Reviewing Canada Start-Up Business Commitment Certificate or the Letter of Support

Reviewing the Commitment Certificate or the Letter of Support

The Commitment Certificate or the Letter of Support would need to ensure that they address the following key elements.

• Client Information: Name of the applicant
  • Required Information: The name of the applicant must be exactly the same as specified on the passport or travel document. Officers would need to flag this in the Global Case Management System (GCMS) in case they find that the applicant’s name differs from the other names on file.
• Related Applicants: Essential applicants
  • Required Information: The Commitment Certificate or the Letter of Support would need to indicate any essential applicants there might be. In all cases, these names would need to be consistent with the names given on file too.
• Business Information
  • Required Information: This field requires the provision of a concise but complete description of the type of business that the applicant intends to operate. As such, applicants would need to avoid listing brief technical terms only.
    • Example: Instead of specifying “Experimental farming”, the applicant would need to elaborate on the subject by specifying, “This business is being established as an experimental farming facility which will grow a new type of rice engineered to grow in a shorter growth cycle which is normally found in colder climates such as those which exist in Alberta.”
• Business Structure
  • Required Information:
  • The Commitment Certificate would need to specify the details of the amount of the investment. In addition, it must mention the details of the parties investing the amounts listed too. The officers do not require the attachment of any bank transfers as proof of this. This is because the authorities consider the terms specified in the commitment as satisfactory evidence for the purposes of this pilot. Some Commitment Certificates might only name designated business incubators. In this scenario, the authorities do not require any investment details.
  • Some Commitment Certificates might only list the details of angel investor groups. In this scenario, one of the angel investor groups would need to act as the lead entity. In addition, the minimum total combined funds from all the designated entities would need to be at least $75,000.
    • Example: Stephen has three angel investors in his business. All three investors i.e. Investor A, Investor B and Investor C have agreed to invest $20,000 each in the business. In this scenario, the sum of the three investments together adds up to $60,000. This does not meet the minimum investment amount required from designated angel investor groups i.e. $75,000. As such, Stephen would not meet the definition of a member of the Start-Up Business Class.
  • The Commitment Certificates would need to name the designated venture capital funds. It would also need to identify one of these funds as the lead. In addition, the minimum amount of total funds submitted by all designated entities would need to be at least $200,000.
  • It is worth mentioning that both venture capital funds and angel investor groups have the ability to support a single commitment. However, the provisions specified in MI 2 (3) (a) specify that only a venture capital fund can serve as the lead entity. These provisions also specify that the minimum total combined funds from all entities would need to be at least $200,000.
    • Example: Agnes has three investors in her business. Investor A is a venture capital fund. It has agreed to invest $80,000 in the business. Investor B is also a venture capital fund. It has agreed to invest $100,000 in the business. Lastly, Investor C is an angel investor group. It has agreed to invest $75,000 in the business. The total investments of the three investors amounts to $255,000. In this situation, the total combined funds for venture capital funds meets the prescribed requirement of at least $200,000.
  • The Commitment Certificates would need to describe the applicant’s role in the business. This includes providing details about the applicant’s title and any tasks that the applicant will need to perform for the company.
    • Example: Merely listing the applicant’s title as ‘CEO’ will not suffice. The certificate would need to have a description that outlines what the designated entity expects the applicant to do as a CEO.
  • The Commitment Certificates would need to describe the legal and financial structure of the business. This includes providing details related to incorporation or the plans to incorporate. Officers would need to flag the designated entity for a peer review if:
    • The designated entity has a disproportionately low percentage of shares or,
    • The designated entity has little to no role in the legal control of the business
  • It is worth mentioning that the converse would apply in cases where the applicant has little to no control or equity in the business
    • Example: Review to determine if the business viable or has come into being purely for the purpose of immigration. The authorities only permit qualified participants to own 50 percent or more of the voting rights. This is in accordance with the provisions specified in section 7 (1) (b) of the Ministerial Instructions (MIs).
  • The Commitment Certificates would need to specify the names and functions of all the individuals who hold or will hold an interest in the business. This would need to take the relationship of the participants into account as well. Situations could arise where a spouse or common-law partner might own shares in the business, but are not a part of the team. In this scenario, the officers would not be able to count their shares towards the total required for the qualified participants.
    • Example: The raising of concerns becomes a necessity in case a member or members of the team end up playing very minor roles in the business. This is even more so if the member is also related to an applicant and would not be eligible for immigration as a dependent. This would typically happen if the member is an adult child of the team lead. Therefore, officers would need to consider the role of the team member as well as the significance of the team member’s role in the business. Officers have the authority to reject the team member’s application if they find that the role seems relatively minor or insignificant i.e. administrative support. But, they should only take this course of action if they deem that the primary purpose of the application is immigration as opposed to making a contribution as a member of the entrepreneurial team.
  • The Commitment Certificates would need to describe the terms and conditions applicable to the investment or the commitment
    • Example: The officers would need to review all terms and conditions of the investment or the commitment. This would enable them to evaluate the authenticity of the venture, including factors such as:
      • The requirement of regular progress reports
      • The budget reviews or audits
      • The controls over transfer of shares or voting rights
      • The indemnification and insurance
      • The confidentiality and non-disclosure details
      • The expenses
      • The composition of the board (which is separate from the articles of incorporation)
      • The matters that necessarily require a majority board approval and,
      • The rights of the preferred shareholders
  • The Commitment Certificates would need to identify the names and functions of any other person who holds or could expectedly end up holding an interest in the business. Officers would need to assess the number of shares and voting rights that each person typically holds. The Ministerial Instructions (MIs) specify the requirement for the percentage of ownership. Therefore, officers would need to review these Ministerial Instructions (MIs) for changes to the voting shares and the percentage of ownership. The authorities only permit qualified participants to own 50 percent or more of the voting rights. This is in accordance with the provisions specified in section 7 (1) (b) of the Ministerial Instructions (MIs).
    • Example: The applicant could be the child of a wealthy overseas industrialist. This industrialist might have bought a significant number of shares and could be investing large sums into the applicant’s intended business venture. This could raise concerns that the parent might well be the de facto controlling interest. As such, the applicant could simply be acting on the parent’s instructions. Similarly, officers would need to keep a lookout for foreign ownership and investment by governments or non-profit organisations in the applicant’s intended business. Officers would need to view these as indicators of concern about the genuineness of the venture. Therefore, they should not think twice about investigating such ventures further.
    • In some cases, the business incubator might be the party making the commitment. In this scenario, the Commitment Certificates would need to clearly indicate that the applicant has found acceptance into the incubator program. In addition, it should clearly identify the following details:
      • The program name
      • The start date
      • The location and,
      • The duration
• Background Information
  • Required Information: This would need to describe the relationship between the applicant and the investment team. It would need to elaborate on any past business dealings that have existed between the two parties. It would also need to provide details on how the investment team became aware of the business investment opportunity.
• Work Permit for Essential Applicant (if applicable)
  • Required Information: A designated entity could indicate its support for a work permit application. However, this is only possible if the designated entity considers it critical for the applicant to come to Canada before the applicant obtains permanent resident status for expediting the establishment of the start-up business in Canada.