Canada: Doing Business In Atlantic Canada

EMBRACING EAST COAST POTENTIAL

Welcome to the newest edition of Doing Business in Atlantic Canada. As a leading law firm with locations throughout Atlantic Canada, we have strong roots within this community and are proud to share our insights into its unique legal and economic landscape.

It is an exciting and challenging time for Atlantic Canada. Irving Shipyard, based in Halifax, Nova Scotia, was awarded a $25 billion government contract to build new naval vessels. Utility companies in Newfoundland and Labrador and Nova Scotia are investing in a multi-billion dollar project to develop hydro-electric capacity, the Lower Churchill project, and an underwater link to ship that electricity to markets all along the eastern seaboard. Newfoundland and Labrador and Nova Scotia are reaping the benefits of a growing offshore oil and gas industry, while Prince Edward Island and New Brunswick entrepreneurs in the technology, biotech, aerospace and defence sectors continue to demonstrate the strength of our region's start-up community.

We face some interesting new challenges as well. A report released in early 2014 by the Ivany Commission, called Now or Never: An Urgent Call to Action for Nova Scotians brought a spotlight to these challenges – ones we believe each of the Atlantic Provinces shares. They include immigration (specifically, attracting new entrepreneurs to our provinces), developing a stronger export culture, and diversifying beyond a traditional dependence on natural resources. Thanks to this report, these issues have re-emerged as priorities for both the public and private sectors.

At Stewart McKelvey, our single objective is the best results for our clients. We have the capacity, experience and size to assist, whether local clients aspire to expand in national and international markets, or national and international clients wish to explore Atlantic Canadian expansion. More on our firm and our team is provided on the next page and see our website for more details, www.stewartmckelvey.com.

We welcome your interest in Atlantic Canada. Should you wish to learn more, I am pleased to answer your questions or put you in contact with our team.

John Rogers, QC
CEO, Stewart McKelvey

CHAPTER 1 - INTRODUCING STEWART MCKELVEY

At Stewart McKelvey, our single objective is to achieve "the best results for our clients".

Since the last edition of Doing Business In Atlantic Canada prepared in 2009, this commitment to our clients has manifested itself in many ways. Some of our work includes acting as lead counsel for a large grocery chain that recently cemented its position as the second largest grocery retailer in Canada; we helped to open international markets for a large aquaculture company that now distributes products throughout the world; and we advised a local production company that has grown into a leading distributor and producer of children's entertainment.

Since our 2009 edition, we recognize our clients' definition of the best result has also evolved. It means much more than a successful business outcome and has grown to encompass a new definition of value.

We knew we must invest in leading edge technologies and learn more about legal processes which foster efficiency, improve clients' access to information and increase responsiveness. Therefore, we focused our attention on client-facing tools that support improved service and greater value. Members of our team are recognized as leaders in the development of eDiscovery protocols, and are certified in Legal Project Management. Where appropriate we apply this training and technology to deliver on our commitment of cost efficiency and the highest quality of service.

Value may also be seen in our commitment to the communities in which we live and work. Through sponsorships, donations or direct staff and lawyer participation, we give generously to local events and charities that help to improve the quality of life and strength of our communities. We foster diversity amongst our staff and we have initiated many green initiatives designed to reduce our environmental footprint.

Our Doing Business In Atlantic Canada publication is another way we add value and we are pleased to share our insights into this region.

Within this publication, we are pleased to provide you with specific detail with regards to areas of practice, greater detail on business and tax incentives designed to attract you to this region and some basic facts about our communities and the economic outlook for the region.

WELCOME TO ATLANTIC CANADA

Atlantic Canada

Quick Facts

  • Canada, the world's second largest country, occupies the upper portion of the North American continent. Its boundaries stretch from the Pacific Ocean in the west to the Atlantic Ocean in the east, to the Arctic Ocean in the north and to the United States in the south.
  • Canada has a federation of 10 provinces and three territories.
  • It has a population of approximately 33 million people.
  • Canada has two official languages, English and French, meaning that they have equal status in all federal institutions and are the languages used officially by the federal government.

