Many Canadian companies raise funds in cross-border financings, with most rounds including at least 1 U.S. resident investor (if not a U.S. lead investor). If your Canadian startup is raising funds from U.S. investors, you will need to keep the following in mind:

1.  Value Your Startup in USD

All Canadian startups should value themselves in USD. While early investors may be Canadian, U.S. startup to benefit from the USD-CAD exchange rate, further extending runway to the extent expenses (see: payroll) are in CAD.

In our experience: (a) Canadian investors expect a USD valuation; (b) US investors don’t consider forex; and (c) your company is not more appealing because CAD is cheaper – investors are looking for quality companies not forex discounts.

2.  US vs Canadian Templates

Most startup financings use template documents, either YC’s SAFE or the National Venture Capital Association priced-round documents (CVCA for Canadians). It’s important to use the correct, Canadian, version of these templates as the Canadian version contains key clauses designed to achieve Canadian legal compliance. The Canadian versions are very similar to the US versions, which similarity will create comfort for your U.S. investors and their legal counsel.

3.  Canadian and US Securities Laws Apply

As a Canadian startup, raising company from U.S. investors will implicate cross-border securities laws. First, since your startup is incorporated in Canada, Canadian securities laws apply. Second, since the investor is resident in the U.S., U.S. securities laws apply. It is critical that compliance with these securities laws be addressed before closing a financing. Luckily, cross-border legal counsel should be able to address compliance quickly.

4.  You Don’t Need to incorporate in the US

You don’t need to be a U.S. company to raise money from U.S. investors and many U.S. investors won’t force you to be a US company. Of the 1,400+ companies we represent, we’ve only had to incorporate a U.S. company to appease U.S. investors twice in the last 12 years. Read our blog posts on the subject here: Should I Incorporate my Canadian Startup in Delaware and Revisiting – Should I Incorporate my Canadian Startup in Delaware.

If you are an Amazon seller, it is highly recommended you obtain trademark protection for your brand and enrol in the Amazon Brand Registry.  Amazon’s Brand Registry provides a variety of tools to monitor brand representation and prevent the sale of counterfeit goods on Amazon.

in order to take advantage of the Amazon Brand Registry you first must have:

1. A trademark with an active or pending registration;
2. A trademark registration number, or application number granted that the trademark is pending registration; and
3. A list of categories that the brand falls under.

The Amazon Brand Registry provides registered users with the ability to directly address counterfeit products. Those suspected of being bad actors are automatically removed from Amazon and the sale of these counterfeit products halted. Through Amazon’s ‘Counterfeit Crimes Unit’, the company additionally holds bad actors responsible through “building cases, undertaking investigations, and pursuing civil litigation”. Furthermore, trademarked brands registered under the Amazon Brand Registry are protected under ‘Project Zero’, which offers several benefits:

1. Suspected counterfeits are proactively blocked from being listed on Amazon;
2. Brand owners can directly remove products they think are counterfeits, which information is fed into Amazon’s algorithms to better catch counterfeits proactively in the future; and
3. Product serialization allows brand owners to apply a 2D code similar to QR codes on their products that uniquely identifies and authenticates the legitimacy of their brand.

There are also numerous ways that the Amazon Brand Registry helps registered merchants grow, including:

1. Access to prioritized product advertisements, displayed on headlines of search pages;
2. Customizable brand storefronts and the ability to specify in-depth product descriptions; and
3. Prioritized search results that are pushed by Amazon’s internal algorithm.

If you have a brand you want trademarked in Canada or the US, please feel free to contact one of our IP attorneys. We are licensed to practise in both Canada and the US and can assist new business owners obtain trademark protection for Amazon Brand Registry enrolment.

On January 1, 2024, the US Department of Treasury’s Financial Crimes Enforcement Network (FinCEN) launched the online BOI E-Filing System and began accepting Beneficial Owner Information Reports pursuant to a new compliance regime under the Corporate Transparency Act.

1. Who needs to file?

Starting January 1, 2024, all non-exempt entities formed or registered to do business in the United States are required report Beneficial Owner Information (“BOI”) to FinCEN by January 1, 2025. This includes all corporations, LLCs, limited partnerships or similar entities created by filing a document with any US state, territory or Indian tribe as well as foreign non-US entities that are registered to do business with any US state, territory or Indian tribe.

2.  Who is a beneficial owner?

A beneficial owner is any individual who, directly or indirectly:

• exercises “substantial control” over a reporting entity; or
• owns or controls 25% or more of the ownership interests (equity, stock, voting rights, convertible instruments or any other instrument, contract or other mechanism used to establish ownership) of a reporting entity.

An individual exercises “substantial control” of a reporting entity if such individual:

• serves as a senior officer (for example, president, CEO, COO, CFO, general counsel and any other key officer position of a reporting entity);
• has authority over the appointment or removal of any senior officer or a majority of the board of directors; or
• directs, determines or has substantial influence over important decisions made by a reporting entity.

3.  What information needs to be provided?

A reporting entity is required to provide the following information about Beneficial Owners:

• full legal name;
• date of birth;
• current address; and
• unique identifying number and an image of government-issued identification (US passport, state-issued driver’s license, or a foreign passport).

4.  Who is exempt from the Beneficial Ownership Information filings?

There are 23 exemptions, which are listed in greater detail in the Small Entity Compliance Guide by FinCen.

One of the key exemptions is for “large operating companies” that: (1) employ 20 full time employees in the US; (2) has a physical presence in the US; and (3) filed federal income tax for the previous year demonstrating more than $5,000,000 in gross receipts or sales.

Other key exemptions are for inactive entities that are not engaged in active business and for subsidiaries of any other exempt entities.

5.  What does this mean for you?

If you are a beneficial owner of a US entity and not exempt from the filing requirements, failure to maintain and file a BOI Report by January 1, 2025 may result in fines up to $500 per day per violation and potential imprisonment.

Please reach out to the Voyer Law team to discuss your Beneficial Ownership Information filing requirements and whether your entity qualifies as an exempt entity.