Written by Cassidy Peterson
JD Candidate 2026

Canadian businesses of all sizes are now using artificial intelligence (“AI”) to streamline operations, analyze markets, and support decision-making.[1] Whether through automated bookkeeping, customer-service chatbots, HR screening software, or data-driven analytics, AI has become embedded in how modern companies operate.[2]
 
However, as AI adoption grows, so do the legal, governance, and ethical questions surrounding its use. Canada’s regulatory landscape is shifting, courts are paying closer attention to directors’ responsibilities, and businesses are being asked to show how they use AI responsibly.[3]
 
Canada’s Evolving Approach to AI Regulation
Canada attempted (and failed) to pass a federal AI law. The proposed Artificial Intelligence and Data Act introduced in Bill C-27, did not move forward.[4] This means Canada does not currently have a single national statute regulating AI.
 
Instead, AI regulation is emerging through provincial initiatives. Ontario, for example, has enacted Bill 194, which imposes rules for AI use within the public sector, including accountability and risk-management obligations.[5] Other provinces can be expected to follow a similar path as AI becomes more integrated across industries.
 
With no federal anchor, Canadian organizations such as legal associations, universities, and sector-specific regulators are developing their own best-practice guidance on ethical AI use.[6] These frameworks fill an important gap but also create uncertainty for businesses operating across provinces.
 
Innovation vs. Precaution
Politically and economically, Canada sits between two competing global approaches:[7]

1. The U.S. model: Light-touch, pro-innovation, minimal restrictions
2. The EU model: Heavy emphasis on privacy, risk-classification, and mandatory safeguards

 
Canadian policymakers continue to debate which direction the country should lean toward, leaving many businesses unsure how to prepare for future legal change.
 
How AI Impacts Corporate Governance
Directors under the Canada Business Corporations Act and provincial equivalents owe two core duties:[8]

1. Fiduciary duty: To act in the best interests of the corporation
2. Duty of care: To act with the skill and diligence of a prudent person

 
These duties apply even when AI tools are involved, so directors must now ask:

• Can we trust AI’s recommendations?
• Are the datasets biased?
• Is the tool privacy-compliant?
• Can we explain how AI-influenced decisions were made?

 
If a board relies on AI and something goes wrong—such as discrimination in hiring, biased analysis, a privacy breach, or flawed financial predictions—directors cannot simply point to the algorithm as the culprit. Courts in Canada assess the quality of the decision-making process, not just the outcome.[9] Directors must therefore exercise meaningful oversight, verify accuracy, and document how AI tools support (rather than replace) human judgment.[10]
 
How AI Can Help Canadian Businesses
When deployed responsibly, AI offers meaningful advantages, especially for resource-constrained start-ups:[11]
 
Data-Driven Insights: AI can process massive data sets quickly, identifying trends or financial risks that humans may miss
Operational Efficiency: Automating reporting, data entry, or routine compliance checks frees up time for strategic planning and reduces costs
Stronger Risk Management: AI can flag anomalies earlier, help predict market volatility, and automate aspects of compliance monitoring
Fewer Human Errors: AI can offer consistency in tasks that are traditionally repetitive and error-prone
 
These benefits can give smaller companies a competitive edge traditionally reserved for larger enterprises. But they also come with meaningful risks.
 
The Risks Associated with AI Use
AI tools are powerful, but without strong oversight they can expose companies to legal and ethical issues: [12]
 
Bias & Discrimination: AI systems often replicate biases in their training data. This can lead to discriminatory hiring decisions, unfair risk scoring, or inequitable customer treatment—potentially violating Canadian human-rights legislation
Privacy Concerns: AI tools often require access to sensitive personal or corporate data. Uploading confidential information to third-party systems without safeguards risks breaches and regulatory non-compliance.
Lack of Transparency: AI models may produce recommendations without clear reasoning. This makes it difficult for directors to justify board decisions influenced by algorithms.
Over-Reliance & Reduced Human Judgment: Employees or executives may defer to AI outputs without critical thinking, creating governance blind spots.[13]
 
6 Practical Recommendations for Canadian Companies
1. AI Oversight by the Board of Directors and Management: Directors and managers should stay informed on AI systems used within the business.[14] They should also actively question and verifying AI outputs. 

