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Community Small Business Investment Funds Act

S.O. 1992, CHAPTER 18

Historical version for the period November 4, 2004 to December 15, 2004.

Disclaimer: This consolidation is not an official copy of the law because it is affected by one or more retroactive provisions which have not been incorporated into it. For information about the retroactive provisions, see S.O. 2004, chapter 16, subsection 5 (2) and S. O. 2004, chapter 31, Schedule 7, subsections 20 (2), (3) and (4).

Amended by:  1994, c. 17, ss. 76-98, 100, 101; 1996, c. 24, ss. 5-10; 1996, c. 29, ss. 10-14; 1997, c. 19, s. 11; 1997, c. 43, Sched. C; 1998, c. 34, ss. 12-24; 1999, c. 9, ss. 50-70; 2000, c. 42, ss. 1-8; 2001, c. 23, ss. 10-18; 2002, c. 8, Sched. I, s. 6; 2002, c. 17, Sched. F, Table; 2002, c. 22, ss. 16-31; 2004, c. 16, s. 1.

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CONTENTS

PART I
GENERAL

1.

Interpretation

2.

Register of investment corporations

PART II
EMPLOYEE OWNERSHIP LABOUR SPONSORED VENTURE CAPITAL CORPORATIONS

3.

Definitions

4.

Preliminary vote by eligible employees

5.

Application for registration of corporation

6.

Corporation qualifications

7.

Entitlement to registration

8.

Issuance of certificate of registration

9.

Investment by corporation

10.

Eligible investment

11.

Investment according to business plan

PART III
LABOUR SPONSORED INVESTMENT FUND CORPORATIONS

12.

Definitions

13.

Application for registration of corporation

14.

Corporation qualifications

14.1

Disposition of Class A shares

15.

Entitlement to registration

16.

Issuance of certificate of registration

16.1

Research oriented investment fund

17.

Required investment levels

18.

Interpretation, eligible investment

18.1

Investment levies

PART III.1
COMMUNITY SMALL BUSINESS INVESTMENT FUND CORPORATIONS

18.2

Definitions

18.3

Application for registration

18.4

Corporation qualifications

18.5

Entitlement to registration

18.6

Issuance of certificate of registration

18.7

Required investment levels

18.8

Interpretation, eligible investment

18.9

Dividends and return of capital

18.10

Actions requiring approval

PART IV
ASSETS, CREDITS AND ADMINISTRATION

19.

Form of assets

20.

Investment restriction

21.

Material change in investments

22.

Returns

23.

Returns required by Minister

24.

Tax credit

24.1

Small business investment credit, labour sponsored investment fund

25.

Tax credits and incentives

25.0.1

Research investment incentive

25.1

Certificate of compliance

26.

Revocation of registration of corporation

27.

Payment of tax credits, special cases

27.1

Notice of amalgamation or merger, etc.

27.2

Notice of dissolution, etc.

28.

Investment level tax

28.1

Investment level tax, shareholder in community small business investment corporation

29.

Tax payable

30.

Notice of demand

31.

Notice of proposal by Minister

32.

Audits and investigations

33.

Requirement to keep books and records

34.

Offence

35.

Application to court by Minister

36.

Cease trade order

39.

Disclosure document

40.

Civil liability

41.

Delegation by Minister

42.

No action against Commission, etc.

43.

Immunity re compliance

44.

Payroll deduction plan

45.

Regulations

45.1

Forms, etc.

46.

Money

PART I
GENERAL

Interpretation

1. (1) In this Act,

“Canadian partnership” has the meaning assigned by section 102 of the Income Tax Act (Canada); (“société de personnes canadienne”)

“Class A share”, in respect of a corporation, means a share of a class of shares that entitle the holders thereof to,

(a) receive notice of and, subject to the legislation under which the corporation is organized, to attend and vote at all meetings of the shareholders of the corporation,

(b) receive dividends at the discretion of the board of directors of the corporation, and

(c) receive, on dissolution of the corporation, all the assets of the corporation that remain after payment of all amounts payable to the holders of all other classes of shares of the corporation; (“action de catégorie A”)

“Class B share”, in respect of a corporation, means a share of a class of shares that do not entitle the holders thereof to receive dividends but do entitle the holders thereof to,

(a) receive notice of and, subject to the legislation under which the corporation is organized, to attend and vote at all meetings of the shareholders of the corporation,

(b) receive, on dissolution of the corporation, an amount equal to the amount of the equity capital received by the corporation on the issue of the Class B shares, and

(c) in the case of a corporation registered under Part II or III, vote as a class to elect a majority of the board of directors of the corporation; (“action de catégorie B”)

“Commission”, “Director”, “material fact”, “misrepresentation” and “reporting issuer” have the meanings specified in the Securities Act; (“Commission”, “directeur”, “fait important”, “présentation inexacte des faits”, “émetteur assujetti”)

“common-law partner” has the meaning given to it in subsection 248 (1) of the Income Tax Act (Canada); (“conjoint de fait”)

“community small business investment fund corporation” means a corporation registered under Part III.1; (“fonds communautaire de placement dans les petites entreprises”)

“disclosure document” means a document that contains prescribed material relating to a specified employee ownership corporation; (“document d’information”)

“distribution” has the meaning specified in the Securities Act and “distribute”, “distributed” and “distributing” have corresponding meanings; (“placement”, “placer”, “placé”)

“eligible business activity”, of a corporation or a partnership, means,

(a) except for the purposes of Part III.1, a business that would be an active business carried on by a corporation for the purposes of subsection 125 (7) of the Income Tax Act (Canada) if carried on by a corporation, or

(b) a specialty investment fund which makes equity investments and loans primarily to businesses that satisfy the definition of “eligible business” in section 12; (“activité commerciale admissible”)

“eligible investment” means,

(a) in respect of an employee ownership labour sponsored venture capital corporation, an investment in an eligible business that is an eligible investment under Part II,

(b) in respect of a labour sponsored investment fund corporation, an investment in an eligible business that is an eligible investment under Part III, and

(c) in respect of a community small business investment fund corporation, an investment in an eligible business that is an eligible investment under Part III.1; (“placement admissible”)

“eligible investor” means an eligible investor as defined in Part II, III or III.1, as the context requires; (“investisseur admissible”)

“employee organization” means,

(a) a trade union,

(b) an association or federation of trade unions, or

(c) an association or federation of worker co-operatives; (“association d’employés”)

“employee ownership labour sponsored venture capital corporation” means a corporation registered under Part II; (“société à capital de risque de travailleurs de type actionnariat”)

“equity capital”, in respect of a corporation, means the amount of consideration paid in money, calculated in the prescribed manner, for which shares of the corporation are issued; (“capitaux propres”)

“fiscal year”, in respect of a corporation or partnership, means the period for which the accounts of the business of the corporation or partnership have been ordinarily made up and accepted for the purposes of assessment under the Income Tax Act (Canada); (“exercice”)

“individual” has the meaning given to that term by subsection 248 (1) of the Income Tax Act (Canada); (“particulier”)

“investment corporation” means a corporation registered under Part II, III or III.1; (“société de placement”)

“labour sponsored investment fund corporation” means a corporation registered under Part III; (“fonds de placement des travailleurs”)

“major shareholder”, in respect of a corporation, means a person who beneficially owns, directly or indirectly, 10 per cent or more of the voting rights attached to all voting shares of the corporation from time to time outstanding; (“actionnaire important”)

“Minister” means the Minister of Finance; (“ministre”)

“Ministry” means the Ministry of the Minister; (“ministère”)

“original purchaser” includes, where a Class A share is acquired by a trust governed by a registered retirement savings plan, the eligible investor whose investment corporation tax credit would take into account the amount of consideration paid to acquire or subscribe for the Class A shares held by the trust; (“premier acheteur”)

“permanent establishment” means,

(a) in respect of a corporation, a permanent establishment as defined by section 4 of the Corporations Tax Act, or

(b) in respect of a partnership, a permanent establishment as determined under subsections 4 (1) to (10) of the Corporations Tax Act if all references in those subsections to a corporation were read as references to a partnership; (“établissement stable”)

“person” means, except where the context requires otherwise, an individual, corporation, partnership, unincorporated association, unincorporated syndicate, unincorporated organization, trust, trustee, executor, administrator or other legal representative; (“personne”)

“prescribed” means prescribed by the regulations; (“prescrit”)

“qualifying corporation” means a corporation that is not,

(a) an investment corporation, or

(b) a qualifying financial institution or a specified corporation or insurance corporation related to the qualifying financial institution for the purposes of section 66.1 of the Corporations Tax Act; (“société admissible”)

“qualifying individual” means an individual who is ordinarily resident in Canada but does not include a trust; (“particulier admissible”)

“qualifying trust” has the same meaning as in subsection 127.4 (1) of the Income Tax Act (Canada); (“fiducie admissible”)

“registered retirement income fund” has the same meaning as in subsection 146.3 (1) of the Income Tax Act (Canada); (“fonds enregistré de revenu de retraite”)

“registered retirement savings plan” has the meaning assigned by subsection 146 (1) of the Income Tax Act (Canada); (“régime enregistré d’épargne-retraite”)

“regulations” means regulations made under this Act; (“règlements”)

“related group” has the meaning assigned by subsection 251 (4) of the Income Tax Act (Canada); (“groupe lié”)

“research oriented investment fund” means, with respect to a calendar year, a labour sponsored investment fund corporation that meets the requirements set out in subsection 16.1 (2); (“fonds de placement axé sur la recherche”)

“security” means a share of a class or series of shares of a corporation or a debt obligation; (“valeur mobilière”)

“specified employee ownership corporation” means a corporation that has notified the Minister under subsection 4 (2) of its intention to apply for registration as an employee ownership labour sponsored venture capital corporation; (“société de type actionnariat déterminée”)

“stated capital” and “stated capital account” have the same meanings as in the Business Corporations Act or the Canada Business Corporations Act, as the case requires; (“capital déclaré”, “compte capital déclaré”)

“taxable Canadian corporation” has the meaning assigned by subsection 89 (1) of the Income Tax Act (Canada); (“société canadienne imposable”)

“trade” or “trading” includes the meaning specified in the Securities Act; (“opération”)

“trade union” means a provincial affiliate of a national or international trade union, a trade union holding province-wide bargaining rights, a certified provincial council of trade unions, a designated or certified provincial employee bargaining agency and a provincial organization of trade unions; (“syndicat”)

“voting share” means a share of a class or series of shares of a corporation carrying a voting right either under all circumstances or under circumstances that have occurred and are continuing, other than a share of a class or series that must vote separately by reason of a statutory requirement; (“action avec droit de vote”)

“worker co-operative” has the same meaning as in the Co-operative Corporations Act. (“coopérative de travail”)  1992, c. 18, s. 1 (1); 1994, c. 17, s. 76; 1997, c. 43, Sched. C, ss. 2 (1-9), 23 (2); 1998, c. 34, s. 12; 1999, c. 9, s. 50; 2000, c. 42, s. 1; 2004, c. 16, s. 1 (2).

