Authored by Pushkar Prehar, Associate Lawyer, Greenberg Hameed PC.
The Start-up Business Class is a part of the economic class of immigration pursuant to subsection 12(2) of the Immigration and Refugee Protection Act ( SC 2001, c. 27) [“Act”] , which provides that a foreign national may acquire permanent residence status in Canada by being selected as a member of the economic class on the basis of their ability to become economically established in Canada. Under subsection 14.1(1) of the Act, the Minister of Citizenship and Immigration [“Minister”] may give instructions establishing a class of permanent residents as part of the economic class and may provide rules governing such class.
The Minister promulgated the Ministerial Instructions Respecting the Start-up Business Class Program [“Ministerial Instructions”], which have since been incorporated mutatis mutandis into sections 98.01 to 98 of the Immigration and Refugee Protection Regulations, SOR/2002-227 [“Rules”]. The Ministerial Instructions form the relevant legal framework for the start-up business class, and visa officers must comply with them (Act, s 14.1(7)).
The Rules establish the start-up business class program [“Program”] as “class of persons who may become permanent residents on the basis of their ability to become economically established in Canada” and who meet the requirements of this section. To qualify for the class, an applicant must:
i. have obtained a commitment from either a designated entity (business incubator, an angel investor group or a designated venture capital fund), listed in schedules of the Ministerial Instructions;
ii. have attained a certain level of language proficiency;
iii. have a certain amount of transferable and available funds; and
iv. have a qualifying business
Immigration, Refugees and Citizenship Canada [“IRCC”], in a 2013 meeting of the Standing Committee on Citizenship and Immigration, noted that the Program is aimed at “ensuring that entrepreneurs […] are cleared to become a permanent resident once they do a deal with a venture capital partner, an angel investor, or an incubator. This defined that the Program is, first and foremost, a permanent residence program.
The Program also offers an option for the entrepreneurs to temporarily work on their business in Canada prior to granting permanent residency. The available guidance is provided on the IRCC website, which provides that applicants may begin working as entrepreneurs in the development of their business described in the Commitment Certificate before acquiring their permanent residence.
Recent Policy Changes
1) Cap and priority processing
On April 29, 2024, to address backlogs, improve processing times and with the aim to streamline the immigration process for entrepreneurs, the Minister announced changes to the Program. These changes took effect on April 30, 2024:
- Cap: The number of permanent residence applications intake each year was capped to those associated with no more than 10 start-ups per designated organization. Each designated organization could only issue 10 Commitment Certificates each year.
- Priority processing: for entrepreneurs whose start-up is supported by Canadian capital or by a business incubator that is a member of Canada’s Tech Network, with retrospective applicability. Leaving the other applications in a delay.
Although the policy was announced to reduce processing times, the aforementioned change made it clear that the program was being overhauled due to unscrupulous players who purportedly “sold” this Program in the “immigration marketplace” as an easy and direct pathway to permanent residency by creating fictitious businesses and selling them to uninformed and naïve applicants worldwide at a premium price.
As soon as these changes were announced, the immigration marketplace collapsed for the unscrupulous players, presumably benefiting the immigration system at large.
Conversely, albeit being prohibited from charging a fee to review and assess the business proposal or the business, many designated entities increased their fees multifold for issuing the Commitment Certificates to prospective applicants in the guise of “incubation” or “training modules” for the entrepreneurs.
Over 84 designated entities are allowed to issue 10 Commitment Certificates each year to a team comprising up to 5 entrepreneurs. By capping the intake to 10, the direct impact clearly seen in the marketplace is that the premium prices rose to first-class prices, and the applicant/entrepreneur/foreign nationals are still falling prey to the schemes of unscrupulous players.
A peer review is an independent assessment of a commitment by a panel of experts convened by the industry association that represents the lead designated entity on the commitment certificate. The peer review process was designed to protect against fraud and to ensure that designated entities’ and applicants’ activities are in line with industry standards.
An officer may request a peer review if it assists in the application process or for the purpose of completing a quality assurance exercise.
