Canada's Startups: Unlocking US private equity
Like most lawyers, I find it hard to love any lawyer more than I love myself. But lately, I've been having unnaturally warm feelings about Stephen Hurwitz, late of Choate Hall in Boston. Many of you will remember his predecessor firm Testa Hurwitz, which rose to prominence on the back of its prowess in trade secrets litigation. When my clients wanted to make someone cry, I would send them to TH. Since the demise of TH, Stephen has made his home at Choate Hall.
Stephen's practice is built in part on US and Canadian VC activity, and I applaud his recent efforts to revive US interest in high tech Canada. In particular, he has done a good job identifying and advocating changes in tax treaty rules to make it easier for US VCs to invest in Canada.
Under the current regime, US VCs typically invest through an alternate structure to ensure their capital gains on any Canadian investment aren't double-taxed. Whenever a US VC is added to any deal I work on, I mentally add $100k to the legal fees, and I'm usually not far off. A reform of Canada's tax rules could eliminate this hurdle, at a time when new sources of capital are sorely needed. A summary of the tax challenges of cross border VC investing is available on Choates' web site; I recommend a look for those who want greater detail.
Stephen's practice is built in part on US and Canadian VC activity, and I applaud his recent efforts to revive US interest in high tech Canada. In particular, he has done a good job identifying and advocating changes in tax treaty rules to make it easier for US VCs to invest in Canada.
Under the current regime, US VCs typically invest through an alternate structure to ensure their capital gains on any Canadian investment aren't double-taxed. Whenever a US VC is added to any deal I work on, I mentally add $100k to the legal fees, and I'm usually not far off. A reform of Canada's tax rules could eliminate this hurdle, at a time when new sources of capital are sorely needed. A summary of the tax challenges of cross border VC investing is available on Choates' web site; I recommend a look for those who want greater detail.
posted by Suzanne Dingwall Williams at
12:58 PM
1 Comments:
The world of Los Angeles private equity funds is a fairly rarefied world. The vast majority of these funds are organized as limited partnerships (LP) where the investors are principally institutional investors such as pension funds, banks, and high net worth individuals.The general partner (GP) identifies the opportunity, calls money from its lLP's (also called a drawdown or takedown) up to the amount committed and can do so at any point until the fund is liquidated. When an investment is liquidated, the GP distributes proceeds to the LP's in kind or in cash. The compensation from LPs to GP's consists of a management fee, plus a fraction of the profits called the carried interest.
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