At the Collision conference in Toronto in late June, Clearco CEO Michele Romanow took the stage alongside federal Innovation Minister François-Philippe Champagne for a panel about the success of the Canadian tech industry. Romanow’s company had grown to become one of the giants of Canadian tech, and could expand in any country it wanted, said the moderator, journalist Amber Mac. Why, she asked, did it choose to stay in Toronto?

“We are a deeply proud Canadian company,” Romanow said, speaking against a background illuminated with red and white. “Last year, we entered 10 countries around the world and kept those Canadian roots as we did this. I’m still so bullish on the Canadian economy and growing here.”

While the merchant-financing startup remains headquartered in Toronto, Romanow and co-founder Andrew D’Souza have been legal residents of Barbados since at least March 2021.

Clearco spokesperson Nick Rosen-Wachs told The Logic Romanow and D’Souza moved to Barbados in fall 2020 due to Canadian COVID-19 restrictions and the high number of cases in Toronto. “At that point in time, Barbados had no COVID-19 cases and offered them a place to move about freely to run the business,” he said. They established legal residency “shortly thereafter.”

“Andrew and Michele fell in love with Barbados and have established long-term residences there,” Rosen-Wachs said. “At this time, they have no intention of returning to Canada.” According to Rosen-Wachs, they remain Canadian citizens.

D’Souza and Romanow, a star of the CBC program Dragons’ Den, have often used their status among Canada’s most prominent entrepreneurs to champion Canada’s tech sector. 

The two have run Clearco since its 2015 founding. Once romantic partners, they announced in February that their relationship had ended but that they would continue to lead the company, Romanow moving from president to CEO and D’Souza from CEO to executive chair of Clearco’s board. 

Clearco has since been among the many Canadian tech companies struggling with its footing amid industry headwinds. On July 29, it announced plans to cut roughly a quarter of its workforce, citing macroeconomic conditions. 

Former employees said D’Souza and Romanow were open with staff about their whereabouts, and regularly called in to meetings from Barbados. No current or former Clearco employee with whom The Logic spoke over the last several months raised the co-founders’ residency in Barbados as something that hindered their ability to run the company.

The company has covered expenses for employees who travelled to Barbados to meet with Romanow and D’Souza on business, Rosen-Wachs said.

“Clearco is an international, remote-first company, where employees travel to in-person meetings as necessary,” he said. “Andrew and Michele typically travel to meet their employees and this is well documented but there have been rare [cases] where employees met with them in Barbados. This is no different than prior to their relocation, where employees would travel to meet in Toronto or various other international locations when in-person meetings were necessary.”

Asked whether the company has paid for D’Souza and Romanow’s travel and accommodations as part of their trips between Barbados and Toronto, he said, “The company pays for employees’ travel expenses who are required to travel as part of their required jobs. We unequivocally have never used company money for personal travel of any employee.”

Rosen-Wachs declined to confirm exactly when D’Souza and Romanow became legal residents of Barbados, but filings for Clearco in the United Kingdom and Canada list Barbados as their country of residence dating back to at least March 2021. The change came prior to the close of two large funding rounds in April and July of that year—including one led by global investment giant SoftBank, its first investment in a Canadian company—that valued Clearco at nearly US$2 billion, reportedly five times higher than its valuation in 2019, when it had last raised money. 

As The Logic first reported, Clearco raised additional funds earlier this year at a US$2.5-billion valuation. The company confirmed the 2021 rounds included secondary share sales in which employees who had been with the company longer than two years—including D’Souza and Romanow—were able to sell equity in the company to investors.

The move came with favourable tax implications for the two. Under the terms of a 1980 treaty between Barbados and Canada, Canadian citizens earning income in Barbados are not required to pay taxes in Canada. Barbados’s tax brackets are 12.5 per cent for personal income up to 50,000 Barbados dollars—the equivalent of roughly $32,000 per exchange rates offered Aug. 8—and 28.5 per cent above that amount. There are no higher tax brackets. An individual in Ontario earning $100,000 in employment income would pay roughly 27 per cent in federal and provincial income taxes as well as deductions for employment insurance and the Canada Pension Plan, while an individual making the same in Barbados would pay tax of roughly 23 per cent.

Besides its lower rate of personal income tax, Barbados has no tax on capital gains, the profit someone earns when they sell an investment.

Rosen-Wachs declined to say whether Romanow and D’Souza sold shares in the 2021 rounds, citing company policy not to disclose information about its employees’ financial transactions, but said D’Souza and Romanow’s move “had nothing to do with a fundraising round.” 

“​​Michele and Andrew are and will remain fully compliant with all of their Canadian tax obligations,” Rosen-Wachs said. 

He declined to specify what portion of their time the co-founders spend in Canada, saying, “Last year they spent more time visiting other offices outside of Toronto since new markets required more attention as they launched,” citing the company’s operations in the U.S., U.K. and Ireland. He also confirmed that as part of their relocation D’Souza and Romanow gave up the apartments they were leasing. “Travel restrictions prevented them from using them,” he said. 

Clearco has established a legal entity in Barbados, listed as CFT (Barbados) Corp., according to corporate filings.

According to two people with knowledge of the matter, D’Souza’s and Romanow’s salaries were paid through the Barbados corporation. The Logic has agreed to protect the sources’ identities. Anatoliy Melnichuk, a Canadian entrepreneur and business partner of Romanow’s whom the company said has been an advisor to Clearco since its founding, was also registered as an employee of CFT (Barbados) Corp., according to one source.

“Clearco establishes legal entities in countries where they do business, as for example, they did in Ireland and U.S.,” Rosen-Wachs said. “Like many businesses, this is part of a company’s business structure as they develop and grow internationally.” Asked what business Clearco does in Barbados, Rosen-Wachs said “We are not going to comment on the specifics of countries in which we operate.”

Clearco is still incorporated in Canada, and continues to maintain its headquarters in Toronto, although as The Logic has previously reported, the company has scaled back its office footprint in the city as it looks to cut costs. 

In March 2021, Clearco dissolved its federally registered corporate entity in Canada and later incorporated a new entity in B.C., which has no residency requirements for company directors. Federally registered corporations, in contrast, require at least a quarter of directors to be Canadian citizens living in Canada. 

Romanow and D’Souza both serve on Clearco’s board of directors, the latter as executive chair. According to filings with Canadian regulators, as of April 2021 only one of Clearco’s directors, Rajen Ruparell, was a Canadian resident.

Rosen-Wachs said Clearco proactively changed its corporate structure in anticipation of its Series C round, which included investment from Japan-based SoftBank and U.S.-based Oak HC/FT, and future financing rounds. “The makeup of the Clearco board has changed significantly following the two fundraising rounds of 2021,” he said.

Members of the company’s board did not respond to questions The Logic sent via email and text message.

The company’s investors have ties to funding sources that deploy public money into high-growth companies. BDC Capital, for example, a subsidiary of the Business Development Bank of Canada, is an investor in early Clearco backer Inovia Capital.

Inovia has also received funding from firms investing public money through the federal government’s Venture Capital Catalyst Initiative, which allocated $450 million towards Canadian companies and investment funds. 

During the pandemic, Clearco received government funding under the Canada Emergency Wage Subsidy program, public records show.

Clarification: This story has been updated to clarify how personal-income taxes in Barbados compare to those in Ontario.