Silvia de Sousa
Thompson Dorfman Sweatman LLP (Lex Mundi Member Firm)

Legal system

1. What is the legal system (civil law, common law or a mixture of both)?

Manitoba has a common law system.

2. Are there any restrictions on foreign investment (including authorisations required by central or local government)?

The federal Investment Canada Act (RS 1985 c28), regulates foreign investment in Manitoba. There are some restrictions on foreign investment when non-Canadians acquire control over an existing Canadian business or establish new businesses, in particular in the following sectors:

- Banking and insurance.

- Print and broadcasting media.

- Telecommunications.

- Air transport.

3. Are there any exchange control or currency regulations

The Canadian dollar is not subject to any exchange control.

The federal Cross-Border Currency and Monetary Instruments Reporting Regulations require a visitor to Canada to declare all currency and monetary instruments (for example, stocks and bonds, cheques, travellers cheques, money orders, bank drafts, and treasury bills) totalling at least Can$10,000 (about EUR6,658).

4. What grants or incentives are available to investors? Are any of these aimed specifically at foreign investors?

A range of programmes and services are provided by Manitoba Trade and Investment, which is a corporate body created under the Manitoba Trade and Investment Corporations Act (CCSM c T125). The corporate body can provide grants, loans, loan guarantees or incentives, on such terms and conditions as it considers appropriate (including the taking of security).

Business Vehicles

5. What is the most common form of business vehicle used by foreign companies to conduct business in your jurisdiction? in relation to this vehicle, please provide details on:

- Registration formalities (including timing).

- Minimum (and maximum) share capital.

- Whether shares can be issued for non-cash consideration, such as assets or services (and any formalities).

- Any restrictions on the rights that can attach to shares.

- Any restrictions on foreign shareholders.

- Management structure and any restrictions on foreign managers.

- Directors’ liability.

- Parent company liability.

- Reporting requirements (including filing of accounts) and cost of compliance.

The most common form of business vehicle used by foreign companies in Manitoba is the corporation, which can be incorporated either under the Canadian Business Corporations Act (RS 1985 c C-44) (federal) or the Corporations Act (CCSM c C225) (Manitoba). For the purpose of this section, only corporations created under the Corporations Act (Manitoba) are discussed.

- Registration formalities. To carry on a business in Manitoba, a corporate name must be reserved with the Companies Office. A corporate name must end with limited, incorporated or corporation (or some shortened version). Once the corporate name is cleared with the Companies Office, articles of incorporation must be filed within 90 days of receiving the name. Fees are charged for registering the corporate name and filing the appropriate forms.

- Share capital. There are no maximum or minimum share capital requirements, with the exception of insurance corporations.

- Non-cash consideration. Shares can be issued for non-cash consideration, including property or past services. A share cannot be issued until consideration is paid in full. The term “property” does not include promissory notes.

- Rights attaching to shares. Rights attaching to shares can be restricted by:

- the Corporations Act;

- the articles of incorporation; and

- shareholder agreements.

- Foreign shareholders. There are no extra restrictions on foreign shareholders in Manitoba.

- Management structure. A corporation usually has a single-tier board with at least one director. The following people are disqualified from acting as a director:

- anyone less than 18 years of age;

- a person who is not an individual; and

- a person who has the status of a bankrupt.

In addition, at least 25% of the directors must be residents of Canada, or if a board is comprised of three or fewer directors, one of them must be a resident of Canada.

- Directors’ liability. Directors can be personally liable under common law for certain breaches or under the Corporations Act in a number of situations, including non-payment of wages.

- Parent company liability. Parent companies are only liable for the acts of subsidiaries as shareholders, except in certain rare cases where a court pierces the corporate veil. Each corporation is treated as a separate entity.

- Reporting requirements. There are the following annual reporting requirements:

- an annual return must be filed with the Companies Office;

- annual resolutions or minutes must be prepared; and

- a separate income tax return must be completed and filed with the federal government.

Employees

6. What are the main laws regulating employment relationships?

Generally, the law of Manitoba applies to about 90% of all employees, including foreign employees, working in Manitoba. The main laws regulating employment relationships are:

- The Employment Standards Code (CCSM c E110).

- The Labour Relations Act (CCSM c L10).

- The Workplace Health and Safety Act (CCSM c W210).

- The Human Rights Code (CCSM c H175).

About 10% of employees working in Manitoba work in federally regulated industries, and the main laws regulating those employment relationships are:

- Canada Labour Code (RS 1985 c L-2).