The IRCC announced that effective August 1, 2024, all peer reviews will be paused until further notice and no new peer review requests will be accepted, and all ongoing peer reviews must be cancelled.
Federal Court jurisprudence
This pilot program was launched in 2013, and since then, the Federal Court has published less than 15 judgments on the issue, whereas another pilot program launched in 2021 (during the onset of the COVID-19 pandemic) called “TR to PR Pathway” has over 10 published judgments. Pointing to the obvious that either this is not a highly litigated area or a highly grey area in Immigration Law where the cases were reaching early resolutions and not seeing their day Court through an oral hearing. The judgments discussed below reveal the nuances of this Program:
1. Oversight by one can cost the team
Most recently, the Federal Court in Damangir v. Canada (Citizenship and Immigration), 2024 FC 599 observed that all the Applicants in the group of a five-member start-up team were affected by the failure of one applicant to disclose a prior temporary residence visa refusal.
In this case, an “essential member” of the start-up team failed to disclose a prior visa refusal in their application. The team was highly skilled and had made substantial progress in their start-up in Canada. The application had been in processing since May 2020, and due to the processing times, the five team members and their families were waiting for it to be processed, which was ultimately refused after three years.
2. Importance of a solid Business Plan
The Federal Court in Ajili v. Canada (Citizenship and Immigration), 2023 FC 788 discussed the importance of a business plan in the application package of a Start Up Business Class Program. The Court also provides guidance on the essential elements of a business plan.
The Court at Paras 29 held:
[29] … The business plan never identified what the product would be, how it would be created and what was unique about it. There was no evidence that it could generate a revenue stream; the costs associated with the project were not identified, nor were the steps to be taken to actually manufacture the booths. In effect, it was an idea that was not fleshed out.
3. Rule 89: Artificial Transactions
It is observed that the most common ground of refusal of permanent residency under the Start-up business class program, at least challenged before the Federal Court, has been under Rule 89 (Artificial Transactions): A transaction entered into primarily for the purpose of acquiring a status or privilege under the Act rather than for the purpose of engaging in the business activity for which a commitment referred to in paragraph 98.01(2)(a) was intended.
The following judgments discuss this issue:
The Court in Bui v. Canada (Citizenship and Immigration), 2019 FC 440, laid down significant principles that were later applied in other judgments of the court. It was held that:
- There is a fine line between immigration being motivated in part by economic motives and participating in an immigration program primarily for the purpose of acquiring a status or privilege under the Act.
- The standard of proof in such matters is that of a balance of probabilities (which is highly factual).
- The Ministerial Instructions do not require that a venture be first experimented in a foreign country before being deployed in Canada
In the case of Ngyuen v. Canada (Citizenship and Immigration), 2020 FC 1126, the Applicant argued that it is unreasonable for the visa officer to rely on the absence of progress in her business to refuse the application since the start-up business class program has no requirement to prove success or demonstrate a particular degree of progress and also reiterates that an applicant does not even need to apply for a work permit, such that reliance on a lack of progress while Ms. Nguyen had a work permit is unreasonable, the court rejected the argument and held:
[53] These arguments are not persuasive. The visa officer neither imposed a requirement to prove success or demonstrate a specific degree of progress. Rather, they compared Ms. Nguyen’s own stated intentions as described in the commitment documents she filed to obtain a work permit and in support of her application for permanent residence with her actual conduct in moving the business forward…
In a similar case, Le v. Canada (Citizenship and Immigration), 2020 FC 734, the Applicant argued that it was unreasonable for the officer to make a negative inference from the short length of time (two weeks) they spent in Canada on their one-year work permit, as they are not obligated under the Program to obtain a work permit. The Court held:
[29]… The Officer acknowledged that there are no work permit obligations on the Applicants. However, the Officer was concerned that there was a “big discrepancy between what was stated in the commitment certificate […] and the applicant’s actions once the work permit was issued” (that is, that the Applicants’ positions were full-time positions in Vancouver, that there were urgent business reasons for the Applicants to come to Canada, and that the Applicants were to undergo a one-year incubation program in Vancouver). It was not unreasonable for the Officer to conclude that this discrepancy demonstrated the Applicants’ were working with Empowered to acquire a status or privilege under the IRPA rather than for the purpose of engaging in the business activity for which their arrangement was intended.
