Start-up business class: Peer reviews
This section contains policy, procedures and guidance used by Immigration, Refugees and Citizenship Canada staff. It is posted on the Department’s website as a courtesy to stakeholders.
A peer review is an independent assessment of a commitment by a panel of experts convened by the industry association that represents the lead designated entity on the Commitment Certificate. For example, if the Commitment Certificate was issued by a designated angel investor group, then the National Angel Capital Organization (NACO) would be responsible for organizing a peer review panel to evaluate the commitment.
The peer review process was designed to build in safeguards to protect against fraud and to ensure that the deals made between private sector partners and foreign entrepreneurs are in accordance with industry standards.
The review process should be implemented in the following situations:
- when there are concerns about the Commitment Certificate or about whether the designated entity has performed due diligence according to industry standards; and
- for quality assurance on a random basis.
To initiate a peer review, the officer must complete the relevant fields of the peer review request form [IMM 5765] and send it via secure e-mail (Entrust) or by courier to the industry association named in the application. The officer must also provide the industry association with the following:
- the Commitment Certificate;
- the term sheet/client agreement;
- other relevant supporting documentation.
The industry association will then assemble a panel of experts to complete the peer review. The designated entity will provide the peer review panel with a copy of its due diligence package. The panel will review the package to assess whether the designated entity undertook the required due diligence in accordance with industry standards outlined as follows:
- Are the business model and value proposition, as well as the sources of actual and projected revenues, clearly articulated? Has a sufficient level of due diligence been performed to demonstrate that this is a growth-oriented business that is viable in Canada?
- Has a current list of shareholders been provided and has the due diligence process included a review of the shareholder agreements?
- Has the due diligence process properly covered the business's overall marketing, sales and distribution strategy?
- Has the due diligence process reviewed the business's relevant material contracts in key areas such as sales, distribution and marketing, employment agreements with executive officers and loan agreements with officers, directors and holders of more than 5% of the shares?
- Has the due diligence process adequately reviewed the control that the business has over the intellectual property and other assets that it needs to operate successfully?
- Has the due diligence process adequately reviewed the audited financial statements and notes, the quarterly financial statements and the capital budget for the current fiscal year and the next one?
- Has the due diligence process adequately reviewed all the agreements relative to obligations for borrowed money, copies of all binding agreements and the projected use of proceeds from the current financing round?
- Has the due diligence process adequately reviewed all material employment and consulting agreements as well as stock options, bonus structures, retirement plans, profit-sharing, incentives and pension plan details?
- Has the required due diligence on the management team been performed, and did it properly assess the team's ability to successfully build and grow the business in Canada?
- Any other due diligence completed or an explanation for why the above was not completed, if applicable.
The panel members must not disclose any information that they receive about an applicant's business during the peer review process. In addition, the panelists' identities must not be disclosed to the designated entity or the applicants under any circumstances.
If the peer review panel has any doubts or concerns regarding the due diligence undertaken by a designated entity, the panel must address these with a representative from the designated entity and provide them with an opportunity to respond verbally.
After this discussion, should the peer review panel still find that the designated entity has not conducted sufficient due diligence or has not operated in accordance with industry standards, they must advise the designated entity so that the latter can understand where they went wrong and what they must do differently in the future. The peer review findings must also be returned to Immigration, Refugees and Citizenship Canada (IRCC) via Entrust or by courier.
While officers must consider the assessment provided by the peer review panel, they are not constrained by it in making a final decision. They must still assess all information and make a decision based on their own findings. Authority to make a final decision on the case rests with the officer.
Example: Paul is a rice farmer with limited education. The Commitment Certificate on his file indicates that he will farm rice in Alberta. His application indicates that he intends to grow a new type of rice engineered to grow in conditions similar to those in Alberta. BioInno (a designated angel investor group) has agreed to fund the project and has issued a Commitment Certificate.
The officer is concerned that this could be a fraudulent case and sends a peer review request to the NACO. The peer review panel finds that Paul has registered a patent for the new rice seed in his home country and has successfully grown the rice in experimental trials. The panel is satisfied that there is sufficient evidence to show that BioInno has taken reasonable measures towards obtaining its objectives in the commitment. After reviewing other factors, the panel concludes that due diligence was done by the designated entity.
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