Government Regulation of Business in Canada: Challenges and Impact on Economic Growth

This essay analyzes the impact of government regulations on businesses in Canada, focusing on recent issues and challenges faced by corporations. It argues that strict regulations limit growth opportunities and hinder economic growth. The regulations imposed by the government focus on protecting the rights of minorities to ensure that large organizations did not misuse their power to violate their rights. The essay evaluates the imposition of strict regulations on directors and how they are facing immense pressure from the government while discharging their duties.

Government Regulation of Business

The government imposes regulations on businesses to govern them in order to ensure that they did
not act unethically by misusing their position, and they contribute to the economic growth of the nation.
Various historical incidents highlighted the importance of the governance of businesses in Canada. The
regulations imposed by the government on businesses focus on risk assessment and risk management. The
regulations imposed by the government focus on protecting the rights of minorities to ensure that large
organizations did not misuse their power to violate their rights.1 This essay will focus on analyzing a recent
issue which has gained media attention in Canada relating to the imposition of strict regulations by the
government on businesses. The thesis will argue that imposition of these regulations is not beneficial for the
corporations because it limits their growth opportunities and makes it difficult for them to expand their
operations. This essay will evaluate the imposition of strict regulations on directors and how they are facing
immense pressure from the government while discharging their duties.
Recently, Canada becomes the world’ first-ever country to make a law which provides that every new
regulation introduced, one must be eliminated. The leadership of British Columbia his notable for its results
and longevity at the provincial level; there has been a reduction in regulatory requirements by 48 per cent
since 2001.2 Due to these changes, many entreprenures have established their business in the country while
maintaining a high level of safety and environmental protection. This regulatory model has become a beacon
of hope for leaders who are interested in making progress in challenging policy areas. However, these changes
did not bring benefits to Canadian businesses. A study conducted by the Canadian Federation of Independent
Business provided that the cost of regulation to Canadian business is $36 billion in a year.3 Red Tape
Awareness Week is started by the Canadian Federation of Independent Business which is a week that is
dedicated to highlighting excessive regulation cost and encouraging the government to take action regarding
addressing this issue. It is provided that around $10 million is wasted on excessive regulation on businesses in
Canada.
These regulations are becoming a serious issue for the future of the economy of the country because it
is highly unlikely that people would prefer to start a business in the future due to high regulation costs. It is
likely to adversely affect a large number of small businesses in the country due to the pressure of excessive
compliance with regulations.4 It is argued that the regulatory burden is undermining business competitiveness
in the country which is unhealthy for its economy. Due to the pressure of these regulations, the businesses
1 Irving Abella and Harold Martin Troper. None is too many: Canada and the Jews of Europe, 1933-1948. University of Toronto Press,
2012.
2 James Broughel and Laura Jones. “Effective Regulatory Reform.” Mercatus Center, 2018,
https://www.mercatus.org/publications/state-and-local-policy/effective-regulatory-reform-united-states-vs-british-columbia.
Accessed 15 November 2018.
3 Laura Jones. “Regulations cost businesses $36 billion a year — and owners are telling their kids being an entrepreneur isn't worth
the costs.” Financial Post, 2018, https://business.financialpost.com/entrepreneur/regulatory-accumulation-is-still-damming-
entrepreneurial-flow-comment. Accessed 15 November 2018.
4 Robert B Gibson. "In full retreat: the Canadian government's new environmental assessment law undoes decades of progress."
Impact Assessment and Project Appraisal 30.3 (2012): 179-188.

are becoming less competitive which makes Canada a less attractive place to invest, start or grow a new
business venture. The objective of these regulations is to create a safe business environment; however, these
regulations have started to smother businesses and making it difficult for them to expand their branches into
new fields without facing pressure from government regulations. The United States has implemented
significant corporate tax and regulatory reforms in the country under the Trump Administration and being the
largest trading partner and competitor, Canada cannot fall further behind the country. The Canadian
government is required to improve its regulatory framework and making it more suitable for small and
medium businesses to ensure that they did not feel the pressure of regulations which resulted in adversely
affecting their ability to expand and increase their profitability.
A good example is the new rules implemented by the government for mortgage lending in Ottawa. As per the
guidelines published by the Office of Superintendent of Financial Institutions, the government is moving
forward with regulations which are making it tougher for Canadians to qualify for uninsured loans. Due to
these regulations, the customers will have to pay a down payment of 20 per cent or more which resulted in
making it difficult for them to apply for a loan.5 These regulations adversely affect the business of banking
firms and other financial institutions which offer the facility of mortgage lending. Although these policies are
safe, and they reduce the risk of increasing a large number of loans which could hinder the economy of the
country, however, they limit the growth opportunities for businesses which adversely affect their future
profitability. It also makes banking and other financial institutions less attractive for investors to invest their
money.
This issue is highlighted by the recent media articles in the country which raises the questions on the
legislative framework implemented by the government of Canada. The changes made in the Canada
Mortgage and Housing Corporation Act is a good example. As per these amendments, it has become difficult
for Canadians to get uninsured loans because the government has changed the qualification criteria. The
regulations of this act resulted in adversely affecting the organizations which operate the business of banking
and other financial services relating to the lending of loans. These regulations reduced the number of parties
that take uninsured loans which hinder the profitability of the banking sector in Canada. Another example is
Canadian Anti-Spam Legislation (CASL) which is a law implemented by the government to protect the personal
information of people. Although the objective of this law is to protect the online privacy of individuals and
avoid spam messages, however, it resulted in making it difficult for corporations to market their products. 6
Organizations find it difficult to share their products or services to customers without considering it as spam. It
5 Garry Marr and Barbara Shecter. “Canada's banking watchdog sets tougher rules for mortgage lending.” Financial Post, 2018,
https://business.financialpost.com/real-estate/mortgages/canadas-banking-watchdog-sets-new-rules-for-mortgage-lending.
Accessed 15 November 2018.
6 Dominic Mochrie. "Canada's anti-Spam/anti-Spyware Legislation: An Overview." Int'l J. Franchising L. 12 (2014): 25.