Interpretation, related persons

(2) Persons are related to each other if,

(a) they are related for the purposes of the Income Tax Act (Canada);

(b) one of them is a partnership and the other person is the majority interest partner of the partnership; or

(c) each of them is a partnership and the same person is the majority interest partner of each.  1992, c. 18, s. 1 (2); 1997, c. 43, Sched. C, s. 2 (10); 2004, c. 16, s. 1 (2).

Interpretation, controlled corporations

(3) Unless otherwise prescribed, a person shall be deemed to control a corporation or partnership if the person has continuing power to determine the strategic operating, investing and financing policies of the corporation or partnership without the co-operation of another person.  1992, c. 18, s. 1 (3); 2004, c. 16, s. 1 (2).

Calculation of voting shares

(4) In calculating, for the purposes of this Act, the total number of voting shares of a corporation beneficially owned or controlled, the total number shall be calculated as the total of all voting shares actually owned or controlled, but each share that carries the right to more than or less than one vote shall be calculated as the number of voting shares equalling the total number of votes carried.  1992, c. 18, s. 1 (4); 2004, c. 16, s. 1 (2).

Idem

(5) For the purposes of subsection (4), the total number of voting shares shall be deemed to include voting shares that would be owned following the exercise of an option, warrant or right, or a conversion right that is attached to a debt obligation or to a share of the corporation, but this subsection does not apply in respect of any corporation in respect of which the Minister determines that the option, warrant, right or conversion right is not reasonably likely to be exercised.  1992, c. 18, s. 1 (5); 2004, c. 16, s. 1 (2).

Calculation of shareholders

(6) In determining the number of shareholders of a corporation for the purposes of this Act, two or more persons holding the same share or shares jointly shall be counted as one shareholder.  1992, c. 18, s. 1 (6); 2004, c. 16, s. 1 (2).

Interpretation, majority interest partner

(7) A person is a majority interest partner in respect of a partnership if the person would be deemed to be a majority interest partner of the partnership under subsection 248 (1) of the Income Tax Act (Canada).  1992, c. 18, s. 1 (7); 2002, c. 22, s. 16; 2004, c. 16, s. 1 (2).

Specified employee ownership corporation

(8) A corporation ceases to be a specified employee ownership corporation if one of the following occurs:

1. The corporation withdraws its notification given to the Minister under subsection 4 (2).

2. The corporation is refused registration under Part II and the refusal is confirmed under section 31.

3. The registration of the corporation is revoked and the revocation is confirmed under section 31.

4. A cease trade order has been issued against the corporation, but this paragraph does not apply if the cease trade order has expired or been rescinded.

5. A receiver, receiver-manager, trustee, liquidator or other person acting in a similar capacity is appointed to assume possession or control of all or a substantial portion of the property and assets of the corporation.  1992, c. 18, s. 1 (8); 2004, c. 16, s. 1 (2).

Idem, application of Securities Act

(9) Except as specified in this Act and the regulations, or either of them, a Class A share and any other share of a prescribed class of a specified employee ownership corporation shall be deemed not to be a security for the purposes of the Securities Act until such time as the specified employee ownership corporation becomes a reporting issuer within the meaning of that Act.  1992, c. 18, s. 1 (9); 2004, c. 16, s. 1 (2).

Register of investment corporations

2. The Minister shall maintain a register of all investment corporations and the register shall be open for public inspection during normal office hours.  1992, c. 18, s. 2; 1997, c. 43, Sched. C, s. 23 (1); 2004, c. 16, s. 1 (2).

PART II
EMPLOYEE OWNERSHIP LABOUR SPONSORED VENTURE CAPITAL CORPORATIONS

Definitions

3. In this Part,

“eligible business” means a taxable Canadian corporation or Canadian partnership and includes a worker co-operative; (“entreprise admissible”)

“eligible employee”, of an eligible business, means an individual, other than a trust, who,

(a) has been employed on a continuing basis for an average of at least fifteen hours each week by an eligible employer and,

(i) continues to be so employed on a year-round basis or as a regular seasonal employee of the eligible employer,

(ii) has been temporarily laid off within the meaning of the Employment Standards Act, 2000, or

(iii) has had his or her employment terminated within a two-month period, or such other period as is prescribed, prior to the registration of an employee ownership labour sponsored venture capital corporation that makes an eligible investment in an eligible business, because of the permanent discontinuance of the business of the eligible employer by whom the employee was employed,

(a.1) will likely become employed on a continuous basis for an average of at least fifteen hours each week by an eligible employer within two months, or such other period as is prescribed, after the registration of an employee ownership labour sponsored venture capital corporation that has made an eligible investment in an eligible business,

(b) is not a major shareholder of an eligible employer,

(c) is not entitled to a share of the profits and losses of an eligible employer equal to or greater than 10 per cent,

(d) is not entitled to receive, on dissolution of an eligible employer, a share of the net assets of the eligible employer equal to or greater than 10 per cent,

(e) is not a member of nor related to a member of a related group that,

(i) controls an eligible employer, or

(ii) would constitute a majority interest partner of an eligible employer if the eligible employer were a partnership and all partnership interests held by the members of the related group were deemed to be held by the same person, and

(f) meets any other prescribed conditions; (“employé admissible”)

“eligible employer”, in respect of an eligible employee of an eligible business, means,

(a) the eligible business,

(b) a corporation controlled by the eligible business, or

(c) a partnership of which the eligible business is the majority interest partner; (“employeur admissible”)

“eligible investor”, in respect of an employee ownership labour sponsored venture capital corporation, means an individual, other than a trust which is not a qualifying trust for the individual, as defined in subsection 127.4 (1) of the Income Tax Act (Canada), who, at the time of subscribing for a Class A share of the employee ownership labour sponsored venture capital corporation,

(a) is ordinarily resident in Ontario,

(b) is an eligible employee of the eligible business or a qualifying trust of the eligible employee, and

(c) meets any other prescribed conditions. (“investisseur admissible”)  1992, c. 18, s. 3; 1994, c. 17, s. 77; 2002, c. 22, s. 17; 2004, c. 16, s. 1 (2).

Preliminary vote by eligible employees

Definition, “Board”

4. (1) In this section,

“Board” means the Ontario Labour Relations Board.  1992, c. 18, s. 4 (1); 2004, c. 16, s. 1 (2).

Intention to apply for registration

(2) A corporation that intends to apply for registration as an employee ownership labour sponsored venture capital corporation shall notify the Minister of its intention before making the application.  1992, c. 18, s. 4 (2); 2004, c. 16, s. 1 (2).

Action by Minister

(3) After receipt of a notice under subsection (2), the Minister shall direct the Board to conduct a vote of the eligible employees of the business in which the proposed applicant corporation intends to invest.  1992, c. 18, s. 4 (3); 2004, c. 16, s. 1 (2).

Condition

(4) The Minister shall not direct the Board to conduct a vote in respect of a proposed applicant corporation until the Minister is satisfied,

(a) that, subject to subsection 6 (4), the proposed investment has been reviewed by the Minister of Economic Development, Trade and Tourism;

(b) that the eligible employees entitled to vote have been provided with a disclosure document; and

(c) that the eligible employees have been provided with advice relating to the proposed investment by an independent adviser.  1992, c. 18, s. 4 (4); 1994, c. 17, s. 78; 1997, c. 43, Sched. C, s. 3 (1); 2004, c. 16, s. 1 (2).

Questions

(5) The vote shall be conducted to answer the following questions or any prescribed alternative questions and to answer any prescribed additional questions:

1. Do you support the application for registration of the corporation as an employee ownership labour sponsored venture capital corporation under the Community Small Business Investment Funds Act?

2. Do you support the proposed investment in the corporation for the purpose of reinvestment in your employer as outlined in the business, human resources and investment plans to be filed under the Community Small Business Investment Funds Act?  1992, c. 18, s. 4 (5); 1997, c. 43, Sched. C, s. 3 (2); 2004, c. 16, s. 1 (2).

Voters re some of eligible business activities

(6) If the proposed investment in the proposed applicant corporation is in respect of only some of the eligible business activities of the employer, no employee may vote unless the employee is an eligible employee employed in carrying on one or more of those activities.  1992, c. 18, s. 4 (6); 2004, c. 16, s. 1 (2).

Questions

(7) If a question arises at any time as to whether a person is an eligible employee or is employed in carrying on some of the eligible business activities of the eligible business, the question may be referred to the Board and the decision of the Board is final and conclusive for all purposes.  1992, c. 18, s. 4 (7); 2004, c. 16, s. 1 (2).

Procedure

(8) Votes conducted by and proceedings before the Board under this section shall be in accordance with its rules, practice and forms, and, for the purpose, sections 110, 111, 114, 116 and 117 of the Labour Relations Act, 1995 apply with necessary modifications.  1992, c. 18, s. 4 (8); 2002, c. 22, s. 18; 2004, c. 16, s. 1 (2).

Results

(9) The Board shall provide the Minister and the eligible employees with the results of the vote taken under this section.  1992, c. 18, s. 4 (9); 2004, c. 16, s. 1 (2).

Application for registration of corporation

5. (1) A corporation may apply for registration as an employee ownership labour sponsored venture capital corporation under this Part if, on the vote conducted under section 4, at least 50 per cent of the votes cast were in support of the application and proposed investment.  1992, c. 18, s. 5 (1); 2004, c. 16, s. 1 (2).

Proposal

(2) An application for registration of an employee ownership labour sponsored venture capital corporation shall be made by filing with the Minister a proposal setting out,

(a) the names of the corporation and the eligible business;

(b) the location of the registered office or permanent establishment in Ontario of the corporation and of the eligible business;

(c) a business plan containing the prescribed information;

(d) an investment plan for the corporation specifying,

(i) the amount of equity capital to be raised on the issue of shares of the corporation and the proposed method of distributing the shares for subscription by eligible employees,

(ii) the maximum number of shares that the corporation may issue and the maximum aggregate consideration for which shares may be issued,

(iii) the amount of the stated capital account of shares issued and to be issued and the amount of equity capital for which the shares were or will be issued,

(iv) the amounts and kinds of debt obligations, if any, issued or to be issued by the corporation,

(v) the restrictions on voting rights, if any, and on ownership of the shares of the corporation,

(vi) the terms and conditions for redemption of shares,

(vii) the estimated number of shareholders of the corporation,

(viii) details of the corporation’s proposed investment policies,

(ix) that the corporation will update the value of its shares on a quarterly basis and setting out the method the corporation will use to calculate the updated value of its shares, and

(x) any other matter prescribed to be set out in the investment plan;

(e) a human resources plan outlining the process through which employees will participate in the ongoing management of the eligible business and, where necessary, outlining measures for retraining of employees and adjustment of the workforce;

(f) information on any plan to be carried out to protect the existing pension benefits, if any, of employees of the eligible business;

(g) the number of directors of the corporation and the name in full and the residence address of each;

(h) the names in full of the officers of the corporation and the residence address of each; and

(i) any other matter prescribed to be set out in the proposal.  1992, c. 18, s. 5 (2); 2004, c. 16, s. 1 (2).

