Toronto, Canada’s largest city, is generally viewed as Canada’s financial centre. The investment fund industry is regulated by the Ontario Securities Commission (OSC), which has authority over the financial sector in Ontario, alongside the Autorité des marchés financiers (AMF).
Canada’s financial system has a reputation for being stable, secure, conservative and mature, and is supported by five major banks.
Canada has long been a pioneer in the hedge fund and alternatives space, and is well-placed to thrive as its financial technology, corporate finance and other markets grow.
Canada has an extensive talent pool in alternative investments and new channels for growth in the retail market. The Canadian alternative industry is poised for success on the private and public alternative front. Private equity, real assets, real estate and infrastructure investments continue to rise in popularity in Canada.
Explore Fund Structures: Ontario Limited Partnerships
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Ontario Limited Partnerships
Fund vehicle description
A limited partnership consists of one or more persons who are general partners and one or more persons who are limited partners. Typically, there is one general partner who manages and directs the affairs of the limited partnership and one or more limited partners who are passive investors. The partnership is formed by GPs and LPs entering into a Limited Partnership Agreement (LPA).
The general partner of a limited partnership has unlimited personal liability for the debts and obligations of the limited partnership and, as such, a manager will generally incorporate a company with nominal assets to use as the general partner.
Key considerations
The primary advantages of setting up Ontario Limited Partnerships include:
• Fast incorporation and investment flexibility. Managers of Canadian private equity funds are not required to register with any Canadian regulatory authority. As long as a Canadian investment vehicle is structured as a “private equity fund”, there are no statutory limitations as to what investment strategies it can employ.
• No regulatory reporting required. A private equity fund is not mandated by statute to deliver any specific reports or financial statements to its investors. It is only required to provide investors with the reports and/or financial statements that it has agreed to provide in its private placement memorandum and limited partnership agreement.
• Beneficial tax framework. An Ontario limited partnership can serve as a tax neutral vehicle for non-Canadian investors. This means that non-resident investors are not required to pay any income tax in Canada or make any Canadian income tax filings. The foreign manager of an Ontario limited partnership is also not be liable to pay any Canadian income tax, or make any income tax filings in Canada.
• Good offshore vehicle reputation. Canada is a reputable jurisdiction, with no “tax haven” perception and an internationally-acceptable, fair judicial system. For this reason, choosing Ontario as a jurisdiction can assist in marketing and fundraising efforts.
Tax implications
When establishing a limited partnership in Canada, it’s important to understand the tax implications.
• Ontario does not apply any direct taxation to limited partnerships.
There is no taxation on income, profits or capital gain in Canada for the partners and the foreign manager—provided that the manager is not Canadian and that there is no substance or business being carried out in Canada.