is also difficult for them to collect private information of customers to contact them to promote their products
and services through digital sources.
The Canadian Business Corporations Act also imposes strict regulations on companies operating in
Canada. The regulations are imposed to ensure that corporations did not misuse their position, and they did
not unethically conduct their businesses. However, these regulations resulted in increasing pressure on the
corporations and their management. The directors have to maintain a duty of care while taking business
decisions to ensure that they exercise their powers with due care and diligence, and they did not misuse them
to gain an unfair advantage.7 Although these policies are beneficial for the company, however, the strict
implementations of these policies raise challenges for directors of foreign countries who operate their
business in Canada. They have to deal with a large number of regulations, and a small mistake could lead to
negative consequences. The judgement given by the court in R. v, Peterson, [2006] A.J. No. 286 is a good
example in which the court finds director acquiescence offences are actually full mens rea offences. 8 It shows
that the directors can be held liable in the Criminal Code if they failed to discharge their duties in an
appropriate manner.
Based on the above observations, it is analyzed that the regulatory framework implemented by the
Canadian government is substantially strict in many situations which are negative for the economic growth of
the country. In order to implement a safe business environment, the government has implemented stricter
regulations which did not allow corporations to take higher risks which provide them various benefits. There
are many inconsistent and unpredictable rules and processes in the country which are making it difficult for
businesses, whether large or small, to comply with them. In the long run, these regulations are likely to hinder
the economic growth of the country by reducing the number of small businesses because they find it difficult
for complies with these laws.9 The cost of compliance with these regulations is substantially high as well which
makes it difficult for them. The directors of corporations are afraid to breach any regulations due to which
they or the company could have to pay penalties to the government. This issue will continue to adversely
affect the economy of Canada until the government resolves it.
In conclusion, the key issue with government regulations in Canada is that they are substantially strict
which makes it difficult for businesses to take risks in the countries. This issue is reducing the number of small
businesses in the country which would result in hindering its economic growth. The provisions of CASL,
Canada Mortgage and Housing Corporation Act and Canadian Business Corporations Act resulted in creating
challenges for organizations which are operating their business in Canada which affects their profitability. The
7 Stephen Bottomley. The constitutional corporation: Rethinking corporate governance. Routledge, 2016.
8 Groiaco. “Ontario Court of Justice.” Groiaco, 2007, http://www.groiaco.com/pdf/Judgment.pdf. Accessed 15 November 2018.
9 Guillaum Dubreuil. “Regulatory Burden Undermining Business Competitiveness, New Chamber Report Rinds.” Canadian Chamber
of Commerce, 2018, http://www.chamber.ca/media/news-releases/180531-regulatory-burden-undermining-business-
competitiveness/. Accessed 15 November 2018.

government should address this issue by considering the research relating to Red Tape and reduce the
number of unnecessary regulations which creates challenges for businesses in Canada. The government
should promote competition between organizations by allowing them to take risks and it should support small
businesses as well. The increased competition in the country will bring new growth opportunities, and it will
increase the number of investors in the country.

Works Cited
Abella, Irving, and Harold Martin Troper. None is too many: Canada and the Jews of Europe, 1933-1948.
University of Toronto Press, 2012.
Bottomley, Stephen. The constitutional corporation: Rethinking corporate governance. Routledge, 2016.
Broughel, James and Laura Jones. “Effective Regulatory Reform.” Mercatus Center, 2018,
https://www.mercatus.org/publications/state-and-local-policy/effective-regulatory-reform-united-
states-vs-british-columbia. Accessed 15 November 2018.
Dubreuil, Guillaum. “Regulatory Burden Undermining Business Competitiveness, New Chamber Report Rinds.”
Canadian Chamber of Commerce, 2018, http://www.chamber.ca/media/news-releases/180531-
regulatory-burden-undermining-business-competitiveness/. Accessed 15 November 2018.
Gibson, Robert B. "In full retreat: the Canadian government's new environmental assessment law undoes
decades of progress." Impact Assessment and Project Appraisal 30.3 (2012): 179-188.
Groiaco. “Ontario Court of Justice.” Groiaco, 2007, http://www.groiaco.com/pdf/Judgment.pdf. Accessed 15
November 2018.
Jones, Laura. “Regulations cost businesses $36 billion a year — and owners are telling their kids being an
entrepreneur isn't worth the costs.” Financial Post, 2018,
https://business.financialpost.com/entrepreneur/regulatory-accumulation-is-still-damming-
entrepreneurial-flow-comment. Accessed 15 November 2018.
Marr, Garry and Barbara Shecter. “Canada's banking watchdog sets tougher rules for mortgage lending.”
Financial Post, 2018, https://business.financialpost.com/real-estate/mortgages/canadas-banking-
watchdog-sets-new-rules-for-mortgage-lending. Accessed 15 November 2018.
Mochrie, Dominic. "Canada's anti-Spam/anti-Spyware Legislation: An Overview." Int'l J. Franchising L. 12
(2014): 25.