Updated value of shares

(3) The method of calculating the updated value of shares of a corporation shall not provide for a premium for control or a discount for minority interests and shall not take into consideration a tax credit under the Income Tax Act or the Income Tax Act (Canada) allowed in respect of the shares.  1992, c. 18, s. 5 (3); 2004, c. 16, s. 1 (2).

Additional material

(4) A proposal shall be accompanied by,

(a) a certified copy of the articles of the corporation;

(b) true copies of all shareholders’ agreements, partnership agreements and proposed agreements relating to the corporation, to which the corporation is a party or of which an officer or director of the corporation, after making reasonable inquiry, has knowledge;

(c) a copy of any collective agreement in force in respect of any eligible employees or any other contract that provides for mandatory or voluntary participation of employees in the acquisition of shares of the employee ownership labour sponsored venture capital corporation; and

(d) all other prescribed material.  1992, c. 18, s. 5 (4); 1994, c. 17, s. 79; 2004, c. 16, s. 1 (2).

Signing of proposal

(5) The proposal shall be signed by two officers or one director and one officer of the corporation and shall contain a certificate in writing signed by one of them, certifying that the information contained in the proposal is complete and accurate.  1992, c. 18, s. 5 (5); 2004, c. 16, s. 1 (2).

Corporation qualifications

6. (1) No corporation shall be registered under this Part unless,

(a) the corporation is incorporated under the Business Corporations Act or the Canada Business Corporations Act and complies with all provisions of the legislation under which it is organized and this Act;

(b) the corporation has never previously carried on business other than the business related to obtaining registration under this Act;

(c) the articles of the corporation provide that the authorized capital of the corporation shall consist only of,

(i) Class A shares that are issuable only to eligible investors of the eligible business and are redeemable or transferable only in the circumstances described in clause (e), and

(ii) such additional classes of shares as are prescribed and that comply with prescribed conditions, and for the purpose different conditions may be prescribed for different classes of shares and for different classes of businesses;

(d) the articles of the corporation restrict the business of the corporation to,

(i) investing in the eligible business, or part of its eligible business activities, as part of an arrangement whereby control of the eligible business or of the eligible business activities changes,

(ii) providing capital through the acquisition,

(A) of voting shares or a partnership interest in respect of the eligible business as permitted under this Act, or

(B) of convertible voting securities in the eligible business which, upon conversion, would not have voting rights or of non-voting preference shares in the eligible business after conversion into a worker co-operative, where the business plan of the employee ownership labour sponsored venture capital corporation as approved under this Act provides or provided for the conversion of the eligible business into a worker co-operative,

(iii) providing financial and managerial advice to the eligible business, and

(iv) incorporating and controlling such other corporations as the corporation may consider advisable to provide services to the corporation in connection with the distribution of the corporation’s shares or to provide financial, investment or managerial advice and expertise;

(e) the articles of the corporation provide that,

(i) subject to subclause (ii), the corporation may redeem a Class A share in respect of which a tax credit certificate has been issued under this Act only if the corporation is requested in writing by the holder of the share to redeem it and the holder of the share has satisfied all other prescribed conditions and,

(A) if the share is held by the original purchaser, the corporation is notified in writing that the original purchaser,

1.  has retired from the workforce or has attained sixty-five years of age,

2.  has, after acquiring the share, become disabled and permanently unfit for work or terminally ill, or

3.  has involuntarily ceased to be an employee of the eligible business for a reason other than dismissal for cause,

(B) the share is held by an individual who notifies the corporation in writing that the share has devolved on the individual as a consequence of the death of a shareholder of the corporation or the death of the annuitant under a trust governing a registered retirement savings plan or registered retirement income fund that was a holder of the share,

(C) the share is held as an investment by a registered retirement savings plan or a registered retirement income fund under which the original purchaser or the original purchaser’s spouse or common-law partner is the annuitant and the original purchaser has died or, if the original purchaser is living, the corporation is notified in writing that the original purchaser has satisfied the condition in sub-sub-subclause 1, 2 or 3 of sub-subclause (A), or

(D) the redemption occurs more than five years after the date on which the share was issued or the redemption occurs within five years after the date on which the share was issued in circumstances other than those described in sub-subclause (A), (B) or (C) and,

1.  the holder of the share receives an amount on the redemption that does not exceed the amount that would otherwise have been payable on the redemption less an amount equal to the tax credit percentage of the lesser of,

i. the amount of equity capital received by the corporation on the original issue of the share, or

ii. the amount that would otherwise have been payable on the redemption, and

2.  the corporation remits to the Minister an amount equal to the amount required to be deducted under sub-sub-subclause 1 in the calculation of the amount receivable by the holder of the share on the redemption,

(ii) the corporation shall not, by reason of the original purchaser of a share described in subclause (i) having retired from the workforce or having attained sixty-five years of age, redeem the share until it has been issued and outstanding for at least two years, and

(iii) the corporation shall not register a transfer by the original purchaser, or by a registered retirement savings plan or a registered retirement income fund under which the original purchaser or the original purchaser’s spouse or common-law partner is the annuitant, of a Class A share in respect of which an investment certificate has been issued under this Act, except if the transfer occurs more than five years after the date on which the share was issued, or the corporation is notified in writing that the share is being transferred,

(A) to be held as an investment of a registered retirement savings plan or a registered retirement income fund under which the original purchaser or the original purchaser’s spouse or common-law partner is the annuitant,

(B) as a consequence of the death of the original purchaser,

(C) at a time when,

1.  the original purchaser has retired from the workforce, or has attained sixty-five years of age, but the share has been issued and outstanding for at least two years, or

2.  the original purchaser has satisfied the condition in sub-sub-subclause 2 or 3 of sub-subclause (A) of subclause (i),

(C.1) to the original purchaser or the spouse or common-law partner of the original purchaser, or

(D) in accordance with other prescribed conditions;

(f) the articles of the corporation prohibit the corporation from lending money, guaranteeing a loan or providing other financial assistance to a shareholder of the corporation, to a person related to a shareholder of the corporation or to an employee organization;

(g) Repealed:  1999, c. 9, s. 51.

(h) the corporation provides an undertaking in a form satisfactory to the Minister that,

(i) the value of its shares will be determined on an annual basis by means of a valuation carried out by an independent qualified person,

(ii) the corporation will provide to each of its shareholders at least quarterly an updated valuation of its shares and disclosure of all major decisions of the corporation that may materially affect that value, and

(iii) the amount to be received by a shareholder on the redemption of any Class A share will be based on the value of the shares determined for the quarter last ending on or before the date of the redemption;

(i) if the eligible business in which the applicant corporation intends to invest is an eligible business described in subsection 6 (4), the Lieutenant Governor in Council has approved the proposed investment;

(i.1) the Minister is satisfied that any conditions to which the approval is subject have been or will be met; and

(j) the corporation meets all other prescribed conditions.  1992, c. 18, s. 6 (1); 1994, c. 17, s. 80 (1-12); 1997, c. 43, Sched. C, s. 4 (1); 1999, c. 9, s. 51; 2000, c. 42, s. 2; 2004, c. 16, s. 1 (2).

Interpretation, tax credit percentage

(2) For the purposes of clause (1) (e) and section 27, the tax credit percentage means the percentage of the equity capital for which the share was originally issued that is applicable in the determination of any tax credit to which the original holder may be or may have been entitled under section 8 of the Income Tax Act.  1992, c. 18, s. 6 (2); 2004, c. 16, s. 1 (2).

Idem

(3) In determining the tax credit percentage in respect of a Class A share of an employee ownership labour sponsored venture capital corporation that is the subject of a redemption or other disposition, the following rules apply:

1. The holder of the share shall be deemed to redeem or otherwise dispose of Class A shares of the corporation in the order in which they were originally issued.

2. A registered retirement savings plan or registered retirement income fund that holds Class A shares of the corporation that have not been issued and outstanding more than five years shall be deemed to redeem or otherwise dispose of the shares in the order in which they were originally issued.

3. Class A shares issued in consideration for the first $3,500 invested by a shareholder in the corporation in a calendar year or within sixty days thereafter shall be deemed to have been issued before any Class A shares issued to the shareholder in consideration for any amounts in excess of $3,500 invested in Class A shares of the corporation during the same time period.  1992, c. 18, s. 6 (3); 1994, c. 17, s. 80 (13); 2004, c. 16, s. 1 (2).

Authority of the Lieutenant Governor in Council

(4) The Lieutenant Governor in Council, upon the recommendation of the Minister of Enterprise, Opportunity and Innovation, may approve business plans, human resource plans and proposed investments to be made by employee ownership labour sponsored venture capital corporations if the eligible business in which the applicant corporation intends to invest, at the time the investment is made, has total gross assets exceeding $50,000,000, calculated in the prescribed manner, and has more than 500 employees, calculated in the prescribed manner.  1997, c. 43, Sched. C, s. 4 (2); 2002, c. 22, s. 19 (1); 2004, c. 16, s. 1 (2).

Guarantee

(5) Approval of a business plan, human resource plan and proposed investments of an employee ownership labour sponsored venture capital corporation does not imply that the Lieutenant Governor in Council guarantees the survival of the eligible business or the rate of return of the investments.  1992, c. 18, s. 6 (5); 2004, c. 16, s. 1 (2).

Consideration

(6) A recommendation by the Minister of Enterprise, Opportunity and Innovation under subsection (4) shall be made after consideration of,

(a) whether the proposal submitted under this Act is equitable and reasonably commercially viable over the period covered by the proposal;

(b) whether an investment to be made by employees is equitable in the circumstances and in light of the objectives of the proposal;

(c) industry trends and prospects affecting the eligible business;

(d) the past and projected performance of the eligible business; and

(e) the competitive position of the eligible business.  1997, c. 43, Sched. C, s. 4 (3); 2002, c. 22, s. 19 (2); 2004, c. 16, s. 1 (2).

Interpretation, restrictions

(7) Restrictions on the issue, ownership or transfer of any class or series of shares of a corporation that are required by this Act to be contained in the articles of the corporation in order to entitle it to registration under this Act shall be deemed for the purposes of subsection 42 (2) of the Business Corporations Act to be restrictions necessary for the obtaining and holding of authority to engage in an activity necessary to the undertaking of the corporation.  1994, c. 17, s. 80 (16); 2004, c. 16, s. 1 (2).

Entitlement to registration

7. (1) A corporation is entitled to registration under this Part by the Minister unless,

(a) this Part has not been satisfied; or

(b) the corporation fails to file the material required by this Act or the regulations.  1992, c. 18, s. 7 (1); 2004, c. 16, s. 1 (2).

Refusal to register

(2) Subject to section 31, the Minister may refuse to register a corporation if, in the Minister’s opinion, the corporation is disentitled to registration under subsection (1).  1992, c. 18, s. 7 (2); 2004, c. 16, s. 1 (2).

Idem

(3) Subject to section 31, the Minister may refuse to register a corporation if, in the Minister’s opinion, the proposed investment or the actions of the corporation or the eligible business do not comply with the spirit and intent of this Act and the regulations.  1992, c. 18, s. 7 (3); 2004, c. 16, s. 1 (2).