- Canadian Human Rights Act (RS 1985 c H-6).

7. Is a written contract of employment required? Are any agreements and/or implied terms likely to govern the employment relationship?

Written contracts of employment are not required.

Terms not identified in an employment contract may also be incorporated by:

- Employee handbooks.

- Collective agreements.

- A course of dealings between the employer and the employee.

In addition, mandatory terms are implied into the employment relationship by:

- Statute.

- Common law.

8. Are employees entitled to management representation and/or to be consulted in relation to corporate transactions (such as redundancies and disposals)?

Employees are not entitled to management representation in Manitoba. There is no obligation to consult with employees in relation to corporate transactions unless required by an employment agreement or collective agreement.

9. How is the termination of individual employment contracts regulated?

For provincially regulated employees, the Employment Standards Code governs the termination of individual employment contracts and requires notice of termination, subject to certain exceptions, to be provided in accordance with the following:

- Less than one year of employment: one week notice period.

- At least one year and less than three years: two weeks.

- At least three years and less than five years: four weeks.

- At least five years and less than ten years: six weeks.

- At least ten years: eight weeks.

An employer must pay wages for any portion of that notice that is not provided.

There are several statutory exceptions to this requirement in Manitoba, including in circumstances where an employee acts in a manner that is not condoned by the employer and that:

- Constitutes wilful misconduct, disobedience or wilful neglect of duty;

- Is violent in the workplace; or

- Is dishonest in the course of employment.

In relation to federally regulated employees working in Manitoba, the Canada Labour Code contains both notice of termination provisions and severance pay provisions. It also contains unjust dismissal provisions that permit an employee to file a complaint within 90 days of a termination alleging the dismissal was unjust. Terminations are not considered to be unjust in certain circumstances set out in the Code.

In addition to statutory notice of termination provisions, common law considerations also apply to both provincially and federally regulated employees. Generally, an employee may be terminated either for cause without notice, or without cause with notice. The amount of notice required at common law is in accordance with any enforceable terms of agreement between the employee and the employer, or in the absence of an enforceable agreement, based on the common law implied term of reasonable notice. In many cases, the common law notice obligation will be greater than the statutory minimum notice obligation.

10. Are redundancies/mass layoffs regulated? If so, please give details.

For provincially regulated employees, the Employment Standards Code contains a group notice provision if 50 or more employees are terminated within any four-week period. If the group notice obligations are triggered, a certain amount of notice must be given to employees ranging from ten weeks to 18 weeks, depending on the number of employees terminated. If any portion of the notice is not provided to employees, the employer must provide the equivalent wages in lieu of the notice. The Minister of Labour must also be provided with the notice of termination and may establish a Joint Planning Committee of management and employee representatives.

Similar group notice of termination provisions exist in the Canada Labour Code for federally regulated employees working in Manitoba.

11. Do foreign employees require work permits and/or residency permits? If so, how long does it take to obtain them and how much do they cost?

The entry of foreign employees into Canada is governed by federal law. In almost all cases, a valid work permit is required to work in Canada and a temporary resident visa may be required. A fee of Can$150 (about EUR99.9) is charged for a work permit. Work permit applications received up to 14 July 2008 have a processing time of 74 days. A fee of Can$200 (about EUR133) is charged for a temporary resident visa. Temporary resident visa extension applications for visitors already in Canada received until 22 July 2008 have a processing time of 65 days. The processing times for visitors outside of Canada vary according to the location of the visa office.

Tax

12. In relation to employees, what constitutes tax residency in your jurisdiction?

Residency is determined under both the common law and federal law. Under federal law, an individual is deemed to be a resident in Canada if he sojourned in the country for a period or periods aggregating 183 days or more in the calendar year. In Manitoba, determination as to residency under provincial tax legislation follows common law and federal law.

13. What income tax or social security contributions must the following pay:

- Tax resident employees?

- Non-tax resident employees?

- Employers, in relation to their employees?

Tax resident employees

A tax resident is taxed on his worldwide income. An individual’s basic tax payable for the 2008 and 2009 taxation years and for each subsequent taxation year varies according to the following levels of taxable income (TI):

- Can$37,885 (about EUR25,225) or less: 15%.

- More than Can$37,885 but not more than Can$75,769 (about EUR50,450): 22%.

- More than Can $75,769 but not more than Can$123,184 (about EUR82,021): 26%.

- More than Can$123,184: 29%.

Non-tax resident employees

A non-tax resident is taxed on his Manitoba- source income at the same rates as a tax resident (see above, Tax resident employees).

