Artificial Transaction Explained by the Federal Court.

In a recent decision—Le v. Canada (Citizenship and Immigration), 2025 FC 499—the Federal Court made it clear: Canada’s Start-Up Visa Program is meant for real entrepreneurs with genuine business intentions, not for those using it as a backdoor immigration strategy.

The takeaway is simple: The Start-Up Visa program is intended for committed entrepreneurs who are actively working to build something real and impactful in Canada, not just placeholders.

What is “Artificial Transaction” in the Start-Up Visa Program?

In the context of Canada’s Start-Up Visa (SUV) program, an “artificial transaction” refers to a business arrangement that exists mainly to support an immigration application rather than to build and grow a genuine, innovative business in Canada.

These types of transactions often involve minimal real activity, little to no contribution from the founders, and lack clear signs of business growth or market engagement. If it appears that the primary purpose of the business is to gain immigration status—rather than to create a viable venture with long-term potential—the arrangement may be considered artificial.

Section 89(b) of the Immigration and Refugee Protection Regulations states:

An applicant in the start-up business class is not considered to have met the applicable requirements […] if the fulfillment of those requirements is based on one or more transactions that were entered into primarily for the purpose of acquiring a status or privilege under the Act rather than […] for the purpose of engaging in the business activity for which a commitment […] was intended

This means that simply forming a business, securing a letter of support, or setting up a company on paper is not enough. The applicant must be genuinely involved in building and operating the business as intended under the SUV program. If it becomes clear that the business is just a vehicle to obtain permanent residency—with little or no real effort to carry out the proposed business activities—immigration authorities may find the arrangement to be artificial, and the application may be refused.

Facts of the Case: Start-Up Visa Application

A group of foreign applicants proposed to launch a health-tech start-up in Canada focused on AI-powered software for cancer diagnosis. They secured support from a designated Angel Investment Group, outlined roles in a business plan, and submitted an application for permanent residence.

However, after several years with minimal progress, their application was refused. The reason? Immigration officers found that the applicants were not seriously engaged in building the Canadian business and that the venture appeared to be more about obtaining immigration status than launching a real company.

Immigration Officer’s Reasons for Refusal of the Start-Up Visa Application

The IRCC Officer refused the applicants’ permanent residence applications under the Start-Up Visa class based on the following issues:

• There was no meaningful traction in Canada over multiple years.
• Applicants kept their full-time jobs elsewhere.
• Partnerships and R&D were happening in Europe and Asia—not in Canada.
• A foreign, inactive company held the majority of shares in the Start-Up entity.
• The financial projections in the business plan were not backed by evidence.
• There was no contact with Canadian hospitals, clinics, or customers.

Together, these facts painted a picture of a business that was more theoretical than operational—and more international than Canadian.

Lessons for Start-Up Visa Applicants

1. A Commitment Certificate Is Not a Free Pass
Even if a designated organization endorses your business, immigration officers still assess whether your actions match your claims. Passive endorsement won’t save a weak case.

2. Delay Without Delivery Raises Doubts
Waiting years for permanent residence without doing much in Canada signals a lack of seriousness. Officers expect to see progress—even if limited—during the application period.

3. Canada Must Be the Focus
Developing your business outside of Canada while claiming to build Canadian operations won’t hold up. Officers are looking for Canada-based activities, partnerships, and development.

4. You Must Be Involved
Vague claims about future plans or executive titles are not enough. You need to prove your ongoing contribution—strategy, operations, development, or customer acquisition.

5. Back Up Your Numbers
Financial projections need to be grounded in market research and logic. If your revenue targets or funding goals are based on assumptions without validation, they will be challenged.

Bottom Line

The Start-Up Visa pathway remains a valuable opportunity for global entrepreneurs—but it comes with accountability. If your business doesn’t evolve, doesn’t engage Canada, or isn’t backed by effort and evidence, it may be viewed as an artificial arrangement for immigration purposes.

Success in the SUV program means more than having a good idea—it requires proving you’re building something real in and for Canada.

If you’re building a business in Canada and want to ensure your Start-Up Visa application shows real substance—not just structure—contact us to discuss your case. Or let LIA, our Legal AI Assistant, give your documents a first look.