Issuance of certificate of registration

8. If the corporation complies with this Act, the Minister shall,

(a) endorse on each duplicate of the proposal “Registered/Agréé” and the day, month and year of the registration;

(b) file one of the duplicates in the Minister’s office;

(c) place the name of the corporation in the register of investment corporations as an employee ownership labour sponsored venture capital corporation; and

(d) issue to the corporation a certificate of registration to which the Minister shall affix the other duplicate.  1992, c. 18, s. 8; 1997, c. 43, Sched. C, s. 23 (1); 2004, c. 16, s. 1 (2).

Investment by corporation

9. (1) By the end of the twelfth month after the end of the fiscal year in which a Class A share of an employee ownership labour sponsored venture capital corporation was issued, the corporation shall have invested in eligible investments an amount calculated in the prescribed manner equal to at least 80 per cent of the equity capital received on the issue of the Class A share.  1992, c. 18, s. 9 (1); 2004, c. 16, s. 1 (2).

Idem

(2) The corporation shall keep the amount mentioned in subsection (1) invested in eligible investments.  1992, c. 18, s. 9 (2); 2004, c. 16, s. 1 (2).

Maximum investment

(3) An employee ownership labour sponsored venture capital corporation shall not invest more than the maximum proposed amount set out in its business plan filed with the Minister and approved by the Lieutenant Governor in Council, unless it obtains the consent of the Lieutenant Governor in Council.  1992, c. 18, s. 9 (3); 2004, c. 16, s. 1 (2).

Eligible investment

10. (1) An investment is an eligible investment of an investment corporation registered under this Part if,

(a) it is made in the eligible business, a corporation referred to in subsection 11 (1) or a Canadian partnership referred to in subsection 11 (2), in the manner described in the proposal filed under this Part, and complies with all conditions which may have been imposed in connection with granting approval of the proposed investment;

(b) the eligible business in which the investment is made pays 25 per cent or more of its wages and salaries to employees whose ordinary place of employment is a permanent establishment located in Ontario;

(c) the investment is the purchase of,

(i) in the case of an investment in an eligible business that is a corporation or in a corporation referred to in subsection 11 (1),

(A) voting shares issued by the corporation in exchange for a consideration paid in money, or

(B) convertible voting shares issued by the corporation before conversion into a worker co-operative, or non-voting preference shares issued by the corporation after conversion into a working co-operative, in exchange for consideration paid in money in those circumstances in which the business plan of the employee ownership labour sponsored venture capital corporation as approved under this Act provides or provided for the conversion of the eligible business into a worker co-operative, or

(ii) in the case of an investment in an eligible business that is a Canadian partnership or in a Canadian partnership referred to in subsection 11 (2), an ownership interest in the partnership granted in exchange for a consideration paid in money;

(d) the investment results in the employee ownership labour sponsored venture capital corporation acquiring within the time provided in the business plan approved under this Act,

(i) over 50 per cent of the issued and outstanding voting shares of the eligible business in the case of an investment in a corporation referred to in subclause (c) (i) or, in the case of an investment in a Canadian partnership referred to in subclause (c) (ii), a sufficient ownership interest in the partnership to become a majority interest partner, and

(ii) control of the corporation or partnership, as the case may be;

(e) at the time of the investment and throughout a period of at least two years, the eligible business was primarily engaged in one or more eligible business activities; and

(f) the investment is not used nor intended to be used by the eligible business, the new corporation or the new partnership mentioned in section 11 for the purpose of,

(i) relending,

(ii) investment in land except land that is incidental and ancillary to the eligible business activity or activities in which the eligible business is primarily engaged,

(iii) reinvestment outside Canada,

(iv) purchasing or acquiring the securities of any person,

(v) financing the purchase or sale of goods or services provided to the eligible business by or through any shareholder of the investment corporation or any person related to a shareholder, unless the investment corporation is widely held,

(vi) the payment of dividends,

(vii) the payment of drawings to partners of the eligible business, or

(viii) any prescribed purpose or use.  1992, c. 18, s. 10 (1); 1994, c. 17, s. 81 (1, 2); 1997, c. 43, Sched. C, s. 23 (1); 2004, c. 16, s. 1 (2).

Outside investor

(2) Despite clause (1) (d), if, in accordance with the business plan of an employee ownership labour sponsored venture capital corporation as approved under this Act, an outside investor acquires a voting share or a partnership interest in the same corporation or partnership in which the employee ownership labour sponsored venture capital corporation is investing, the employee ownership labour sponsored venture capital corporation shall be deemed to have complied with clause (1) (d) if the employee ownership labour sponsored venture capital corporation, either alone or together with the outside investor, acquires, within the time provided in the business plan, control of the corporation or partnership in which the investment is being made and,

(a) in the case of an investment in an eligible business that is a corporation, or in a new corporation referred to in subsection 11 (1), the employee ownership labour sponsored venture capital corporation acquires and continues to hold at least 40 per cent of the issued and outstanding voting shares of the corporation and has the right to appoint a proportionate share of the members of the board of directors of the corporation; or

(b) in the case of an investment in an eligible business that is a Canadian partnership, or in a partnership referred to in subsection 11 (2), the employee ownership labour sponsored venture capital corporation acquires and continues to hold an ownership interest in the partnership entitling it to receive at least 40 per cent of the net profits of the partnership on any distribution of the profits of the partnership, or at least 40 per cent of the net assets of the partnership on dissolution of the partnership.  1992, c. 18, s. 10 (2); 2004, c. 16, s. 1 (2).

Interpretation, outside investor

(3) For the purposes of subsection (2), a person is considered to be an outside investor in a corporation or partnership if prior to the investment the person did not, either alone or together with members of a related group of which the person was a member, control the corporation or partnership and did not deal with the corporation or partnership except on a basis that would be considered to be arm’s length for the purposes of the Income Tax Act (Canada).  1992, c. 18, s. 10 (3); 2004, c. 16, s. 1 (2).

Interpretation, widely held corporation

(4) For the purposes of this section, an employee ownership labour sponsored venture capital corporation is widely held if the corporation has ten or more shareholders and no shareholder or related group of which a shareholder is a member owns more than 10 per cent of the issued and outstanding voting shares of the corporation.  1992, c. 18, s. 10 (4); 2004, c. 16, s. 1 (2).

Exception, worker co-operatives

(5) For the purposes of this section, the employee ownership labour sponsored venture capital corporation shall be deemed to have complied with clause (1) (d) once the eligible business becomes a worker co-operative as contemplated in the business plan of the corporation as approved under this Act.  1994, c. 17, s. 81 (3); 2004, c. 16, s. 1 (2).

Investment according to business plan

11. (1) If the business plan approved by the Lieutenant Governor in Council provides for the investment by the employee ownership labour sponsored venture capital corporation to be in a new corporation incorporated solely to continue carrying on one or more eligible business activities of the eligible business or to be amalgamated with the eligible business, an investment in voting shares issued by the new corporation shall be considered to be an investment in an eligible business if the investment complies with the approved business plan.  1992, c. 18, s. 11 (1); 2004, c. 16, s. 1 (2).

Idem

(2) If the business plan approved by the Lieutenant Governor in Council provides for the investment by the employee ownership labour sponsored venture capital corporation to be made in a new Canadian partnership established for the purpose of carrying on one or more eligible business activities of the eligible business, an investment in a partnership interest in the new partnership shall be considered to be an investment in an eligible business, if the investment complies with the approved business plan.  1992, c. 18, s. 11 (2); 2004, c. 16, s. 1 (2).

PART III
LABOUR SPONSORED INVESTMENT FUND CORPORATIONS

Definitions

12. (1) In this Part,

“eligible business” means a taxable Canadian corporation or Canadian partnership,

(a) that pays 50 per cent or more of its wages and salaries to employees whose ordinary place of employment is a permanent establishment of the eligible business located in Ontario,

(b) that has 50 per cent or more of its full-time employees employed in respect of eligible business activities carried on by the corporation or partnership in Ontario,

(c) whose total gross assets, together with the total gross assets of all related corporations and partnerships, do not exceed $50,000,000, calculated in the prescribed manner, or such other amount as may be prescribed, at the time the labour sponsored investment fund corporation makes the investment in the eligible business,

(d) that together with all related corporations and partnerships does not have more than 500 employees, or if another number of employees has been prescribed for the purposes of this definition, the prescribed number of employees, at the time the labour sponsored investment fund corporation makes the investment in the eligible business, and

(e) that, except for failing to satisfy the provisions of this clause, would have been an eligible business for the purposes of this Part, primarily engaged in eligible business activities for at least two years, or for the total length of time the corporation or Canadian partnership has been carrying on any business if it has carried on business less than two years, or

a taxable Canadian corporation or Canadian partnership all or substantially all of the fair market value of the property of which is, at the time the labour sponsored investment fund makes investments in an eligible business specified in clauses (a) to (e), attributed to,

(f) property used in eligible business activities, as specified in clause (a) of the definition of “eligible business activity” in subsection 1 (1), carried on by the particular corporation or partnership or a corporation or partnership controlled by the particular corporation or partnership,

(g) shares of the capital stock or debt obligations of one or more corporations or partnerships that, at the time, are eligible businesses related to the particular corporation or partnership, or

(h) a combination of properties described in clause (f) or (g); (“entreprise admissible”)

“eligible investment in a research business” means, with respect to a particular labour sponsored investment fund corporation, an investment described in subsection (3); (“placement admissible dans une entreprise de recherche”)

“eligible investor” means, in respect of a particular Class A share of a corporation registered under this Part,

(a) an individual who subscribes for the share, but not an individual who is a trust,

(b) an individual who is an annuitant (as defined in subsection 146 (1) of the Income Tax Act (Canada)) of a qualifying trust that subscribes for the share, or

(c) a spouse or common-law partner of an individual described in clause (b); (“investisseur admissible”)

“qualifying debt obligation” means a debt obligation that,

(a) if secured, is secured solely by a floating charge on the assets of the entity or by a guarantee given by an investment corporation,

(b) Repealed:  1999, c. 9, s. 52.

(c) does not restrict the entity by the terms of the debt obligation or by the terms of any agreement related to that obligation from incurring other debts, and

(d) by its terms or by any agreement relating to that obligation is subordinate to all other debt obligations of the entity, except that, where the entity is a corporation, the particular debt obligation need not be subordinate to,

(i) a debt obligation issued by the corporation that is prescribed to be a small business security for the purposes of paragraph (a) of the definition of “small business property” in subsection 206 (1) of the Income Tax Act (Canada), or

(ii) a debt obligation owing to a shareholder of the corporation or to a person related to the shareholder; (“créance admissible”)

“scientific research and experimental development expenses” means, with respect to expenses incurred by an entity in a fiscal year, the total of all expenses incurred by the entity in the year that are described in subparagraph 37 (1) (a) (i), (i.1) or (ii) or 37 (1) (b) (i) or (ii) of the Income Tax Act (Canada). (“dépenses afférentes aux activités de recherche scientifique et de développement expérimental”)  1992, c. 18, s. 12; 1994, c. 17, s. 82; 1997, c. 43, Sched. C, s. 5 (1, 2); 1999, c. 9, s. 52; 2000, c. 42, s. 3 (1-3); 2004, c. 16, s. 1 (2).

