Federal Update: Implementation of new Investor Program

As was previously reported in this Newsletter (April 1999 Edition), on April 1, 1999, the Federal government announced the implementation of its new Investor Program. The new rules and regulations only apply to individuals who submit their Immigrant Investor applications after March 31, 1999.

As previously reported, the essential changes to the Federal Program can be grouped into two categories. Firstly, the dollar thresholds have been increased. Whereas previously an Immigrant Investor had the option of investing $250,000, $350,000 or $500,000 for a five-year period, the new Program provides for one single investment option in the amount of $400,000. In addition, the minimum net worth required of the Investor has been increased from $500,000 to $800,000.

On a second level, the old Federal Program required Investors to make their investment in a provincial government-administered venture capital fund. Each of these funds would then pool investor money and invest it in other businesses as permitted by Federal regulations and provincial guidelines. Under the new Program, Citizenship and Immigration Canada will act as agent on behalf of provincial and territorial funds, and investments will be subsequently allocated to approved provincial or territorial funds. In this manner, a single federal window will replace the numerous funds previously available to Investors.

Investors who are destined for the Province of Quebec have only been partially affected by the new rules. Quebec has agreed to raise its minimum investment amount to $400,000 and its minimum net worth requirement to $800,000. However, Quebec will not abolish its current system of provincial government-administered venture capital funds.

While the new Federal Program was officially announced on April 1, 1999, there was no actual Program in effect under which candidates could submit their applications as Investors. The latest Update from Citizenship and Immigration Canada confirms that the Program is officially "up and running," and explains the new processing procedures under the revamped Program.

With respect to the actual application forms, candidates are allowed to use the "old" application forms until such time as new application forms which reflect the changes from the "old" Program are made available.

Processing and Right of Landing Fees remain unchanged under the new Program (processing fees are $1,000 CDN for the principal applicant, $500 CDN for each family member over the age of 18, and $100 CDN for each family member under the age of 18; Right of Landing Fees are $975 CDN for each family member 19 years and older, while family members under 19 years of age do not pay a Right of Landing Fee).

Under the new Program, applicants will pay their $400,000 investment directly to the Receiver General for Canada, and a non-transferable zero interest promissory note – fully guaranteed by participating provinces – will be issued for subsequent repayment, without interest, five years and two months after the end of then month in which payment is received in Ottawa.

Applicants can make their $400,000 investment anytime after an application has been submitted, although payment will not actually be required until immediately prior to visa issuance once all other immigration matters have been resolved. Visas will not be issued to Investors prior to such payment. Arrangements to allow applicants to wire their $400,000 directly to the Federal government will be completed shortly. Until such time, however, applicants may pay their investment by bank draft or money order.

Any arrangements to finance the $400,000 investment are the applicant’s responsibility. If a lender requires the $400,000 promissory note to be pledged as collateral, applicants must arrange with the lender to notify the Federal authorities who, in turn, will confirm receipt of any such arrangements directly with the lender.

The Federal government has prepared a form of Subscription Agreement which must be used in order to subscribe for the $400,000 promissory note. Two copies of this agreement must be signed and submitted along with the $400,000 payment. The Federal authorities will counter-sign both copies of the agreement and return one fully-signed counterpart to the Investor along with a receipt for the $400,000. The actual Promissory Note will be sent to the Investor shortly afterwards, and will indicate the provincial distribution of the $400,000 as well as the redemption date for the Promissory Note (no more than five years and three months after the date of payment).

It is important to note the Government’s refund policy. Absolutely no refunds will be made after visa issuance. However, if an Investor wishes to withdraw his or her application prior to visa issuance, the $400,000 will be returned to the Investor within 90 days of a written request for same. In addition, if an investment has been made and a visa subsequently refused, then a full refund will be made within 90 days of a requests for same.

As a result of the government’s refund policy, certain Investors may choose to make their payment well in advance of visa issuance. Given that the processing of Investor application often takes in excess of 12 months (and even as much as 24 months or more), those Investors who believe they have "strong" cases may opt to make their payment at the same time as they submit their applications. If they are ultimately issued visas, their five-year "lock-in" period will only have three or four years left to run after visa issuance. On the other hand, this "gamble" would fail if visas are not ultimately issued. Although the $400,000 payment would be refunded, the payment would have earned zero interest during the period between payment and refund.