Corporations merge. Corporations divide. It’s all part of the ‘circle of corporate life’.
However, when a corporate restructuring of any kind occurs, there may be consequences employers of foreign workers that were part of the previous entity/entities, and are now (or now are sought to be) part of the new entity/entities. It is imperative, particularly in today’s Canadian immigration environment, that immigration consequences in any corporate transaction be considered along with all other issues, lest there be extreme negative consequences for both employers and employees. Among other issues, a corporate buyer could find itself without the right to use the services of the foreign workers in the corporation it just purchased – and those foreign workers could be key.
This is an extremely complex topic, but in this article, we will try highlight some issues of concern in connection with the subject at hand.
Mergers and Acquisitions
To breakdown the considerations in this area, we need to look at two issues.
- Firstly, we must look at whether there is, and who is, the ‘Successor in Interest’.
- Secondly, we must look at the consequences based on the foreign workers’ type of work
Work permits can be based on various categories including Labour Market Impact Assessments (LMIAs), intra-company transfers, or other non-intra-company LMIA exemptions.
From Immigration Canada’s point of view, the consequences for foreign workers after a corporate merger/transaction, depend in large part on whether there is, and who is, the ‘Success in Interest’ (SII). An SII is a corporation which can show that it has substantially assumed the interest and obligations, assets and liabilities of the original corporation, and continues to operate the same business.
As will be elaborated upon below, this will have different consequences when there is a share purchase vs. an asset purchase.
With the knowledge of Immigration’s Canada concern about who the SII is, we must now look at a further breakdown, and consider the types of work permits that foreign workers may hold.
(i) LMIA-Based Work Permits
In the case of an LMIA, these are issued to specific companies for specific positions. So, if a foreign worker continues to work with an SII, he/she can continue to be employed. However, there is a caveat in that the LMIA and work permit will need to be amended to reflect any new name or entity. Failure to properly amend could put employer and/or employee in violation of Canadian immigration law.
Of course, where the new company is not an SII, this reasoning will not be applicable. This could happen, for instance, where only a portion of a business is purchased (most notably in an asset transaction).
(ii) Intra-Company Transfers
In the case of an intra-company transfer, the question becomes, essentially, ‘does the foreign worker still have somewhere to return to?’ That is, an intra-company transfer is premised on the belief that the person comes from an affiliate abroad, and is expected to return there (subject to various rules concerning later obtainment of permanent residence, etc.). If the transaction changes this reality, then the foreign employee is no longer entitled to an intra-company based work permit. The issue will be predicated on the nature of the transaction.
Again, this can become complex, but let’s look at two scenarios.
- A foreign company ‘A-Co Global’ (which has a Canadian subsidiary, ‘A-Co Canada’), is bought by another foreign company ‘B-Co Global’ in a share transaction. If the structure of A-Co Global remains in tact, and all that has happened is that B-Co Global has purchased the shares of A-Co Global, then nothing has changed. The intra-company transferee from A-Co Global to A-Co Canada can still go back to A-Co Global.
- The Canadian subsidiary only (‘X-Co Canada’) of foreign company ‘X-Co U.K.’, is bought by Canadian company ‘Y-Co.’ The link between X-Co Canada and X-Co U.K. is broken. A foreign worker transferred from X-Co U.K. to X-Co Canada no longer can return to X-Co U.K. This may mean that the foreign worker is no longer eligible to be an intra-company transferee.
As can be seen in just these two brief descriptions, these situations can become complex quickly, and certainly, there are many more caveats and pitfalls beyond just what these two examples show.
(iii) Other Non-LMIA Foreign Workers
In the case of other non-LMIA work permits (e.g. NAFTA professionals), the issue comes down more or less to the question of Successor in Interest as canvassed above. The foreign worker, presuming he/she is still qualified, may continue to work with any SII. There is again the caveat though that any work permit must be amended to reflect the new name/entity.
Spin-Offs
Spin-offs are another topic, and there are certainly consequences in this scenario as well for foreign workers, and their employers. Based on the discussions above, it can already be seen that issues about things like where intra-company transferees would return, can arise, and otherwise, generally, issues relating to who the SII is. As such, here too, proper immigration planning must be undertaken.
Summary
Yet again, and as can be seen, the consequences of what happens to – often vital – foreign workers when a corporation’s character chances, can be significant. Certainly, appropriate legal advice should be sought for specific scenarios, and it should also be noted that the consequences in Canada may be different from those in other countries. It is therefore simply impossible to rely on knowledge from other countries’ systems to determine what actions should be considered in Canada.
The information in this article is for general purposes only, and not intended as legal advice for any particular situation.