Canada's four most easterly provinces form the region known as Atlantic Canada and has a population of approximately 2.3 million people. These provinces are (from west to east):

  • New Brunswick
  • Prince Edward Island
  • Nova Scotia
  • Newfoundland and Labrador

New Brunswick

Quick Facts

  • Population: 747,000 people.
  • In the Atlantic Time Zone and observes Daylight Saving Time.
  • Bounded by Quebec to the north west, Nova Scotia to the east and the state of Maine to the south west.
  • More than 5,500 km of coastline stretching between the Gulf of St. Lawrence and the Bay of Fundy, making up more than 87% of the total New Brunswick boundary.
  • The only province where both English and French are official languages, meaning that all provincial government services are required to be made available to the public in both languages.

Natural resources are an important part of the provincial economy. About 80% of the province is forested. Combined with fishing, agriculture and mining, these traditional natural resource based industries have long been the cornerstone of the provincial economy.

New Brunswick's dependence on these traditional resources is evolving. The province is rich in natural gas deposits and its proximity to markets in Quebec and the United States has helped to foster a growing natural gas industry. A proposed east-west pipeline, a project that promises to ship oil from Calgary to New Brunswick, would further bolster this province's strong natural resources sector. Many of the lead manufacturing industries are derived from the production of these resources and include food processing, pulp and paper, sawmills, oil refining and metal processing.

What is relatively new to the province is its strong start-up and entrepreneurial community. The Information and Communications Technologies sector contributes just under $900 million to the provincial GDP. Success stories such as Radian6's sale to tech giant Salesforce have helped to inspire further growth and investment, by both the government and angel investors from around the world. The province continues to invest heavily in R&D, and in partnership with its universities, has also helped to support a strong bio-med sector which benefits from this growing start-up community.

Prince Edward Island

Quick Facts

  • The smallest province of Canada, but with a population of 140,000 people it has the highest population density of any Canadian province.
  • Lies in the Gulf of St. Lawrence and is surrounded by the other three Atlantic Provinces and the province of Quebec.
  • The Confederation Bridge stretches 13 km across the Northumberland Strait, connecting Prince Edward Island to New Brunswick.
  • No place in the province is more than 16 km from the sea.
  • Prince Edward Island is in the Atlantic Time Zone and observes Daylight Saving Time.

The province is known as the "Garden of the Gulf" as 90% of the land is arable. It is a low level island and has red sandy clay which is excellent for agriculture. It is no surprise that the province is best known for its potatoes and that agriculture accounts for much of the provincial economy.

The service industry, including a large tourism industry, is pivotal to the Island's economy. But like many, the Island is looking for ways to diversify and government investment in the millions of dollars has helped local companies in the aerospace and defence, information technology and communications sectors.

Nova Scotia

Quick Facts

  • It has a population of 938,000 people.
  • Is almost completely surrounded by the Atlantic Ocean.
  • It is comprised of a mainland peninsula and the island of Cape Breton.
  • Its capital, Halifax, boasts the world's second largest natural ice-free harbour.
  • In the Atlantic Time Zone and observes Daylight Saving Time.

In 2011, Irving Shipyard in Halifax, Nova Scotia won the $25 billion government contract to build supply and naval vessels, supporting the growth of a shipbuilding centre of excellence in this region. BP and Shell are involved in multi-million dollar offshore oil and gas exploration projects off the coast of the province and the hope for a new LNG shipment facility helps round out healthy projections for the province's future.

In addition to a healthy natural resources based economy, which includes fisheries, forestry and mining, the province has gained a reputation for its financial sector. Approximately 3,300 financial and insurance companies were operating in Nova Scotia in 2011.

