CANADA Law and Practice Contributed by: Rachel V Hutton, Michael L Dyck, Mario Paura and Miguel Manzano, Stikeman Elliott LLP
traded or privately held. Foreign investors may invest in real estate in Canada through owner - ship of units in a REIT, subject to the restric - tions noted in 2.11 Legal Restrictions on For- eign Investors and 2.10 Taxes Applicable to a Transaction . The use of REITs permits individual investors to participate in real estate investment in multiple sectors without having direct ownership of real estate. However, income earned by a REIT is passed to the unitholders, giving investors simi - lar investment income to that of direct owner - ship. An owner of real property may wish to establish a REIT as a means of attracting equity investment. There is no specific legislation governing the organisational structure of a REIT. Principles of contract law and trust law will govern the REIT (see 5.5 Applicable Governance Require- ments ). Both publicly traded and private REITs will be subject to securities laws requirements that will regulate the issuance and sale of units in REITs, although the sale of interests in private REITs may have additional transfer, redemption and sale restrictions. A REIT may wish to be “mutual fund trust” under the Income Tax Act and, as such, would need to meet the require - ments to qualify as such. 5.4 Minimum Capital Requirement There is no minimum capital requirement for any
through its articles, shareholder agreements and corporate by-laws. The articles provide basic details such as the corporation’s business name, registered office, first director(s), share capital and share provisions. By-laws are used to add to, or supplant, default provisions set out in the corporation’s governing statute. Shareholder agreements may regulate how shares are sold, specify procedures by which important decisions are made, and provide protection for minority shareholders. Federal or provincial statutes stip - ulate corporate requirements such as the num - ber and residency of the directors and fiduciary duties. Public corporations are also subject to applicable securities law requirements. Partnerships While partnership legislation may impose basic governance rules, most sophisticated parties enter into partnership agreements setting out matters of governance in detail. The agreement typically addresses capital contributions, busi - ness operations, profit/loss distributions and addition or removal of partners. Co-Ownerships Based on the contractual nature of a co-owner - ship, governance requirements vary depending on the agreement between the parties, which may establish rights and restrictions relating to the underlying land, determine profit-sharing and delegate management responsibilities. Trusts Trusts are typically governed by the trust deed, under which the trustees’ powers may be limited to merely holding title at the behest of the benefi - cial owner, or may extend to allowing the trustee to exercise full discretion over dealings with the subject lands. In all cases, the trustee holds all benefits derived from the land for the beneficial owner/beneficiary.
of the aforementioned entities. 5.5 Applicable Governance Requirements Corporations
Corporations can be incorporated either feder - ally or provincially, and are required to file articles of incorporation. A corporation’s governance framework can be shaped by its shareholders
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