, or

(ii) an equity investment in the business of at least $1,000,000;

(c) the foreign national provides or will provide active and ongoing management of the business from within the province that nominated them; and

(d) the terms of the investment in the business do not include a redemption option.

 

(2) Section 87 of the Regulations is amended by adding the following after subsection (8):

Definitions

(9) The following definitions apply in this
section.

“immigration-linked investment scheme”
« projet de placement lié à l’immigration »

 

“immigration-linked investment scheme” means a strategy or plan

(a) where one of the objectives of the strategy or plan is to facilitate immigration to Canada and one of the objectives of the promoters of the strategy or plan is to raise capital; or

(b) where the agreement or arrangement in respect of the strategy or plan was entered into primarily for the purpose of acquiring a status or privilege under the Act.

“percentage of equity”
« pourcentage des capitaux propres »

“percentage of equity” has the same meaning as in subsection 88(1).

Non-application

(10) Subsections (5), (6) and (9) do not apply in respect of a foreign national who is issued a nomination certificate referred to in paragraph (2)(a) before September 2, 2008.

Transitional

(11) Subsections (5) and (6) as they read immediately before September 2, 2008 apply in respect of a foreign national referred to in subsection (10).

 

5. The Regulations are amended by adding the following after section 87:

Requirements for accompanying family members

87.1 A foreign national who is an accompanying family member of a person who makes an application as a member of the provincial nominee class shall become a permanent resident if, following an examination, it is established that

(a) the person who made the application has become a permanent resident; and

(b) the foreign national is not inadmissible.

 

6. Sections 106 and 107 of the Regulations are replaced by the following:

Permanent resident status

107. A foreign national who is an accompanying family member of a person who makes an application as a member of the investor class, the entrepreneur class or the self-employed persons class shall become a permanent resident if, following an examination, it is established that

(a) the person who made the application has become a permanent resident; and

(b) the foreign national is not inadmissible.

 

7. Section 109.4 of the Regulations is repealed.

 

8. Sections 114 and 115 of the Regulations are replaced by the following:

Family members — requirement

114. The requirement with respect to a family member of a live-in caregiver applying to remain in Canada as a permanent resident is that the family member was included in the live-in caregiver’s application to remain in Canada as a permanent resident at the time the application was made.

Family members — permanent residence

114.1 A foreign national who is a family member of a live-in caregiver who makes an application to remain in Canada as a permanent resident shall become a permanent resident if, following an examination, it is established that

(a) the live-in caregiver has become a permanent resident; and

(b) the foreign national is not inadmissible.

Conformity — applicable times

115. The applicable requirements set out in sections 112 to 114.1 must be met when an application for a work permit or temporary resident visa is made, when the permit or visa is issued and when the foreign national becomes a permanent resident.

 

9. The portion of section 122 of the French version of the Regulations before paragraph (a) is replaced by the following:

Exigences applicables aux membres de la famille qui accompagnent le demandeur

122. L’étranger qui est un membre de la famille et qui accompagne la personne qui présente une demande au titre de la catégorie du regroupement familial devient résident permanent si, à l’issue d’un contrôle, les éléments ci-après sont établis :

 

10. The portion of section 129 of the French version of the Regulations before paragraph (a) is replaced by the following:

Exigences applicables aux membres de la famille qui accompagnent le demandeur

129. L’étranger qui est un membre de la famille et qui accompagne la personne qui présente une demande au titre de la catégorie des époux ou conjoints de fait au Canada devient résident permanent si, à l’issue d’un contrôle, les éléments ci-après sont établis :

 

COMING INTO FORCE

 

11. These Regulations come into force on September 2, 2008.

[10-1-o]

Footnote a
S.C. 2001, c. 27

Footnote 1
SOR/2002-227