Where a partner is going through business immigration, the shareholders’ agreement has to do two things at once: keep the program conditions intact until the decision, and protect everyone if the immigration project does not succeed. A standard template does neither.
What the programs require of the structure
In the Start a business stream, the applicant’s share of the contributed capital must reach at least 25 %, held alone or with the spouse or common-law partner included in the application. The applicant may join up to three other people who are also applying, and each must then hold at least 25 %.
In the Business takeover stream, the logic changes: the applicant must acquire and hold control of the business, alone or with the included spouse. Business partners may not themselves apply as entrepreneurs and must not hold control.
Several years may pass between filing, the work permit, the Selection Certificate and permanent residence. The agreement is the tool that keeps those thresholds stable throughout.
The clauses that protect compliance with the program
- Ownership thresholds: prohibit, without unanimous consent, any issuance or transfer of shares that would take the applicant below 25 % in stream 2, or cost them control in stream 3, until permanent residence is obtained.
- Pre-emptive rights: allow the applicant to subscribe first to any new issuance in order to maintain their proportion.
- Contributions: fix the amount, the schedule and the form of each contribution, and provide for its documentation, consistently with the business plan and the spending to be demonstrated.
- The applicant’s role: a director and officer position with real powers, matching what was described to the Ministry.
- The unanimous agreement: the Business Corporations Act allows shareholders to restrict the board’s powers. The tool is useful, but a unanimous agreement that strips the applicant of all decision-making can contradict the role presented in the application.
The general mechanics of this document are set out in our piece on the shareholders’ agreement. What follows is added when a partner is going through immigration.
The clauses that protect the partners if immigration fails
The triggers
Refusal or rejection of the selection application, refusal of the work permit, refusal of permanent residence, abandonment of the project.
Each event must be defined in writing, with no room for interpretation.
The buy-out
A put and call option, with a price set by an agreed formula or by a valuator.
Set the closing period and the payment terms at signature.
Advances
Repayment of shareholder loans and the order of priority among them.
Also provide for who injects funds if the applicant no longer can.
Deadlock
Mediation, then a buy-out mechanism such as a shotgun clause.
A disagreement must not paralyse the business while the file is being processed.
Non-competition and non-solicitation complete the set. They must stay reasonable as to duration, territory and activities, failing which they risk not being enforced: see the non-competition clause.
The nominee trap
Some structures register shares in the applicant’s name while real control belongs to someone else, or the reverse, simply to clear a threshold. This is a risk we refuse to let our clients run: a misleading declaration exposes the application to rejection, and the side agreement becomes a source of dispute between partners.
Legitimate solutions exist. In the Start a business stream, for example, the minimum holding may be held with the spouse or common-law partner included in the application.
A special case: the seller who stays a shareholder
In a takeover the seller often keeps a minority interest or a vendor take-back to secure the transition. The agreement must then check that their rights, such as a veto on certain decisions or security over the shares sold, do not hand control back to them. In the Business takeover stream, a partner holding control compromises the program’s core condition.
Tax coordination
Share classes, dividends, the spouse’s participation and each shareholder’s tax residence all carry significant tax consequences. We draft the agreement in coordination with an accountant or tax specialist, so that the structure serving the immigration file is also efficient from a tax standpoint.
How MEKA AVOCAT works on this
We draft the agreement reading the program conditions alongside corporate law, and we set it against the real timetable of the file: filing, work permit, Selection Certificate, permanent residence. If a partner’s request is incompatible with the program, we flag it before signature, not after the refusal.
Texts and sources
This article draws on the Business Corporations Act (Quebec), the Quebec Immigration Regulation and the official stream 2 and stream 3 pages of the Entrepreneur Program published by Quebec’s immigration ministry.
Frequently asked questions
Can my spouse hold part of the 25 % required in the Start a business stream?
Yes, if the spouse or common-law partner is included in the application.
Can a partner already established in Quebec hold the majority in the Start a business stream?
The stream requires the applicant to hold at least 25 %, not the majority. The agreement must nonetheless guarantee that this threshold is maintained until permanent residence.
In the Business takeover stream, can my partner also apply as an entrepreneur?
No. Business partners may not file a permanent selection application as entrepreneurs in that stream, and they must not hold control.
What happens if my application is refused after signature?
That is exactly what the agreement must provide for: a defined trigger, a buy-out option, a calculable price and the treatment of the advances made.
Going into partnership on a business immigration project?
The agreement is drafted before the first payments, not after. A meeting lets us align the program thresholds, the contributions and the exit scenarios with the real timetable of your file.
Next: the Start a business stream, the shareholders’ agreement in its general form, and our work on shareholder agreements and governance.
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Lawyer, member of the Barreau du Québec since 2014, founder of MEKA AVOCAT. This text sets out general legal information: it describes rules that apply broadly, not the answer to a particular case, and does not replace advice on your own situation.