2. Create Clear Internal Policies for AI Use[15]

• What AI tools can and cannot be used
• Rules for handling confidential data
• Training requirements: On AI risks, data-protection practices, bias mitigation and ethical considerations
• Human-in-the-loop expectations
• Documentation and reporting standards

3. Conduct Risk Assessments Before Using AI: Companies should evaluate the kinds of data being processed, any potential harms and biases, less-invasive alternatives available, the accuracy and limitations of the AI tool, and the proportionality of risk to business need.[16]

4. Perform Due Diligence on Third-Party AI Providers

• This could include asking vendors for:
  1. Clear contractual protections
  2. Security documentation
  3. Audit reports
  4. Bias testing results

5. Consider Creating an Internal AI Governance Committee: For companies relying heavily on AI, a committee can be implemented to oversee transparency, accountability, privacy protections, and policy updates.[17]

6. Keep AI as a tool, not a decision-maker: Boards need to remain ultimately responsible for decisions made. AI should inform judgment, not replace it.

Key Takeaways

• Canada’s AI regulatory landscape is shifting; founders should monitor provincial developments.
• Directors remain accountable even when AI is used for analysis or recommendations.
• Strong oversight, documentation, and internal policies can reduce liability.
• Ethical, careful AI adoption builds investor and customer trust—especially in sectors handling sensitive data.
• Early adoption of governance best-practices can become a competitive advantage.
• AI can support better business decisions, but only when paired with human expertise, strong oversight, and responsible governance.

Note: The above information does not constitute legal advice. No guarantees are made as to accuracy, completeness, or applicability to individual situations.

[1] Fitriana Yuniastuti, “Use of Artificial Intelligence in Operational Efficiency and Business Management Strategic” (2024) 3:5 West Science Information System and Technology at 563.

[2] Ustahaliloğlu, M. K. “Artificial intelligence in corporate governance” (2025) 7(1) Corporate Law & Governance Review [Virtus] at page 123.

[3] Corporate Governance Institute, “AI and Boardroom Decision‑Making” (September 2024) (online: www.thecorporategovernanceinstitute.com/insights/guides/ai-and-boardroom-decision-making [AI and Boardroom Decision Making].

[4] Blair Attard‑Frost, “The Death of Canada’s Artificial Intelligence and Data Act: What Happened, and What’s Next for AI Regulation in Canada?” (17 January 2025) (online: montrealethics.ai/the-death-of-canadas-artificial-intelligence-and-data-act-what-happened-and-whats-next-for-ai-regulation-in-canada/ [Canada’s Artificial Intelligence and Data Act].

[5] Ibid; Strengthening Cyber Security and Building Trust in the Public Sector Act, 2024, SO 2024, c 24.

[6] Ibid.

[7] Brandon Nussey, “The AI Regulation Tug of War: Canada Struggles to Find Balance” (December 2024) online: www.cpaontario.ca/insights/blog/ai-regulation-canada-struggles-to-find-balance [Nussey].

[8] Canada Business Corporations Act, RSC 1985, c C-44, s 122(1) [CBCA].

[9] Ibid, s 122(1)(b).

[10] Ibid.

[11] Virtus, supra note 2 at page 123.

[12] Ibid at page 124-125; AI and Boardroom Decision Making, supra note 3.

[13] Optiv Security, Inc., “AI Governance and Risk Management” (28 February 2025) online: www.optiv.com/insights/discover/blog/ai-governance-risk-management.

[14] Information Commissioner’s Office, “What Are the Accountability and Governance Implications of AI?” (15 March 2023) online: ico.org.uk/for-organisations/uk-gdpr-guidance-and-resources/artificial-intelligence/guidance-on-ai-and-data-protection/what-are-the-accountability-and-governance-implications-of-ai/ [Information Commissioner’s Office].

[15] Andrew MacDougall, Sam Ip, Simon Hodgett & Naomi Chernos, “The Board’s Oversight in the Age of AI: Ethics, Compliance and Competitive Advantage” (18 March 2025) online: osler.com/en/insights/updates/the-board-s-oversight-in-the-age-of-ai-ethics-compliance-and-competitive-advantage/.