Same

(2) For the purpose of determining the number of employees under clause (d) of the definition of “eligible business”, an employee who normally works at least 20 hours per week shall be counted as one employee and an employee who normally works less than 20 hours per week shall be counted as half an employee.  1997, c. 43, Sched. C, s. 5 (3); 2004, c. 16, s. 1 (2).

Eligible investment in a research business

(3) For the purposes of this Part, an eligible investment in a research business by a labour sponsored investment corporation for a particular calendar year is an investment by the corporation in an entity that is a taxable Canadian corporation or a Canadian partnership and with respect to which the circumstances described in one or more of the following paragraphs exist:

1. At least 50 per cent, or such other percentage as may be prescribed, of the total expenses incurred by the entity during the entity’s most recent fiscal year ending before the day on which the investment was made and for which financial statements are available are scientific research and experimental development expenses.

2. If the entity was established in the calendar year or in the previous calendar year, or if it first began business in one of those calendar years,

i. the entity undertakes to incur scientific research and experimental development expenses in the fiscal year in which the investment is made, or in the following fiscal year, in an amount equal to at least 50 per cent, or such other percentage as may be prescribed, of its total expenses for the year, and

ii. the labour sponsored investment fund corporation accepts the undertaking.

3. The entity fulfilled an undertaking given in a previous year under paragraph 2.

4. The entity was formed to exploit intellectual property developed by a Canadian institution that is a university, college, research institute, hospital or other prescribed research institution and,

i. at least 10 per cent of the issued and outstanding voting shares of the entity or 10 per cent of the value of all partnership interests in the entity, as the case may be, are held by a Canadian institution that is a university, college, research institute, hospital or other prescribed research institution, and

ii. the amount of the scientific research and experimental development expenses incurred by the entity in the entity’s fiscal year in which the labour sponsored investment fund corporation makes its investment is equal to at least 50 per cent or such other percentage as may be prescribed of the amount invested by the corporation in the entity in the fiscal year.  2000, c. 42, s. 3 (4); 2002, c. 22, s. 20; 2004, c. 16, s. 1 (2).

Date of Class A share redemption

(4) For the purpose of sections 14 and 14.1, when determining the date on which a Class A share of a labour sponsored investment fund corporation that was issued in February or March is redeemed, a redemption that occurs in February or on March 1 shall be deemed to occur on March 31.  2000, c. 42, s. 3 (4); 2004, c. 16, s. 1 (2).

Capital available for investment

(5) For the purposes of this Part, a labour sponsored investment fund corporation’s capital available for investment at a particular time is the amount, if any, by which “A” exceeds “B” where,

  “A” is the total cost of all investments and property held by the corporation at that time, each of which was an eligible investment as defined in section 18 or in subsection 204.8 (1) of the Income Tax Act (Canada) at the time the investment was made or is property maintained in a reserve as defined in subsection 19 (2), and

  “B” is 20 per cent of the net value of the corporation’s total assets at that time.  2000, c. 42, s. 3 (4); 2004, c. 16, s. 1 (2).

Application for registration of corporation

13. (1) An employee organization may make application under this Part for registration of a corporation as a labour sponsored investment fund corporation to make investments in eligible businesses if the corporation has a permanent establishment in Ontario and,

(a) the corporation is incorporated under the Business Corporations Act or the Canada Business Corporations Act; or

(b) the corporation is registered under Part X.3 of the Income Tax Act (Canada).  1992, c. 18, s. 13 (1); 2004, c. 16, s. 1 (2).

Proposal

(2) An application under this section shall be made by filing with the Minister a proposal setting out,

(a) the name of the corporation;

(b) the location of the registered office or permanent establishment in Ontario of the corporation;

(c) an investment plan for the corporation specifying,

(i) the amount of equity capital to be raised on the issue of each class of shares of the corporation,

(ii) the classes and series of shares, the maximum number of shares that the corporation is authorized to issue of each class and series and the maximum aggregate consideration for which all shares of each class and series may be issued,

(iii) the amount of the stated capital account of each class and series of shares issued and to be issued and the amount of equity capital for which the shares were or will be issued,

(iv) the amounts and kinds of debt obligations, if any, issued by the corporation,

(v) any restrictions on ownership and voting rights of the shares of the corporation,

(vi) the terms and conditions for redemption of shares,

(vii) the estimated number of shareholders of the corporation,

(viii) details of the corporation’s proposed investment policies,

(ix) that the corporation will update the value of its shares on a quarterly basis and setting out the method the corporation will use to calculate the updated value of its shares, and

(x) any other matter prescribed to be set out in the investment plan;

(d) the number of directors of the corporation and the name in full and the residence address of each;

(e) the names in full of the officers of the corporation and the residence address of each; and

(f) any other matter prescribed to be set out in the proposal.  1992, c. 18, s. 13 (2); 2004, c. 16, s. 1 (2).

Updated value of shares

(3) The method of calculating the updated value of shares of a corporation shall not provide for a premium for control or a discount for minority interests and shall not take into consideration a tax credit under the Income Tax Act or the Income Tax Act (Canada) allowed in respect of the shares.  1992, c. 18, s. 13 (3); 2004, c. 16, s. 1 (2).

Additional information

(4) A proposal shall be accompanied by,

(a) a certified copy of the articles of the incorporation;

(b) a true copy of all shareholders’ agreements, partnership agreements and proposed agreements relating to the corporation to which the corporation is a party or of which an officer or director of the corporation or the employee organization, after making reasonable inquiry, has knowledge; and

(c) any other prescribed material.  1992, c. 18, s. 13 (4); 1994, c. 17, s. 83; 2004, c. 16, s. 1 (2).

Additional material

(5) The proposal shall be signed by two officers or one director and one officer of the corporation and shall contain a certificate in writing signed by one of them certifying that the information contained in the proposal is complete and accurate.  1992, c. 18, s. 13 (5); 2004, c. 16, s. 1 (2).

Corporation qualifications

14. (1) No corporation shall be registered under this Part unless,

(a) the corporation complies with all provisions of the legislation under which it is organized, the Securities Act, this Act and, in the case of a corporation referred to in clause 13 (1) (b), the Income Tax Act (Canada);

(b) the corporation has never previously carried on business other than the business related to obtaining registration under this Act or the Income Tax Act (Canada);

(c) the articles of the corporation provide that the authorized capital of the corporation shall consist only of,

(i) Class A shares that are issuable to eligible investors only,

(ii) Class B shares that are issuable only to and may be held only by an employee organization, and

(iii) such additional classes of shares as may be authorized, if the rights, privileges, restrictions and conditions attached to the shares are approved by the board of directors of the corporation and by the Minister;

(d) the articles of the corporation restrict the business of the corporation to,

(i) assisting the development of eligible businesses, creating, maintaining and protecting jobs by providing financial and managerial advice to eligible businesses and by making eligible investments, and

(ii) incorporating and controlling such other corporations as the corporation may consider advisable to provide services to the corporation in connection with the distribution of the corporation’s shares or to provide financial, investment or managerial advice and expertise;

(e) Repealed:  2001, c. 23, s. 10 (2).

(f) the articles of the corporation prohibit the corporation from lending money, guaranteeing a loan or providing other financial assistance to a shareholder of the corporation, to a person related to a shareholder of the corporation or to an employee organization;

(g) Repealed:  1997, c. 43, Sched. C, s. 6.

(h) the corporation provides an undertaking in a form satisfactory to the Minister that,

(i) the value of its shares will be determined on an annual basis by means of a valuation carried out by an independent qualified person,

(ii) the corporation will provide to its shareholders an updated valuation of its shares and disclosure of all major decisions of the corporation that may materially affect that valuation in accordance with the practices of the mutual fund industry, and

(iii) the amount to be received by a shareholder on the redemption of a Class A share will be based on the value of the shares determined on the date of the redemption; and

(i) the corporation meets all other prescribed conditions.  1992, c. 18, s. 14 (1); 1994, c. 17, s. 84 (1-12); 1997, c. 43, Sched. C, s. 6; 1999, c. 9, s. 53; 2000, c. 42, s. 4; 2001, c. 23, s. 10; 2004, c. 16, s. 1 (2).

Definition, eligible investors

(2) For the purposes of clause (1) (c), “eligible investors”, of a corporation that is registered under Part X.3 of the Income Tax Act (Canada) and that has a permanent establishment in Ontario, means individuals who are ordinarily resident in Canada and who would be eligible investors under this Part if they were ordinarily resident in Ontario but does not include trusts which are not qualifying trusts for individuals, as defined by subsection 127.4 (1) of the Income Tax Act (Canada).  1992, c. 18, s. 14 (2); 1994, c. 17, s. 84 (13); 2004, c. 16, s. 1 (2).

Interpretation, restrictions

(3) Restrictions on the issue, ownership or transfer of any class or series of shares of a corporation that are required by this Act or by Part X.3 of the Income Tax Act (Canada) to be contained in the articles of the corporation in order to entitle it to registration under this Act or under Part X.3 of the Income Tax Act (Canada), as the case requires, shall be deemed for the purpose of subsection 42 (2) of the Business Corporations Act to be restrictions necessary for the obtaining and holding of authority to engage in an activity necessary to the undertaking of the corporation.  1992, c. 18, s. 14 (3); 2004, c. 16, s. 1 (2).

Investments outside Ontario

(4) For the purposes of subclause (1) (d) (i), where a corporation is registered under Part X.3 of the Income Tax Act (Canada) and has a permanent establishment in Ontario, “eligible businesses” include businesses that are eligible for investment by investment corporations registered under that Part.  1994, c. 17, s. 84 (14); 1997, c. 43, Sched. C, s. 23 (1); 2004, c. 16, s. 1 (2).

Disposition of Class A shares

14.1 (1) This section applies if a Class A share of a labour sponsored investment fund corporation that was issued after May 6, 1996 is redeemed, acquired or cancelled by the corporation less than eight years after the day on which the share was issued.  2001, c. 23, s. 11; 2004, c. 16, s. 1 (2).

Tax payable

(2) Subject to subsection (3), the person who was the shareholder immediately before the redemption, acquisition or cancellation of the Class A share shall pay a tax under this Part equal to the amount calculated using the formula,

A × B

in which,

  “A” is 20 per cent if the corporation issued the share as a research oriented investment fund and 15 per cent in any other case, and

  “B” is the lesser of,

(a) the amount of equity capital received by the corporation on the issuance of the share, and

(b) the amount that is payable by the corporation on the redemption, acquisition or cancellation of the share. 

2001, c. 23, s. 11; 2004, c. 16, s. 1 (2).

Exception

(3) No amount is payable under subsection (2) if any of the following conditions is satisfied:

1. After the shareholder acquired the share, the shareholder became disabled and permanently unfit for work or became terminally ill.