Employers

All employers in Manitoba are required by both provincial and federal law to deduct certain amounts from the income of their employees for employment insurance premiums, Canada Pension Plan contributions and income tax. Employers are also required to submit employer premiums for Canada Pension Plan and Employment Insurance.

14. In relation to business vehicles, what constitutes tax residency in your jurisdiction?

Every corporation that maintains a permanent establishment in Manitoba at any time in a taxation year must pay tax for the year. In addition, under the common law doctrine of residency in respect to business entities, a corporation is generally deemed resident in Manitoba if its central management and control is located in Manitoba, which is a question of fact.

15. Please give details on the main taxes that potentially apply to a tax resident business vehicle (including rates).

In Manitoba, the tax payable by a corporation that carries on active business is calculated by the following formula: tax payable = T × R × Dp/Dy. In this formula:

- T is corporation’s taxable income earned in Manitoba for the taxation year. The amount of taxable income earned in the year in Manitoba is determined by federal regulations.

- R is the applicable tax rate for the period as set out in the provincial legislation.

- Dp is the number of days in the taxation year that fall within the period.

- Dy is the number of days in the taxation year.

In 2008, the Manitoba provincial tax rate for corporations carrying on active business is 3%.

16. How are the activities of non-tax resident business vehicles taxed?

A non-resident business must pay tax on all income earned in Manitoba, but is subject to different rates of tax. For example, in 2008 the rate of tax on general income earned in Manitoba by a non-resident corporation is 13.5%. Non-resident corporations may also be subject to branch tax.

17. Please explain how each of the following is taxed:

- Dividends paid to foreign corporate shareholders.

- Dividends received from foreign companies.

- Interest paid to foreign corporate shareholders.

- Intellectual property (iP) royalties paid to foreign corporate shareholders.

- Dividends paid. The payment of dividends by a Canadian corporation to a non-resident shareholder is subject to a 25% withholding tax. However, dividend payments to residents of countries with which Canada has a tax treaty are usually limited by the treaty to a lower rate, such as 15%.

- Dividends received. Dividends received by resident Canadians from foreign companies are taxed in the same manner and at the same rate as dividends received by resident companies.

- Interest paid. Withholding tax on interest paid by a company to non-resident shareholders who are at arm’s length with the payor company was recently eliminated, except for specific types of participating debt interest. A 25% withholding tax still applies to interest payments made to non-arm’s length non-resident shareholders.

- IP royalties paid. A 25% withholding tax applies to payments of certain IP royalties to non-residents. However, IP royalty payments to residents of countries with which Canada has a tax treaty are usually limited by the treaty to a lower rate, such as 15%. Royalties paid to non-residents in respect of a copyright for the production or reproduction of any literary, dramatic, musical or artistic work are exempt from tax under federal legislation. 18. Are there any thin capitalisation rules (restrictions on loans from foreign affiliates)? If so, please give details.

Thin capitalisation rules are governed by federal legislation and limit the interest deductible on outstanding indebtedness owed to certain non-residents.

19. Must the profits of a foreign subsidiary be imputed to a parent company that is tax resident in your jurisdiction (controlled foreign company rules)?

Manitoba does not have controlled foreign company rules. This comes under federal legislation.

20. Are there any transfer pricing rules? If so, please give details.

Rules regarding transfer pricingare contained under federal legislation. Canadian taxpayers must report taxable income arising from transactions conducted with related non-residents as though the resident taxpayer and the related nonresident were at arm’s length during the tax year.

21. How are imports and exports taxed?

Imports and exports are taxed under the Retail Sales Tax Act (CCSM c R130), of Manitoba. At the federal level, imports and exports are taxed under the Excise Tax Act.

Competition

22. Are restrictive agreements and practices regulated by competition law in your jurisdiction? if so, please give brief details.

Issues with respect to competition law are regulated under the federal Competition Act (RS 1985 c C-34).

Intellectual Property

23. Please outline the main intellectual property rights that are capable of protection in your jurisdiction. in each case, please state:

- Nature of right.

- How protected.

- How enforced.

- Length of protection.

Patents

- Nature of right. In Manitoba, to be patentable an invention must be:

- new;

- non-obvious;

- useful.

- How protected. Protection is achieved by registration under the federal Patent Act, (RS 1985 c P-4).

- How enforced. A claim for infringement may be brought in the courts of the province where the infringement occurred, or in the Federal Court of Canada.

- Length of protection. An exclusive right is granted for a maximum of 20 years.