[16] Information Commissioner’s Office, supra note 14.

[17] Thomson Reuters, “How AI Can Help You Manage Risks” (23 May 2025) online: <legal.thomsonreuters.com/blog/how-ai-can-help-you-manage-risks/>.

Written by Jamil Oueidat
JD Candidate 2026

This blog post is for general informational purposes only and does not constitute legal advice.
 
International students studying in Alberta often look for opportunities to start their own business ventures. Regardless of the industry, incorporation can be an exciting new step toward transforming that entrepreneurial ambition to reality. Yet, for years, Alberta’s corporate rules placed limits on non-Canadian entrepreneurs. The law made it difficult for a foreign student to establish a company they could fully direct and control.
 
That landscape has changed. Recent amendments to the Alberta Business Corporations Act (“ABCA”) have removed several barriers that once discouraged non-Canadian citizen founders. The province has deliberately opened the door wider, making it far easier for an international student to incorporate, own shares, and structure a business without relying on Canadian partners.
 
If you are considering formalizing your venture or laying the foundation for future plans in Canada, understanding these changes is essential. This short guide explains what has changed, what remains required, and what every international student should know before incorporating a business in Alberta.
 
Removal of Director-Residency Requirement
 
Before 2021, ABCA required that at least 25% of a corporation’s directors be “resident Canadians.” [1] For many international students, newcomers, and anyone without established ties in Canada, this rule acted as a major obstacle to incorporation. You could have a solid business idea, the funding, and the willingness to run the company, yet you were still forced to find a Canadian resident willing to sit on your board. For many students, that meant relying on people they barely knew, paying someone just to meet the requirement, or abandoning incorporation altogether.
 
 This changed on March 29, 2021, when the residency requirement was removed from the ABCA.[2] This change was catalyzed by Alberta’s Red Tape Reduction Implementation Act, which amended a number of other provincial laws.[3] By taking out the residency requirement, Alberta opened the door for international students and foreign entrepreneurs to incorporate without needing Canadian directors or silent partners.
 
In practical terms, this means you can now structure your corporation the way you intended from the start: with the directors you choose, full control over decision-making, and no dependency on anyone solely for compliance.
 
Alberta Resident Agent for Service
 
While Alberta removed the residency requirement for directors, it did introduce one new condition: every corporation must appoint an agent for service who is an individual resident of Alberta and who has an address that is publicly accessible during regular business hours.[4] This requirement is meant to ensure that the corporation has a reliable point of contact within the province. Think of it as someone who would serve as your company’s local point of contact for official documents, legal notices, and government correspondence.
 
Many corporations meet this requirement by appointing a trusted Alberta resident, a professional service provider, or a legal representative. The key consideration is dependability and the ability to receive documents during standard business hours.
 
Can Non-Canadians Own Shares in an Alberta Company?
 
There are no residency or citizenship restrictions on share ownership under the ABCA. International students, foreign investors, and non-resident owners may all legally hold shares in an Alberta corporation. Canadian shareholders are not required.
 
Conclusion
 
For international students, Alberta’s incorporation framework is significantly more accessible than it was prior to 2021. You may hold full ownership of the corporation, appoint directors who are not resident Canadians, and structure the company without relying on Canadian partners. The primary provincial requirement that remains is the appointment of an Alberta resident agent for service, along with compliance with any federal or immigration-related restrictions that govern your ability to work. When these obligations are met, incorporation can serve as a practical foundation for future plans, whether your intention is to operate a small venture during your studies or to establish a long-term platform for business activity in Canada.
 
[1] Bryan Haynes & Adrienne Roy, “Important Changes to the Alberta Business Corporations Act Now in Effect” (12 April 2021), online (blog): <https://www.bennettjones.com/Insights/Blogs/Important-Changes-to-the-Alberta-Business-Corporations-Act-Now-in-Effect>.

[2] Sarat C. Maharaj & Lucas A. Tomei, “Alberta removes director residency requirements” (1 April 2021), online (blog): <https://www.dentons.com/en/insights/articles/2021/april/1/alberta-removes-director-residency-requirements?utm_source=chatgpt.com>.

[3] Ibid.

[4] Supra note 1.