Finally, the province has also fostered a healthy start-up community, partially building on the robust university sector and with significant investment in big data analytics centres and media and gaming industries. The sector now accounts for 34% of all private sector R&D spending and employs more than 21,000 people.

Newfoundland & Labrador

Quick Facts

  • It consists of the island of Newfoundland and the mainland of Labrador.
  • It is the most easterly province in Canada, where you can find the most easterly point in North America.
  • The population is 508,000 people, mostly concentrated on the Avalon Peninsula where the capital city of St. John's is located.
  • It is in the unique position of having two time zones. Labrador is in the Atlantic Time Zone, which is one hour ahead of the Eastern Time Zone. Newfoundland has its own time zone, which is one-half hour ahead of the Atlantic Time Zone. So if it is 1 p.m. in Toronto it will be 2 p.m. in Labrador and 2:30 p.m. in Newfoundland. Both Newfoundland and Labrador observe Daylight Saving Time.

Newfoundland and Labrador's economy is currently one of the fastest growing in Canada. Oil and gas is leading this growth including well established projects at Hibernia, Terra Nova and White Rose, and new discoveries off the Flemish Pass Basin. The development of a multi-billion dollar hydro-electric project, the Lower Churchill project, further enhances the province's strong position in the energy markets.

Labrador's mineral development, particularly in iron ore, is also expected to rise. This remote area of the country is rich in mineral deposits and large mining companies from around the world have invested in its potential.

The City of St. John's, its capital, is also investing in its ocean technology. With 15 research and educational institutions in the surrounding area, the City aims to attract over $1 billion in private sector revenue by 2015. Private sector investment in R&D in this region is particularly strong, including the development of its manufacturing, oceans, technology and biotech sectors.

Economic Equation of the Atlantic Advantage

Atlantic Canada offers one of the most competitive business cost environments among the G7 countries.

We have one of the lowest annual facility costs in Canada. (see chart)

We boast a highly competitive tax environment. (see chart)

To encourage innovation, our region has some of the most favourable tax rates for R&D spending.

R&D is growing faster in Atlantic Canada than the rest of Canada.

We benefit from low utility, insurance and labour costs.

We offer easy access to North American and European markets, thanks to a convenient location, very strong transportation infrastructure and an advanced telecommunications network.

What does this mean?

When you add these up, it equals the Atlantic Advantage – a lower cost of doing business. These are direct, material savings which can be reinvested back into growth and development, benefit shareholders and help you gain a competitive advantage.

WORKFORCE

Atlantic Canada has one of the world's best labour markets, with a skilled workforce of 1.2 million people and among the lowest rates of turnover and absenteeism in North America. Atlantic Canada has more post secondary institutions per capita than anywhere else in Canada. As well, more than 200 different training programs are offered through Atlantic Canada's community college network. The result is a highly skilled and educated workforce, a considerable portion of which is bilingual in English and French.

QUALITY OF LIFE

The cost of living in Atlantic Canada is 25 to 65% lower than that of other major North American regions. It has the best Housing Affordability Index in Canada, and property taxes are 30% lower than the Canadian and United States average.

Canadian residents enjoy lower direct health care costs as a result of the publicly funded health insurance system, which covers a wide range of health, hospital and physician services. The existence of this system provides employers with a competitive cost advantage over those having to provide direct funding of private employee health insurance programs.

Atlantic Canada is also a very safe environment in which to live and do business, with lower rates of crime than most other industrialized nations. It offers safe, friendly, family-oriented communities, with an abundance of excellent schools, universities and colleges within the region.

INCENTIVES

Many of the incentives available in Atlantic Canada take the form of forgivable loans, interest-free repayable loans, equity participation, or combinations thereof. Training-related incentives, such as in the form of subsidized wages, are also commonly offered in the region.

For a detailed survey of available incentive programs in Atlantic Canada, please see the Appendix: Business Incentives.

