This editorial was written by Attorney Colin R. Singer and appeared in the National Financial Post – February 9, 2015

Former Harper Government’s Business Immigration Program is a Charade

The previous Conservative government’s Immigrant Investor Venture Capital (IIVC) Pilot Program aims to raise $120-million from 60 eligible ultra-high net worth investors. The funds are intended to be invested in Canada-based startups with high growth potential. Ironically, the new program unofficially confirms Canada’s definitive retreat from the global residence-through-investment industry, which it created in 1986 with the Quebec government.

Under the program, approved applicants with a personal net worth of $10 million must invest at least $2 million into a government-approved venture capital fund for a minimum period of 15 years, with no guarantee for return of capital.

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Immigration Attorney Colin Singer: Program Designed to Woo Immigrant Investors A Charade

Applicants must demonstrate their net worth threshold was obtained from lawful, profit-making management, business or investment activities providing capital or equity gains. Inheritances or assets from principle residential real estate are excluded.

Additional requirements include mandatory language testing and proof of completed Canadian post-secondary education of at least one year, or proof of a foreign educational equivalent. Education assessment can be exempted for applicants with a personal net worth of more than $50 million.

Applicants are charged a modest processing fee of $1,050. Selected applicants must also submit a comprehensive due diligence report prepared by a designated service provider to ensure the source of wealth is generated from lawful business or investment activities. The fund is managed by BDC Capital, the investment arm of the Federal Business Development Bank of Canada and by government selected fund managers.

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This IIVC program is a charade. The previous Conservative government had a dubious history in the immigrant investor industry. In February 2014, after a two-year pause on new applications, it terminated the previous Immigrant Investor Program geared to entry-level millionaires, cancelling more than 15,000 unprocessed applications mostly from Chinese nationals. Many had been waiting up to six years to invest $800,000 per applicant.

To meet IIVC requirements, the delays to complete mandatory language testing, education equivalence assessment as well as to secure the comprehensive financial documentation will take far longer than the short solicitation window.

By imposing mandatory language testing, the only immigrant investor program in the world to do so, Canada is not even be a consideration for the vast majority of the world’s ultra high net worth individuals who reside in China, accounting for 80 per cent of the market. This factor alone renders IIVC a non-player in the residence by investment industry, which it has dominated for almost 30 years.

U.S. EB-5 the Industry Leader

The leading countries offering ultra-high net worth permanent residence programs include the U.S., U.K., Malta and Australia. Each offers far more attractive terms and conditions that include much shorter investment terms, substantially lower net worth criteria, open ended subscription periods and no language proficiency requirements. The U.S., which became the default leader in the industry once Canada terminated its highly popular program in 2014, offers its EB-5 conditional residence visa which requires an investment of US$1 million or US$500,000 in an approved Regional Center and no minimum net worth requirement.

The immigrant investor industry has proven to be a highly lucrative business bringing billions of dollars to governments including Canada for infrastructure investment. Canada had a stronghold on the mid-level investor market largely dominated by China and the Middle East. The province of Quebec continues to successfully promote its own immigrant investor program with a threshold of $800,000. Each applicant must pay a processing fee of $10,000. These fees alone will fund the Quebec government’s entire annual immigration program.

Previous Federal Program

The previous federal Immigrant Investor program, a five-year interest-free passive investment, was established in response to the demand for investment capital by Canadian businesses. During the 1990s Canada received a much greater benefit from the investment capital attributed to higher interest rate environments.

However, even at the current low rates, Canada would remain the most popular destination for the mid-level immigrant investor market, allowing for tremendous revenue potential to governments and the private sector.

Time For a New Federal Investor Program

Under a revised passive immigrant investor program at $2 million, with suitable legislation and a centralized processing centre, Canada could easily subscribe and efficiently process 1,000 applications each year and charge a subscription fee of $25,000 per applicant. Aside from the obvious massive direct monetary benefits are the indirect economic “consumption” benefits that objective studies have assessed at $700,000 per family during a five-year term, which the government dismisses. Most importantly, the children of immigrant investors will, in many instances, provide invaluable links to the international business community, which is an immeasurable benefit from effective immigration policy.

There are currently more than 25 global residence and citizenship based investment programs. The industry will experience significant growth in the years ahead. Perhaps there are other reasons why this government chooses to close Canada’s doors to a largely Asian and Middle Eastern immigrant investor clientele. In the current rapidly changing economic environment, Canada’s business community should demand an immediate, objective reconsideration.