CANADA Law and Practice Contributed by: Darin Renton, Jill Winton, Amy Chao and Irena Ninkovic, Stikeman Elliott LLP
Regulatory Regime for Funds and 4.7 Compensation and Placement Agents . IFMs that hold or have access to the cash or securi - ties of a fund must also, subject to certain exceptions, appoint a Canadian custodian. 2.10 Anticipated Changes for Funds There are currently no anticipated changes to the regulation of alternative funds.
Subsidiaries can also be used to facilitate the financ - ing of specific assets or pools of assets by separate lenders or a syndicate of lenders. 2.8 Local/Presence Requirements for Funds Generally, there is no requirement for alternative funds to have a Canadian investment manager or general partner, nor to have a physical presence in Canada. Mutual fund trusts require a Canadian-resident trus - tee. Canadian resident investment funds are required to have a registered investment fund manager (IFM) in their Jurisdiction of formation. Investment funds formed elsewhere will trigger the IFM registration requirement in each of Ontario, Quebec and New - foundland and Labrador (referred to as Exemption Jurisdictions) if they distribute securities in those Jurisdictions. As a result, non-resident IFMs must either obtain IFM registration or file to rely on the reg - istration exemption (the non-resident investment fund manager exemption or the IFME). See 3.3 Regulatory Regime for Managers for further detail. Certain Jurisdictions have laws requiring entities (including general partners and IFMs) that carry on or are deemed to carry on business in such Jurisdiction to register extra-provincially. Alternative funds struc - tured as limited partnerships may need to register extra-provincially to maintain limited liability status for the limited partners, and generally require a local reg - istered address and the appointment of an agent for service of process in the Jurisdiction of registration. Subject to certain exceptions, portfolio assets of Canadian public funds must be held by a Canadian custodian. 2.9 Rules Concerning Service Providers There are no specific rules for private alternative funds and their managers with respect to the appointment of non-resident administrators, custodians, directors and other service providers that do not require regis - tration under Canadian securities laws. Private place - ment agents distributing alternative fund securities in Canada must be registered or rely on an exemption from registration in the relevant Jurisdiction; see 2.2
3. Fund Managers 3.1 Origin of Promoters/Sponsors of Alternative Funds
Canadian resident alternative funds are typically established by Canadian promoters. Non-resident funds distributed in Canada or in which feeder funds and access funds invest are predominantly estab - lished by US and European promoters. 3.2 Legal Structures Used by Managers Alternative fund managers are typically structured as corporations, including unlimited liability compa - nies (ULCs) in the Jurisdictions, but they may also be structured as general partnerships and limited part - nerships. Individual personnel compensation or equity incen - tive arrangements are generally not determinative for the type of structure used, but affiliated entities may be formed for the purpose of receiving performance allocation or carried interest for tax reasons. These entities may also be formed as corporations, ULCs or partnerships, depending on the particular circum - stances and the applicable tax rules. 3.3 Regulatory Regime for Managers NI 31-103 regulates dealer, adviser and IFM registra - tion requirements, exemptions from these require - ments, and registrants’ activities. The requirement to register is generally triggered in each Jurisdiction where a person or company is: • in the business of trading or advising; • holding themselves out as being in the business of trading or advising; or
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