2. Within 60 days after the day on which the share was issued to the original purchaser,

i. the shareholder asks the corporation to redeem it, and

ii. the tax credit certificate referred to in subsection 25 (5) that was issued in respect of the share is returned to the corporation.

3. The shareholder acquired the share from another person as a consequence of,

i. the death of the other person, or

ii. the death of an annuitant under a trust governing a registered retirement savings plan or registered retirement income fund that previously held the share.

4. The shareholder is a trust governing a registered retirement savings plan or registered retirement income fund and, after the shareholder acquired the share, the annuitant under the plan or fund became disabled and permanently unfit for work or became terminally ill.

5. No tax credit certificate was issued under this Act at any time in respect of the share.  2001, c. 23, s. 11; 2004, c. 16, s. 1 (2).

Withholding and remittance of tax

(4) If tax is payable under subsection (2) as a result of the redemption, acquisition or cancellation of a Class A share, the labour sponsored investment fund corporation that redeems, acquires or cancels the share shall,

(a) withhold from the amount otherwise payable to the shareholder on the redemption, acquisition or cancellation of the share the amount of tax calculated under subsection (2); and

(b) remit to the Minister on behalf of the shareholder the amount withheld under clause (a), and do so within 30 days after the redemption, acquisition or cancellation.  2001, c. 23, s. 11; 2004, c. 16, s. 1 (2).

Liability for failure to withhold or remit

(5) If the labour sponsored investment fund corporation fails to withhold or remit an amount under subsection (4), the corporation is liable to pay to the Minister as tax under subsection (2) on behalf of the shareholder the amount that the corporation failed to withhold or remit.  2001, c. 23, s. 11; 2004, c. 16, s. 1 (2).

Same

(6) If the labour sponsored investment fund corporation paid an amount to the Minister under subsection (5) as tax under subsection (2) on behalf of the shareholder, the corporation is entitled to recover from the shareholder the amount remitted to the Minister but not withheld by the corporation.  2001, c. 23, s. 11; 2004, c. 16, s. 1 (2).

Definition

(7) In subsections (3) to (6),

“shareholder” means the person who was the shareholder immediately before the redemption, acquisition or cancellation of the Class A share.  2001, c. 23, s. 11; 2004, c. 16, s. 1 (2).

Entitlement to registration

15. (1) An employee organization is entitled to registration of a corporation by the Minister unless,

(a) this Part has not been satisfied; or

(b) the employee organization fails to file the material required by this Act or the regulations.  1992, c. 18, s. 15 (1); 2004, c. 16, s. 1 (2).

Refusal to register

(2) Subject to section 31, the Minister may refuse to register a corporation if, in the Minister’s opinion, the corporation is disentitled to registration under subsection (1).  1992, c. 18, s. 15 (2); 2004, c. 16, s. 1 (2).

Idem

(3) Subject to section 31, the Minister may refuse to register a corporation if, in the Minister’s opinion, the proposed investment or the actions of the corporation or the employee organization do not comply with the spirit and intent of this Act and the regulations.  1992, c. 18, s. 15 (3); 2004, c. 16, s. 1 (2).

Issuance of certificate of registration

16. (1) If the employee organization and the corporation comply with this Act, the Minister shall,

(a) endorse on each duplicate of the proposal “Registered/Agréé” and the day, month and year of the registration thereof;

(b) file one of the duplicates in the Minister’s office;

(c) place the name of the corporation in the register of investment corporations as a labour sponsored investment fund corporation; and

(d) issue to the corporation a certificate of registration to which the Minister shall affix the other duplicate.  1992, c. 18, s. 16 (1); 1997, c. 43, Sched. C, s. 23 (1); 2004, c. 16, s. 1 (2).

Order by Minister

(2) If the Minister considers it appropriate in order to carry out the intent of this Act, the Minister may, at the request of a labour sponsored investment fund corporation, order that the corporation be deemed to have been registered under this Act on a date before the date of actual registration and the corporation shall be deemed to have been so registered.  1992, c. 18, s. 16 (2); 2004, c. 16, s. 1 (2).

Effective date

(3) An order may be made under subsection (2) even though the deemed date of registration is a date before this Act came into force.  1992, c. 18, s. 16 (3); 2004, c. 16, s. 1 (2).

Research oriented investment fund

16.1 (1) A labour sponsored investment fund corporation that intends to issue shares as a research oriented investment fund in a calendar year after 2000 shall give notice of its intention to the Minister in a form approved by the Minister and shall do so by the end of the preceding year.  2000, c. 42, s. 6; 2004, c. 16, s. 1 (2).

Status of corporation

(2) A labour sponsored investment fund corporation that has given the notice required by subsection (1) for a calendar year is a research oriented investment fund during that year,

(a) Repealed:  2001, c. 23, s. 12 (1).

(b) if the corporation complied with the investment requirements and restrictions set out in sections 17 and 18.1 in the preceding year;

(c) if the corporation conducted its business and affairs in accordance with this Act in the preceding year; and

(d) if the aggregate cost of the corporation’s investments, each of which is an eligible investment in a research business that was held at the end of the preceding year, is equal to at least 50 per cent, or such other percentage as may be prescribed, of its capital available for investment at the end of that year or if, instead, the corporation gives the undertaking described in subsection (5).  2000, c. 42, s. 6; 2001, c. 23, s. 12 (1); 2004, c. 16, s. 1 (2).

Penalty for unauthorized issuance

(3) If a labour sponsored investment fund corporation issues a Class A share as a research oriented investment fund during a calendar year but did not meet the requirements set out in subsection (2) when it did so, the corporation shall pay a penalty to the Minister equal to 10 per cent of the value of the consideration received on its issuance.  2000, c. 42, s. 6; 2004, c. 16, s. 1 (2).

(4) Repealed:  2001, c. 23, s. 12 (2).

Undertaking re investments

(5) For the purposes of clause (2) (d), a labour sponsored investment fund corporation that has not made any investments may give the Minister a written undertaking that, before the end of the calendar year referred to in subsection (2), it will make one or more investments, each of which is an eligible investment in a research business and that the cost of those investments will equal at least 50 per cent, or such other percentage as may be prescribed, of the capital available for investment by the corporation at the end of that year.  2000, c. 42, s. 6; 2004, c. 16, s. 1 (2).

Failure to comply with undertaking

(6) If a labour sponsored investment fund corporation fails to comply with its undertaking given under subsection (5), the corporation shall pay a penalty to the Minister equal to 10 per cent of the value of the consideration received on its issuance, during the applicable year, of Class A shares as a research oriented investment fund.  2000, c. 42, s. 6; 2004, c. 16, s. 1 (2).

Required investment levels

17. (1) On December 31 of each year, a labour sponsored investment fund corporation shall hold eligible investments that have an aggregate cost of not less than the amount determined using the formula,

A – B – C + D – E – F

in which,

  “A” is 70 per cent of the aggregate amount of equity capital received by the corporation on the issue of Class A shares that are outstanding at the end of the applicable calendar year and that were issued before the sixty-first day of that year, but excluding Class A shares that have been outstanding,

(a) for at least five years, in the case of shares issued before May 7, 1996, and

(b) for at least eight years, in the case of shares issued after May 6, 1996;

  “B” is 20 per cent of the aggregate amount of equity capital received by the corporation on the issue of Class A shares that were issued during the period beginning on the sixty-first day of the year preceding the applicable calendar year and ending on the sixtieth day of the applicable year and that are outstanding at the end of that year;

  “C” is the aggregate amount of losses of the corporation that are realized on its eligible investments before the end of the applicable calendar year;

  “D” is the lesser of the aggregate amount of gains of the corporation realized on its eligible investments before the end of the applicable calendar year and the amount of the variable “C”;

  “E” is the total of all amounts that are permitted by subsections 24.1 (3) and (4) to be applied against the investment requirement imposed by this subsection; and

“F” is the amount determined under subsection (2).

1999, c. 9, s. 54 (1); 2004, c. 16, s. 1 (2).

(1.1) Repealed:  1999, c. 9, s. 54 (2).

(1.2) Repealed:  1999, c. 9, s. 54 (2).

(1.3) Repealed:  1999, c. 9, s. 54 (2).

Same

(2) The amount of the variable “F” in subsection (1) is calculated using the formula,

G + (H × I/J)

in which,

  “G” is the aggregate amount of tax paid by the corporation under subsection 28 (3) that has not been refunded before the end of the applicable calendar year;

  “H” is the aggregate amount of tax and penalties that the corporation has paid under Part X.3 of the Income Tax Act (Canada) that have not been refunded before the end of the applicable calendar year;

“I” is the aggregate amount of equity capital received by the corporation on the issue of Class A shares that were issued to shareholders who were ordinarily resident in Ontario when the shares were issued and that were outstanding when the taxes or penalties were paid under Part X.3 of the Income Tax Act (Canada); and

“J” is the aggregate amount of equity capital received by the corporation on the issue of Class A shares that were outstanding when the taxes or penalties were paid under Part X.3 of the Income Tax Act (Canada).

1999, c. 9, s. 54 (3); 2004, c. 16, s. 1 (2).

Disposal of investment

(3) For the purposes of this section, a labour sponsored investment fund corporation that disposes of an eligible investment shall be deemed to continue to hold the investment for nine months after the date of disposition.  1999, c. 9, s. 54 (4); 2004, c. 16, s. 1 (2).

Application

(4) This section applies to a corporation registered under Part X.3 of the Income Tax Act (Canada) only in respect of,

(a) equity capital received on the issue of Class A shares to shareholders of the corporation who were ordinarily resident in Ontario at the time the shares were issued; and

(b) amounts paid as a return of capital of Class A shares issued to shareholders of the corporation who were ordinarily resident in Ontario at the time the shares were issued.  1996, c. 24, s. 5 (2); 1996, c. 29, s. 10 (2); 2004, c. 16, s. 1 (2).

Interpretation, eligible investment

18. (1) An investment of a labour sponsored investment fund corporation is an eligible investment if,

(a) the investment is made in an eligible business primarily engaged in one or more eligible business activities carried on in Canada or an eligible business otherwise included in the definition of “eligible business” in section 12;

(b) the investment is the purchase from the eligible business by the labour sponsored investment fund corporation of,

(i) shares or a qualifying debt obligation issued by the eligible business in exchange for a consideration paid in money, if the eligible business is a corporation,

(ii) an ownership interest in the eligible business or a qualifying debt obligation issued by the eligible business in exchange for a consideration paid in money, if the eligible business is a Canadian partnership,

(iii) a guarantee provided by the labour sponsored investment fund corporation in respect of a debt obligation that would, if the debt obligation had been issued to the labour sponsored investment fund corporation at the time the guarantee was provided, have been a qualifying debt obligation issued by the eligible business, or

(iv) an option or right granted by an eligible business that is a corporation, in conjunction with the issue of a share or a debt obligation that is an eligible investment, to acquire a share of the eligible business that would be an eligible investment if that share were issued at the time that the option or right was granted;

(c) the labour sponsored investment fund corporation does not control the eligible business after the investment is made; and

(d) the investment is not used or intended to be used by the eligible business for the purpose of,

(i) relending,

(ii) investment in land except land that is incidental and ancillary to the eligible business activity or activities in which the eligible business is primarily engaged,

(iii) reinvestment outside Canada,

(iv) Repealed:  1999, c. 9, s. 55 (2).

