Federal Government Scrutiny for P.E.I.’s 100% Ownership Stream

Canada’s federal government is being urged to step in and conduct a review of the Prince Edward Island 100% Ownership Stream over allegations it is being misused.

Three foreign students say business immigrants in P.E.I. through the investment stream have asked them to pay back part of their wages in cash.

This follows revelations the province withheld $18 million from candidates who failed to start a business under the program in 2016. The implication is that the candidates are using the stream as a back door to Prince Edward Island immigration, never intending to start a business.

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Opposition politicians on P.E.I. say the province is becoming financially addicted to the income it generates from withholding deposits. Meanwhile, candidates are ignoring the terms of the program, and mistreating the people they have working for their so-called businesses.

The 100% Ownership Stream is one of three under the P.E.I. Business Impact Category, the other two being Partial Ownership and Work Permit.

Candidates for the 100% Ownership Stream must sign an escrow agreement committing to give a deposit of $200,000 to the P.E.I. government until all program requirements are met. After all requirements are met, the money is returned to the applicant.

Of the $200,000, $150,000 is linked to the starting of a business, while the remaining $50,000 is linked to residency.

P.E.I. 100% Ownership Stream: Key Requirements

• Minimum personal net worth of $600,000. This net worth must have been acquired legally.
• At least a high school education.
• Be aged between 21 and 59 years of age at the time of application.
• Previous experience and significant talent in business management.
• Minimum of 4.0 on the IELTS within the last 2 years.
• Detailed business plan. The plan must involve the applicant owning 100 per cent of a P.E.I. business.
• Provide active and on-going management of the business from within P.E.I.
• Sign an escrow agreement committing to give a deposit of $200,000 to the P.E.I. government until all program requirements are met. After all requirements are met, the money will be returned to the applicant.
• Make a total investment in a P.E.I. business of at least $150,000.

But candidates appear to be happy to forfeit the $150,000 in return to secure permanent residence, which is legally difficult to revoke once it has been issued.

The province has set up dedicated phone line to report abuses under the program. It also argues the 100% Ownership Stream has had several success stories, of businesses started by immigrants that have become established and helped boost the P.E.I. economy.

Candidates choosing to forfeit deposits is not a new problem for provincial business immigration programs.

Other provinces have chosen to downsize their business streams and move to two-step offerings to counteract the issue.

Manitoba, British Columbia, Ontario, Saskatchewan and Nova Scotia have all made the switch, now requiring entrepreneurs to spending up to two years setting up their business on a temporary work permit. Only when the business is established are they nominated for permanent residence.

Provincial Entrepreneur Immigration Categories

*Alberta’s Self-Employed Farmer Stream is for agriculture specialists only

P.E.I. and New Brunswick are the only remaining provinces running one-step entrepreneur streams, where candidates put down a deposit which is refunded once the business is up and running.

While the New Brunswick Entrepreneurial Stream has escaped the scrutiny the P.E.I. stream has come under, its terms appear similarly open to exploitation.

In fact, the New Brunswick stream requires a deposit of only $100,000, refundable after three years provided the terms of a Business Performance Agreement have been met.

Establishing whether a business plan is genuine can be a difficult undertaking for provincial officials. Despite signing a business agreement, once permanent residence is issued, provinces would face a long legal battle to see it rescinded by Ottawa. The only real power is to withhold the deposit, which is not meaningful when candidates are already prepared to lose the amount.

Low Retention Rates

Retention rates under such programs are believed to be low, with candidates looking to move to Canada’s major metropolitan areas such as Toronto, Vancouver and Montreal once their permanent residence is secured.

Similarly, low retention rates are seen in the Quebec Immigrant Investor Program, which is different only because it is set up as a passive investment program from the outset. Candidates with a net worth of $1.6 million are asked to invest $800,000 in a government guaranteed bond for five years. They must declare their intent to reside in Quebec, but this is difficult to enforce once permanent residence has been activated.

Quebec maintains complete control over its immigration policies as a result of the 1991 Canada-Quebec Accord.   While Ottawa has previously confirmed it does not plan on challenging Quebec over its retention rates, efforts have been made by the Quebec government, through approved financial intermediaries, to ensure applicants have reasonable ties to the province.

Further reading

• St Kitts & Nevis Prime Minister Urges Canada To Drop Visa Requirement
• CETA: Canada Work Permits for High-Level Business People