In the case of Kwan v. Canada (Citizenship and Immigration), 2019 FC 92 the Applicant argued that it was unreasonable for the Visa Officer to attribute an improper purpose to her application based solely on a lack of progress in the development of her business. The court held that the officer’s concerns were more akin to the lack of meaningful engagement in the development of the business.
The Applicant, in this case, had obtained a work permit, entered Canada on February 25, 2017, and almost immediately returned to Hong Kong on March 17, 2017, without intimating the IRCC of the departure and the reasons behind the same. The applicant also did not provide any proof of active and ongoing management of the business from within Canada. The Court held that:
[17] … In my view, a good faith obligation continues to exist beyond the initiation of an application under this program. If it were otherwise, no purpose would be served by requiring a commitment from the applicant going forward, for regular progress reporting, and for a post-application peer review.
[20] …While it may well be open to applicants in Ms. Kwan’s situation to hold back from initiating business activity until permanent residency has been obtained, that is not what Ms. Kwan did. She gave clear commitments that she failed to honour and the level of her business activity was minimal at best.
IV. Work Permits
The Federal Court in Karimi v. Canada (Citizenship and Immigration), 2023 FC 411, and Serimbetoz v. Canada (Immigration, Refugees and Citizenship), 2022 FC 1130, cleared any ambiguity regarding the processing of work permits under the Start-Up Business Class Program.
The refusals in these cases were primarily on the grounds that the officer was not satisfied that the applicants would leave Canada based on the “purpose of visit” and “family ties”.
Diner J. in Serimbetoz (Supra) held that the primary objective of this program is permanent residence in Canada on the basis of start-up entrepreneurship and refusals on the basis of purpose of visit and family ties, absent reasonable justification for this basis of refusal, when the work permit applications were expressly intended as a precursor to a forthcoming permanent residency application, was not only inconsistent with the purpose of the Program, but it was also illogical.
The same reasoning was adopted by Mcdonald J. in Karimi (Supra) holding that the very purpose of the work visa is to facilitate the establishment of a business in Canada while a permanent residence application is pending, there should be no reason for the Applicants to plan to leave Canada once their work permits expire.
V) Start a business
The Federal Court in Li v. Canada (Citizenship and Immigration), 2022 FC 1327 rejected the arguments of the Applicants and held that to qualify under the Program, an Applicant must START a new business, not join an existing business that has already been incorporated.
In this case, the Applicant joined a business which was active for two years and argued that this is permissible under the regulations.
VI) Peer Review
Several challenges have been raised regarding the Peer Review, its intent, and its process before the Federal Court. However, after the aforementioned policy update, effective August 1, 2024, which states that all peer reviews are paused until further notice. This effectively renders the Peer Review process moot.
Summary
In conclusion, the Start-Up Business Class Immigration Program in Canada is a crucial pathway for innovative entrepreneurs seeking permanent residency. However, the program faces significant challenges and complexities, as highlighted by recent policy changes and Federal Court decisions.
Introducing a cap on Commitment Certificates and priority processing aims to streamline the process and curb fraudulent practices, but has also led to increased costs and challenges for genuine applicants.
The suspension of the peer review process further complicates the landscape, removing a layer of oversight meant to ensure due diligence.
The Federal Court has underscored the importance of transparency and thoroughness in applications, emphasizing that the failure of one team member can jeopardize the entire group’s application.
Additionally, the court has clarified the necessity of a well-developed business plan and genuine business intent, warning against applications motivated primarily by the desire for immigration status rather than entrepreneurial activity.
Overall, while the Program serves as a vital tool for fostering innovation and economic growth in Canada, it requires careful navigation and adherence to its stringent requirements to avoid pitfalls and ensure success.
