agreement or limited partnership agreement, as the case may be, takes the place of the certificate and articles of incorporation and by- laws, and will govern the issuance of partnership units and the operations of the entity. BRIEF SUMMARY OF REGULATION OF ENTITIES Provincial/territorial registration Any business created under the laws of Canada or a particular province or territory, whatever its nature (unincorporated sole proprietorship, corporation, ULC, partnership, general partnership, etc.) must be registered in its home jurisdiction and file annual and updating returns or reports. If the business wishes to operate in another jurisdiction as well, the same registration and reporting requirements must be met in that additional jurisdiction. While the definition of “carrying on business” varies slightly from one jurisdiction to another, it usually involves factual tests based on having a physical presence in the jurisdiction, including having an office, employees who report to work there, or a local telephone listing, without the mind, management and control of the entity necessarily being located there. A trust carrying on a commercial enterprise, such as a business, investment, or real estate trust (whether or not profitable), which is not managed by a registered trustee (such as a trust company), must also register with the Québec Register of Enterprises in the same manner within 60 days of beginning its operations there. Securities Law Securities law is a matter of provincial/territorial jurisdiction, and each province or territory has its own regulator. Unlike the other G7 countries, there is no federal regulator akin to the U.S. Securities and

Exchange Commission. It should be noted that the federal Minister of Finance strongly supports the adoption of a single national securities regulator, as does the International Monetary Fund and the Ontario Securities Commission (Ontario being Canada’s largest capital market). Currently, the 10 provinces and 3 territories in Canada are responsible for securities regulation. Securities regulators from each province and territory have teamed up to form the Canadian Securities Administrators (“CSA”). The CSA is primarily responsible for developing a harmonized approach to securities regulation across the country. In recent years, the CSA has developed the “passport system”, through which a market participant has access to markets in all passport jurisdictions by dealing only with its principal regulator and complying with one set of harmonized laws. It is a major step forward in improving Canada’s securities regulatory system by providing market participants with streamlined access to Canada’s capital markets. In Canada, shares and other securities to be issued by any organization may only be issued through a qualified prospectus. There are broad exemptions from this prospectus requirement. National Instrument 45-106 (adopted in Québec and Ontario as Regulation 45-106, and hereinafter “NI 45 - 106”) sets out the prospectus exemptions and replaces the exemptions previously found in the provincial/territorial securities legislation. The national rules extend the application of the provincial and territorial securities legislation beyond shares in the capital stock of companies to all forms of securities, excluding only non- convertible debt securities. Thus, warrants, options and convertible debentures are covered by the securities rules in addition to

ILN Corporate Group – Establishing a Business Entity Series

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