Guides and Publications
Published: September 24th, 2025
Written By: Bryan C. Friedman and Alex Hamilton
Originally published on Mondaq
Venture Capital Comparative Guide: Canada
Our lawyers contributed to Mondaq’s Venture Capital Comparative Guide, offering an in-depth analysis of Canada’s venture capital ecosystem. Below is an excerpt from the article.
Legal Framework
In Canada, venture capital investments are governed by a combination of federal and provincial legislative provisions. The Canada Business Corporations Act (CBCA) and its provincial counterparts (such as the Ontario Business Corporations Act) set out the foundational rules for corporate governance, shareholders’ rights and directors’ duties.
Securities legislation, administered by provincial regulators such as the Ontario Securities Commission and coordinated nationally by the Canadian Securities Administrators, is also relevant. Canadian securities laws outline the rules on various prospectus exemptions, including the private issuer and accredited investor exemptions— which are often relied on by startups and venture investors alike.
The Income Tax Act (Canada) also influences venture capital structuring, particularly in the context of equity-based compensation (e.g., stock options), corporate reorganizations, and the treatment of capital gains. Programmes such as the Scientific Research and Experimental Development (SR&ED) tax incentive and the Lifetime Capital Gains Exemption further impact investment decisions by offering tax advantages for innovation and small business growth.
Parties & Investment Types
Venture capital in Canada involves a diverse range of investors:
Angel investors who provide early-stage capital in exchange for equity of convertible debt
Angel groups that pool resources to diversify risk and amplify impact
Venture capital firms that manage pooled funds and typically engage in early to growth-stage investment
Corporate venture capital. where corporations invest in startups aligned with their strategic interests
Government-sponsored funds (e.g. Business Development Bank of Canada) that promote innovation and economic growth
Labour-sponsored venture capital corporations, which offer tax incentives to individual investors supporting SMEs.
Investments are most often made directly into Canadian-incorporated companies. However, foreign investors may require foreign holding structures (e.g. a “Delaware flip”) when planning for cross-border scaling or exit strategies.