Employer name changes and corporate restructurings

Organization name changes and corporate restructurings may trigger work permit-related issues for temporary foreign workers employed in Canadian organizations and may have an impact on the employer compliance regime.

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Positions that require a Labour Market Impact Assessment (LMIA) in the Temporary Foreign Worker Program (TFWP)

In corporate restructurings, the holder of the LMIA must contact Employment and Social Development Canada (ESDC)/Service Canada (SC) to inform them of the change. The LMIA is issued by ESDC/SC and allows Canadian employers to hire foreign nationals in a variety of occupations.

The LMIA application imposes conditions on the employer to abide by a prevailing wage, a specific job location and specific job duties when the work permit is issued. Therefore, each LMIA is tailored to fit a particular job offer by a particular employer.

Positions that require an offer of employment in the International Mobility Program (IMP)

Many LMIA exemption programs require that there be a specific organization in Canada who provides the offer of employment, such as the following:

  • NAFTA professionals
  • Intra-company transferees
  • Young Professionals Program

Specific conditions under section R209.2 of the Immigration and Refugee Protection Regulations are imposed on the organization when the work permit is issued to the foreign national. The conditions on the employer are for the whole period of the work permit.

In addition to the conditions imposed, there may also be specific LMIA exemption program requirements that may be affected by a corporate restructuring, such as the intra-company transferees who require a qualifying corporate relationship between the foreign and Canadian entities. Therefore, if a qualifying relationship ceases to exist in the wake of a corporate restructuring, there is no basis for the emerging Canadian entity to continue to employ a temporary worker as an intra-company transferee.

In situations where the original organization still exists after the restructuring, they continue to be responsible for the temporary workers unless the new organization has become the “successor in interest” for the portion of the organization where the temporary workers were employed.

The new organization is responsible for ensuring that it only employs a foreign national in a capacity in which the foreign national is authorized under the Immigration and Refugee Protection Act (IRPA) to be employed, as per paragraph A124(1)(c).

Existing IMP organization with a change of name or address

If an organization changes only its name or address and there are no other changes to the structure of the company or to its Canada Revenue Agency (CRA) business number, the organization will be considered by Immigration, Refugees and Citizenship Canada (IRCC) to be the same employer. They will therefore be assessed against their past compliance in providing their previous temporary workers with the wages, occupation and working conditions previously offered, when a new foreign national is applying for a work permit or at the time of an extension application. Where the work permit processing officer or the case analyst in an inspection learns of a name change, they should verify that there have been no other changes to the company.

Officers who are aware of changes in organization names should advise the employer that they must update the organization’s information in the Employer Portal. Officers should then place a note on the “Organization” tab and add the address as type “Other” to differentiate it from what the employer provides in their offer through the Employer Portal.

Existing IMP organization with a change of business type

If an organization changes its business type (for instance, from proprietorship to corporation) and the change results in the issuance of new business number, the organization should contact IRCC using the Employer Portal mailbox and request that the CRA business number be corrected. This will ensure the original organization is linked with the ongoing one.

Corporate restructurings

The most common corporate restructurings are acquisitions, mergers, consolidations and contractions:

  • An acquisition is the takeover of the controlling interest of one entity by another, and both entities retain their legal existence after the transaction.
  • Mergers and consolidations are the joining together of two entities into a single entity called a surviving entity. The surviving entity assumes all of the assets and liabilities of the merged entities (that is, it purchases the stock, assets and liabilities of the other entities, absorbing them into one corporate structure).
  • A contraction is the reduction in size of a corporation, and it can take several different forms: divestitures, equity carve-outs, spin-offs or split-offs, and split-ups. A divestiture is a sale of a portion of the firm to an outside party. An equity carve-out is a variation of a divestiture that involves the sale of an equity interest in a subsidiary to outsiders. A new legal entity is also created in a standard spin-off. In a split-up, the entire firm is broken up into a series of spin-offs.

The specific characteristics of the restructuring will dictate the resulting action that is required of the employer and the foreign worker.

The main consideration for temporary workers who hold employer-specific work permits is whether the new organization can be seen to be a successor in interest employer or, in the case of an acquisition, the same employer.

Note: Changes in ownership structure should not require a new LMIA or offer of employment if the new organization is a successor in interest.

Additional considerations for processing officers

Definition of successor in interest

To establish a successor in interest, the successor entity must demonstrate that it has substantially assumed the interests and obligations, assets and liabilities of the original owner and that it continues to operate the same type of business as the original owner.

Documentation: The successor in interest can be established through a transfer of ownership document that provides the details about the restructuring.

If some assets or liabilities are not assumed by the successor entity after the corporate restructuring, the successor in interest may not exist. This may occur when a shelf corporation is created and a minimal asset or liability is left with a corporation. Shelf corporations have no activity. They are usually sold to individuals who would prefer to have an aged corporation rather than a new one. A business entity that is created through a process other than incorporation (such as a limited liability company) is simply called a shelf company.

Below are some economic determinants to assist processing officers and case analysts in establishing whether an entity has assumed the required interests, obligations, assets and liabilities of the previous owner.

Assets include, but are not limited to the following:

  • current assets, such as cash, short-term investments, receivables, inventories and prepaid expenses
  • long-term investments, such as securities and pension funds
  • property, plants and equipment
  • human resources
  • intangible assets, such as patents, licenses, trademarks and software development costs

Liabilities include, but are not limited to the following:

  • current liabilities, such as notes and accounts payable, short-term debts, advances from customers on contracts, accrued compensation and benefits and income tax payable
  • long-term liabilities, such as the issuance of bonds, long-term lease obligations, deferred income tax liabilities, service or product warranties and other contingencies
  • continued employment of temporary workers with employer-specific work permits and the assumption of conditions imposed on the employer

Organization selling the business

Where an organization sells or otherwise transfers their business to a new organization, the original organization is still responsible for ensuring that conditions were met until the time of transfer. The new organization may be responsible for continuing the compliance if they are the successor in interest.

Temporary workers who hold employer-specific work permits

Changes in ownership structure should not require a new LMIA or offer of employment if the new organization assumes the previous owner’s assets and liabilities (including those of the previous owner relating to the hiring and retention of temporary workers [for instance, where a successor in interest can be demonstrated]).

If the new organization is a successor in interest

If the take-over organization is a successor in interest in that it has substantially assumed the interests, obligations, assets and liabilities of the original organization (wholly or partially) and continues to operate the same type of business as the original organization, the take-over organization remains the “employer” for the purpose of the existing work permit as well.

The temporary worker is not obligated to obtain a new work permit and will continue to be authorized to work in Canada for the duration of the period stated on the existing work permit as long as both of the following apply:

  • The take-over organization meets the requirements under which the LMIA-exempt work permit was issued (for instance, a qualifying relationship for intra-company transferee), or the take-over organization assumes the LMIA contract.
  • The worker’s employment conditions as per the original offer of employment (for example, the wages, duties and location) have not changed.

If the new organization is not a successor in interest

If the take-over organization does not become a successor in interest (that is, it does not assume all of the interests, obligations, assets and liabilities of the original organization), a new LMIA or offer of employment and new work permits are required for all temporary workers holding employer-specific work permits, and the employees should cease working for the take-over organization until new work permits have been obtained.

The new organization is responsible for ensuring that it only employs a foreign national in a capacity in which the foreign national is authorized under the IRPA to be employed, as per paragraph A124(1)(c).

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