(v) financing the purchase or sale of goods or services provided to the eligible business by or through a shareholder of the labour sponsored investment fund corporation or a person related to a shareholder, unless the labour sponsored investment fund corporation is widely held,

(vi) Repealed:  1999, c. 9, s. 55 (2).

(vii) Repealed:  1999, c. 9, s. 55 (2).

(viii) Repealed:  1999, c. 9, s. 55 (2).

(ix) the payment of the principal amount of outstanding liabilities owing to shareholders of the labour sponsored investment fund corporation or to persons related to such shareholders,

(x) carrying on a business outside Canada, or

(xi) any prescribed purpose or use. 

(e) Repealed:  1999, c. 9, s. 55 (4).

1992, c. 18, s. 18 (1); 1994, c. 17, s. 85 (1, 2); 1999, c. 9, s. 55 (1-4); 2004, c. 16, s. 1 (2).

Interpretation, widely held corporation

(2) For the purposes of this section, a labour sponsored investment fund corporation shall be deemed to be widely held if the corporation has ten or more shareholders and no shareholder or related group of which a shareholder is a member owns more than 10 per cent of the issued and outstanding voting shares of the corporation.  1992, c. 18, s. 18 (2); 2004, c. 16, s. 1 (2).

Idem

(3) In determining the percentage of shares of an eligible business held by a labour sponsored investment fund corporation or in determining whether a labour sponsored investment fund corporation is a majority partner of an eligible business,

(a) a voting share of the eligible business held by a shareholder of the labour sponsored investment fund corporation or by a person related to the shareholder, shall be deemed to be held by the labour sponsored investment fund corporation;

(b) a partnership interest in an eligible business that is a Canadian partnership owned by a shareholder of the labour sponsored investment fund corporation, or by a person related to the shareholder, shall be deemed to be owned by the labour sponsored investment fund corporation; and

(c) an option, warrant or right in respect of a voting share of or a partnership interest in the eligible business issued by a person other than the eligible business and held by a shareholder of the labour sponsored investment fund corporation, or by a person related to the shareholder, shall be deemed to have been exercised and the voting share in respect thereof or the partnership interest shall be deemed to be held by the labour sponsored investment fund corporation.  1992, c. 18, s. 18 (3); 2004, c. 16, s. 1 (2).

Idem

(4) Despite clauses (1) (b) and (d), in the case of an investment in an eligible business that at the time of the investment and immediately thereafter is an eligible business in which an employee ownership labour sponsored venture capital corporation has made an eligible investment, the investment may represent a replacement of outstanding or previously outstanding liabilities or shareholders’ equity of the eligible business, if at least two-thirds of the aggregate eligible investments made by the labour sponsored investment fund corporation represents net new investment capital of eligible businesses, determined in the prescribed manner.  1992, c. 18, s. 18 (4); 2004, c. 16, s. 1 (2).

Order by Minister

(5) Upon application by a labour sponsored investment fund corporation, the Minister may order that non-compliance with clause (1) (c) does not prevent an investment of the corporation from being an eligible investment.  1992, c. 18, s. 18 (5); 2004, c. 16, s. 1 (2).

Qualifications

(6) The Minister may make an order under subsection (5) if satisfied that the non-compliance is part of an arrangement,

(a) to assist in preventing the insolvency of the eligible business;

(b) to assist in restoring the eligible business to solvency; or

(c) to transfer control of the eligible business to another person.  1992, c. 18, s. 18 (6); 2004, c. 16, s. 1 (2).

Effect of order

(7) An order under subsection (5) is effective for the period of time stated in the order, to prevent the non-compliance from affecting the status of the investment as an eligible investment.  1992, c. 18, s. 18 (7); 1994, c. 17, s. 85 (3); 2004, c. 16, s. 1 (2).

Amounts included in investments

(8) For the purposes of sections 17 and 18.1, paragraphs 2 and 3 of subsection 20 (2) and subsection 28 (3), 25 per cent of the amount of all guarantees provided by a labour sponsored investment fund corporation in respect of debt obligations of an eligible business shall be included in calculating the amount of the investment made by a labour sponsored investment fund in that particular eligible business.  1994, c. 17, s. 85 (4); 1996, c. 29, s. 11 (1); 1999, c. 9, s. 55 (5); 2004, c. 16, s. 1 (2).

Deemed cost

(8.1) For the purposes of subsection 28 (3), the cost at any time to a labour sponsored investment fund corporation of eligible investments that are guarantees shall be deemed to be 25 per cent of the aggregate amount at that time of the debt obligations in respect of which the guarantees were provided.  1996, c. 29, s. 11 (2); 2004, c. 16, s. 1 (2).

Minister’s discretion

(9) The Minister may make an order under subsection (5) where the Minister believes that the arrangement meets the spirit and intent of this Act, even though it is not one of the circumstances set out in subsection (6).  1994, c. 17, s. 85 (4); 2004, c. 16, s. 1 (2).

Minister’s order

(10) Upon application by a labour sponsored investment fund corporation, where the Minister is satisfied that it is in the public interest to do so, the Minister may, on such terms and conditions as the Minister considers necessary, order that the non-compliance with clause (1) (b) or subclause (1) (d) (iii) or (x) does not preclude an investment by the corporation from being an eligible investment.  1994, c. 17, s. 85 (4); 1999, c. 9, s. 55 (6); 2004, c. 16, s. 1 (2).

Relending, etc., to holding company

(11) Despite subclause (1) (d) (i), in the case of an investment in a corporation or partnership described in the portion of the definition of “eligible business” in subsection 12 (1) that follows clause (e), the investment may be used by the eligible business for the purpose of relending to the eligible business or to a related corporation or partnership, but only if the investment is not used or intended to be used by the recipient corporation or partnership in a manner that is contrary to a purpose described in clause (1) (d).  1999, c. 9, s. 55 (7); 2002, c. 22, s. 21; 2004, c. 16, s. 1 (2).

Investment levies

Definitions

18.1 (1) In this section,

“listed company” means, in relation to a labour sponsored investment fund corporation, a business described in subsection (6); (“société cotée”)

“small business” means a business that meets the requirements set out in subsection (11). (“petite entreprise”)  1999, c. 9, s. 56; 2001, c. 23, s. 13 (1, 2); 2004, c. 16, s. 1 (2).

(2) Repealed:  2001, c. 23, s. 13 (3).

(3) Repealed:  2001, c. 23, s. 13 (3).

(4) Repealed:  2001, c. 23, s. 13 (3).

Limit on investment in listed companies

(5) During each calendar year, a labour sponsored investment fund corporation shall not make investments in eligible businesses that are listed companies to the extent that the cost of those investments exceeds 15 per cent of the total cost of all investments made in eligible businesses by the corporation in that calendar year.  2001, c. 23, s. 13 (4); 2004, c. 16, s. 1 (2).

Status of listed company

(6) For the purposes of subsection (5), a business is a listed company in relation to a labour sponsored investment fund corporation if, when the corporation makes an eligible investment in the business, any of the shares of the business are listed on a stock exchange prescribed by Regulation 3200 or 3201 made under the Income Tax Act (Canada).  2001, c. 23, s. 13 (5); 2004, c. 16, s. 1 (2).

(7) Repealed:  2001, c. 23, s. 13 (5).

Required investment in small businesses

(8) At the end of each calendar year, a labour sponsored investment fund corporation shall hold eligible investments in small businesses, and the eligible investments must have an aggregate cost of not less than the amount determined using the formula,

D – E – F – G + H – I

in which,

  “D” is 70 per cent of the sum of,

(a) 10 per cent of the aggregate amount of equity capital received by the corporation on the issue of Class A shares that were issued after May 6, 1996 and before March 2, 1997, that are outstanding at the end of the applicable calendar year and that have been outstanding for less than eight years,

(b) 15 per cent of the aggregate amount of equity capital received by the corporation on the issue of Class A shares that were issued after March 1, 1997 and before March 2, 1999, that are outstanding at the end of the applicable calendar year and that have been outstanding for less than eight years, and

(c) 20 per cent of the aggregate amount of equity capital received by the corporation on the issue of Class A shares that were issued after March 1, 1999, that are outstanding at the end of the applicable calendar year and that have been outstanding for less than eight years;

  “E” is 4 per cent of the equity capital received by the corporation on the issue of Class A shares that were issued during the period beginning on the sixty-first day of the preceding calendar year and ending on the sixtieth day of the applicable calendar year and that are outstanding at the end of the applicable calendar year;

“F” is the greater of,

(a) 20 per cent of the realised investment losses relating to all eligible investments made after May 6, 1996, net of realised gains relating to all eligible investments made after that date, or

(b) the amount of the realised investment losses relating to eligible investments made after May 6, 1996, net of realised gains relating to eligible investments made after that date in small businesses;

  “G” is the total of all amounts permitted by subsections 24.1 (3) and (4) to be deducted from the investment requirement imposed by this subsection;

  “H” is the amount required by subsection 24.1 (3.1) to be invested in small businesses;

“I” is the amount determined under subsection (9).

1999, c. 9, s. 56; 2004, c. 16, s. 1 (2).

Same

(9) The variable “I” in subsection (8) is 20 per cent of the amount calculated using the formula,

J + (K × L/M)

in which,

“J” is the aggregate amount of tax that the corporation has paid under subsection 28 (3) and that has not been refunded before the end of the applicable calendar year;

  “K” is the aggregate amount of tax and penalties that the corporation has paid under Part X.3 of the Income Tax Act (Canada) and that have not been refunded before the end of the applicable calendar year;

  “L” is the aggregate amount of equity capital received by the corporation on the issue of Class A shares that were issued to shareholders who were ordinarily resident in Ontario when the shares were issued and that were outstanding when the taxes or penalties were paid under Part X.3 of the Income Tax Act (Canada); and

“M” is the aggregate amount of equity capital received by the corporation on the issue of Class A shares that were outstanding when the taxes or penalties were paid under Part X.3 of the Income Tax Act (Canada).

1999, c. 9, s. 56; 2004, c. 16, s. 1 (2).

Disposal of investment in small business

(10) For the purposes of subsection (8), a labour sponsored investment fund corporation that disposes of an investment in a small business shall be deemed to continue to hold the investment for nine months after the date of disposition.  1999, c. 9, s. 56; 2004, c. 16, s. 1 (2).

Status of small business

(11) For the purposes of subsections (8) and (10), a business is a small business if it meets the following requirements when the labour sponsored investment fund corporation invests in it:

1. It is an eligible business.

2. The total gross assets (as determined in the prescribed manner) of the business and of each corporation and partnership related to it do not exceed $5 million.

3. The total number of employees (as determined in the prescribed manner) of the business and of each corporation and partnership related to it does not exceed 50.  1999, c. 9, s. 56; 2004, c. 16, s. 1 (2).