The Canadian Political and Judicial Systems

Canada has a parliamentary system of democratic government. A former dominion of Great Britain, Canada is a constitutional monarchy, its head of state being the Queen of Canada, Queen Elizabeth II, who is also Queen of Britain, Australia, New Zealand and a number of other Commonwealth nations.

Under the Constitution Act, 1867, powers and responsibilities are divided between the federal government and the 10 provincial governments, with the federal government retaining jurisdiction over the three territories. The federal list of powers under the Constitution generally relates to national matters, such as the regulation of trade and commerce, criminal law and procedure, direct and indirect taxation, banking, currency, defence, navigation and shipping, patents and copyrights. The provincial list of powers is generally concerned with local matters, such as municipal institutions, local works and undertakings, education, direct taxation, the administration of justice, property and civil rights, and matters of a merely local and private nature in the province (including internal trade issues). The Constitution also provides for concurrent federal and provincial jurisdiction in a number of areas, including health, the environment, agriculture and immigration.

An important element of the Constitution is the Canadian Charter of Rights and Freedoms, which was adopted in 1982. The Charter guarantees a series of rights and freedoms, subject only to such reasonable limits prescribed by law as can be demonstrably justified in a free and democratic society. Among the rights and freedoms contained in the Charter are:

  • Fundamental freedoms, including freedom of conscience and religion; freedom of thought, belief, opinion and expression, including freedom of the press and other media of communication; freedom of peaceful assembly; and, freedom of association;
  • Democratic rights, such as the right of citizens to vote in elections for members of the House of Commons and legislative assemblies;
  • Mobility rights, including the right to live and to seek employment anywhere in Canada;
  • Equality rights;
  • Legal rights, such as the right to be secure against unreasonable search or seizure;
  • Language rights, such as the right to use either of Canada's official languages and the right of French and English linguistic minorities to an education in their language; and
  • Protections for aboriginal peoples' pre-existing rights.

The Charter is particularly significant because unlike earlier Canadian human rights legislation, it is entrenched in the Constitution, which is the supreme law of Canada. Laws that are not consistent with the Constitution (including the Charter) may be found to be invalid.

Canada's system of government has three branches: legislative, executive and judicial. At the federal level, the legislative branch is represented by the Parliament, which consists of the House of Commons and the Senate. Members of the House of Commons are elected by direct, popular vote to serve for terms of up to five years. Members of the Senate are appointed by the Governor General (the Queen's representative in Canada), with the advice of the Prime Minister and serve until reaching 75 years of age. At the provincial and territorial level, the legislative branch is represented by a single chamber legislative assembly, whose members are elected by direct, popular vote.

The executive branch consists of the head of state (the Queen, as represented by the Governor General), the Prime Minister and the Cabinet. The Prime Minister is the leader of the party that forms the government in the House of Commons. This is usually the party that has the highest number of members elected. The Cabinet is comprised of the federal ministers chosen by the Prime Minister from among the members of his or her own party sitting in Parliament. The same executive structure exists at the provincial and territorial level, with the head of state (the Queen, as represented by the Lieutenant Governor), the Premier (being the leader of the party which forms the government in the legislature) and the Cabinet.

In Canada, unlike the United States, some elements of the executive and legislative branches are combined, in that the majority party in the legislature also controls the executive.

The judicial branch consists of the Supreme Court of Canada, the Federal Court of Canada, the Tax Court of Canada and the provincial courts. Each province has its own Court of Appeal, together with a number of lower level courts which function as the courts of first instance for most criminal and civil matters. In Canada, the judiciary enjoys complete independence from the other branches of government.

With the exception of Quebec, the laws of Canada are derived from two sources: the statute laws as enacted by the federal and provincial legislatures and the "common law", being the precedents established by the judiciary over time through court decisions. Unlike the rest of Canada, Quebec operates primarily under a civil code system rather than a common law system. The civil code is a written text defining civil laws in the province and has its basis in France's Napoleonic Code.

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