Trade marks

- Nature of right. Under the federal Trade-Marks Act (RS 1985 c T-13), a trade mark is adopted when a person:

- starts to use the trade mark in Canada;

- makes the trade mark known in Canada; or

- registers the trade mark under the act.

A person may also have rights of use under common law once the trade mark has been used to distinguish goods in the marketplace.

- How protected. Protection occurs from when a trade mark is adopted (see above, Nature of right).

- How enforced. A claim for infringement and/or passing off may be brought in the courts of the province where the infringement and/or passing off occurred, or in the Federal Court of Canada.

- Length of protection. Trade mark protection lasts for 15 years and may be renewed indefinitely.

Copyright

- Nature of right. Copyright subsists in the original production of any literary, dramatic, musical or artistic work. The rights of a copyright owner include the sole right to produce or reproduce the work or any substantial part of it. Neighbouring rights and moral rights also exist.

- How protected. Copyright protection arises automatically.

- How enforced. The federal Copyright Act (RS 1985 c C-42), grants jurisdiction over civil remedies for the enforcement of copyright to both the federal and provincial courts. In Manitoba’s courts, the right holder is entitled to receive injunctive relief, damages, accounting of profits or delivery up of the publication. However, for orders relating to the registration of copyright or amendment of registrations, relief must be sought in the Federal Court of Canada.

- Length of protection. Generally, copyright subsists for the life of the author, the remainder of the calendar year in which the author dies, and a period of 50 years following the end of that calendar year. However, exceptions to this general rule exist (Copyright Act).

Confidential information

- Nature of right. The obligations of confidentiality required of an employee are determined by:

- the express terms of the employment contract; or

- the implied terms of the employment contract.

- How protected. The information must remain confidential for it to be protected.

- How enforced. In a claim for breach of confidence, employers in Manitoba must establish in a provincial court that:

- the information conveyed was confidential;

- the circumstances under which the information was conveyed clearly imposes an obligation on the recipient to respect the confidentiality of the information;

- the information was used or disclosed by the employee without consent or justification; and

- the employer suffered damages as a result of the use or disclosure.

The remedies available are damages and/or injunctive relief. This would be through an action filed in the Manitoba Court of Queen’s Bench.

- Length of protection. There is no fixed term, although the information must remain confidential for it to be protected.

Industrial designs

- Nature of right. To be registrable, an industrial design must be a design which is:

- not solely for utilitarian function;

- not a mere method or principle of manufacture or construction; and

- not identical to or confusingly similar to any registered industrial design.

Application for registration must be made within 12 months of any publication of the design. Once registered, the owner has the exclusive right to make or sell, for the purpose of trade or business, any article in respect of which the design is registered and to which the design has been applied.

- How protected. Industrial designs are protected by registration under the federal Industrial Design Act (RS 1985 c I-9).

- How enforced. An action for infringement may be brought before any court of competent jurisdiction, including the Federal Court of Canada.

- Length of protection. The exclusive right is granted for a term of ten years.

Marketing agreements

24. Are marketing agreements regulated in your jurisdiction? If so, please give brief details in respect of the following arrangements:

- Agency.

- Distribution.

- Franchising.

- Agency. There are no specific laws on agency in Manitoba.

- Distribution. In Manitoba, there are laws that govern the distribution of certain agricultural products under The Farm Products Marketing Act (CCSM c F47).

- Franchising. There are no specific laws on franchising in Manitoba.

25. Are there any laws regulating e-commerce (such as electronic signatures and distance selling)? If so, please give brief details.

Generally, electronic commerce is regulated in Manitoba by the Electronic Commerce and Information Act (CCSM c E55). In addition, internet contracts are subject to The Consumer Protection Act (CCSM c C200). Laws concerning electronic signatures have yet to come into force in Manitoba.

Data Protection

26. Are there any data protection laws? If so, please give brief details.

In Manitoba, under the Freedom of Information and Protection of Privacy Act (CCSM c F175), personal information held by public bodies is protected. In addition, protection of health information is available under the Personal Health Information Act (CCSM c P33.5).

The federal Personal Information Protection and Electronic Documents Act (2000 c 5) also protects health and non-health information in the possession of private sector bodies in the province.

Product Liability

27. Are there any laws regulating product liability and product safety? If so, please give brief details.

A claim for product liability in Manitoba can be based on:

- The contractual terms of a purchase or supply agreement.

- An implied warranty under the Sale of Goods Act (CCSM c S10).

- The common law for a negligently manufactured product, a negligent designed product or for failure to warn foreseeable users of the product of dangers inherent therein.