Same, number of employees

(12) For the purposes of paragraph 3 of subsection (11), an employee who normally works at least 20 hours per week shall be counted as one employee and an employee who normally works less than 20 hours per week shall be counted as half an employee.  1999, c. 9, s. 56; 2004, c. 16, s. 1 (2).

Restriction re certain corporations

(13) If a labour sponsored investment fund corporation is registered under Part X.3 of the Income Tax Act (Canada), this section applies only with respect to,

(a) equity capital received by the corporation on the issue of Class A shares to persons ordinarily resident in Ontario when the shares were issued; and

(b) amounts paid as a return of capital for Class A shares issued to persons ordinarily resident in Ontario when the shares were issued.  1999, c. 9, s. 56; 2004, c. 16, s. 1 (2).

PART III.1
COMMUNITY SMALL BUSINESS INVESTMENT FUND CORPORATIONS

Definitions

18.2 (1) In this Part,

“community sponsor” means an entity that may apply for registration of a community small business investment fund corporation under section 18.3; (“commanditaire communautaire”)

“eligible aboriginal community” means,

(a) a First Nation, or

(b) an aboriginal community, other than a First Nation, that is designated for the purposes of this Act as an eligible aboriginal community by an order given by the Minister under subsection 18.3 (6); (“collectivité autochtone admissible”)

“eligible business” means a taxable Canadian corporation or Canadian partnership that meets the criteria described in subsection (1.1) at the times specified in that subsection; (“entreprise admissible”)

“eligible business activity” means a business that would be an active business carried on by a corporation for the purposes of section 125 of the Income Tax Act (Canada) if carried on by a corporation, but does not include,

(a) a business the principal purpose of which is to derive income from real property,

(b) a business the principal purpose of which is to derive income from property, including interest, dividends, rents or royalties, and

(c) a business that would be a personal services business as defined in subsection 125 (7) of the Income Tax Act (Canada) if that definition were read without reference to paragraphs (c) and (d) of the definition; (“activité commerciale admissible”)

“eligible investor” means,

(a) a corporation registered under Part III as a labour sponsored investment fund corporation,

(b) a qualifying financial institution or a specified corporation or insurance corporation related to the qualifying financial institution for the purposes of section 66.1 of the Corporations Tax Act,

(b.1) an individual, a pension fund or a corporation that is not described in clause (a) or (b), or

(c) a prescribed person or entity; (“investisseur admissible”)

“First Nation” means a band as defined in the Indian Act (Canada); (“Première nation”)

“intellectual property” means a patent, licence, permit, know-how, commercial secret or other similar property constituting knowledge, including a trade mark, industrial design, copyright or other similar property constituting the expression of knowledge; (“propriété intellectuelle”)

“qualifying debt obligation” means a debt obligation that,

(a) if secured, is secured solely by a floating charge on the assets of the entity or by a guarantee given by an investment corporation,

(b) Repealed:  1999, c. 9, s. 57 (2).

(c) does not restrict the entity by the terms of the debt obligation or by the terms of any agreement related to that obligation from incurring other debts, and

(d) by its terms or by any agreement relating to that obligation is subordinate to all other debt obligations of the entity, other than debt obligations, if the entity is a corporation, that are prescribed to be small business securities for the purposes of paragraph (a) of the definition of “small business property” in subsection 206 (1) of the Income Tax Act (Canada); (“créance admissible”)

“qualifying financial institution” means a corporation that is a deposit-taking institution for the purposes of section 66.1 of the Corporations Tax Act; (“institution financière autorisée”)

“within the community” means, with respect to a community small business investment fund corporation or a community sponsor,

(a) within the geographical limits of the municipality if the community sponsor is a municipality,

(b) within the geographic limits of the reserve of the First Nation if the community sponsor is the council of a First Nation,

(c) within the geographic limits of the territory designated by the Minister for an eligible aboriginal community, if the community sponsor has been designated a community sponsor for the eligible aboriginal community by an order given by the Minister under subsection 18.3 (6),

(d) within the geographic limits of the territory designated by the Minister, if the community sponsor has been designated a community sponsor for territory without municipal organization by an order given by the Minister under subsection 18.3 (5),

(e) if the community sponsor is a university, a college, an Ontario Centre of Excellence that is an eligible research institute for the purposes of section 43.9 of the Corporations Tax Act, or a research institute affiliated with a university or hospital,

(i) within a facility of the community sponsor, or

(ii) within a place of business in Ontario where intellectual property developed by the community sponsor, or its faculty, staff or graduates, is used in eligible business activities, or

(f) if a municipality and a university, college or research institute affiliated with a university or hospital are co-sponsors of a community small business investment fund corporation,

(i) within the geographic limits of the municipality that is a co-sponsor,

(ii) within a facility of the institutional co-sponsor, or

(iii) within a place of business in Ontario where intellectual property developed by the institutional co-sponsor or by its faculty, staff or graduates is used in eligible business activities. (“dans la collectivité”)  1997, c. 43, Sched. C, s. 10; 1998, c. 34, s. 15 (1); 1999, c. 9, s. 57 (1-3); 2002, c. 22, s. 22; 2004, c. 16, s. 1 (2).

Eligible business

(1.1) A taxable Canadian corporation or Canadian partnership must meet the following criteria in order to be an eligible business in relation to a community small business investment fund corporation:

1. When the community small business investment fund corporation makes an investment in the corporation or partnership, the sum of the following amounts must exceed 1.5:

i. The percentage (expressed as a decimal fraction) that the wages and salaries paid by the corporation or partnership to employees employed in respect of its eligible business activities carried on within the community is of the total wages and salaries paid by it.

ii. The percentage (expressed as a decimal fraction) that the value of the gross assets of the corporation or partnership that are used in its eligible business activities carried on within the community is of the value of its total gross assets.

2. When the community small business investment fund corporation makes its initial investment in the corporation or partnership, the value of the total gross assets of the corporation or partnership, together with the total gross assets of all related corporations and partnerships, must not exceed $1 million or such other amount as may be prescribed.  For the purposes of this paragraph, the value of the total gross assets must be calculated in the prescribed manner.  1999, c. 9, s. 57 (4); 2004, c. 16, s. 1 (2).

Investment period

(2) The investment period for investing in a corporation registered under this Part ends on the first anniversary of the date of registration of the corporation.  1999, c. 9, s. 57 (5); 2004, c. 16, s. 1 (2).

(3) Repealed:  1999, c. 9, s. 57 (6).

Application for registration

18.3 (1) The following persons and organizations may apply under this Part as a community sponsor or sponsors for registration of a corporation as a community small business investment fund corporation to make investments in eligible businesses:

1. An upper-tier municipality, one or more lower-tier municipalities within an upper-tier municipality or a local municipality.

2. The council of a First Nation.

3. An organization designated under subsection (6) as a community sponsor for an aboriginal community, other than a First Nation, that is designated under that subsection as an eligible aboriginal community for the purposes of this Act.

4. One or more universities or colleges of applied arts and technology in Ontario, whose enrolment is counted for the purposes of calculating annual operating grants entitlements from the Government of Ontario.

5. One or more research institutes affiliated with an Ontario university referred to in paragraph 4 or a hospital approved as a public hospital under the Public Hospitals Act.

5.1 An Ontario Centre of Excellence that is an eligible research institute for the purposes of section 43.9 of the Corporations Tax Act.

6. A person or organization designated as a community sponsor for all or part of territory without municipal organization in an order given by the Minister under subsection (5).  1997, c. 43, Sched. C, s. 10; 2002, c. 17, Sched. F, Table; 2002, c. 22, s. 23; 2004, c. 16, s. 1 (2).

Proposal

(2) An application for registration under this Part may be made by filing with the Minister a proposal in duplicate setting out the following information:

1. The name of the corporation and the community sponsor or sponsors.

2. The location of the registered office and all permanent establishments in Ontario of the corporation and the community sponsor or sponsors.

3. An investment plan for the corporation specifying,

i. the rights and privileges attached to each class or series of shares of the corporation, the amount of the stated capital account of each class or series of shares issued and to be issued and the total amount of equity capital for which the shares were or will be issued,

ii. the amounts and kinds of debt obligations, if any, issued by the corporation,

iii. any restrictions on ownership and voting rights of the shares of the corporation,

iv. the proposed number of shareholders of the corporation,

v. details of the corporation’s proposed investment policies, and

vi. any other matter prescribed to be set out in the investment plan.

4. The number of directors of the corporation and the name in full and the residence address of each of them.

5. The names in full of the officers of the corporation and the residence address of each of them.

6. Any other matter required by the regulations to be set out in the proposal.  1997, c. 43, Sched. C, s. 10; 2004, c. 16, s. 1 (2).

Additional information

(3) A proposal shall be accompanied by,

(a) a certified copy of the articles of the corporation;

(b) a true copy of all shareholders’ agreements, partnership agreements and proposed agreements relating to the corporation to which the corporation is a party or of which an officer or director of the corporation or a community sponsor, after making reasonable inquiry, has knowledge; and

(c) any other prescribed material.  1997, c. 43, Sched. C, s. 10; 2004, c. 16, s. 1 (2).

Certificate

(4) The proposal shall be signed by two officers or one director and one officer of the corporation and shall contain a certificate in writing signed by one of them certifying that the information contained in the proposal is complete and accurate.  1997, c. 43, Sched. C, s. 10; 2004, c. 16, s. 1 (2).

Territory without municipal organization

(5) Upon application by a person or organization to the Minister, the Minister may designate the person or organization to be a community sponsor for all or part of territory without municipal organization and may impose terms and conditions considered to be appropriate by the Minister in connection with the designation.  1997, c. 43, Sched. C, s. 10; 2004, c. 16, s. 1 (2).

Aboriginal community other than a First Nation

(6) Upon application by an organization to the Minister, the Minister may,

(a) designate an aboriginal community other than a First Nation as an eligible aboriginal community for the purposes of this Act;

(b) designate the geographic limits of the territory of the community;

(c) designate the organization as a community sponsor for the community; and

(d) impose terms and conditions considered to be appropriate by the Minister in connection with the designations.  1997, c. 43, Sched. C, s. 10; 2004, c. 16, s. 1 (2).

Corporation qualifications

18.4 (1) No corporation may be registered under this Part unless,

(a) the corporation was incorporated under the Business Corporations Act or the Canada Business Corporations Act and is in compliance with that Act and the Securities Act;

(b) the corporation has never previously carried on business other than the business related to obtaining registration under this Act;

(c) the articles of the corporation provide that the capital of the corporation shall consist of Class A shares issuable only to eligible investors under this Part and such other shares as may be authorized, if the rights, privileges, restrictions and conditions attached to the shares are approved by the board of directors of the corporation and the Minister;

(d) the articles of the corporation restrict investment in shares of the corporation by a single investor or a related group to a maximum of $5 million;

(d.1) the articles of the corporation restrict the aggregate investment in shares of the corporation to a maximum of $10 million;

(d.2) the articles of the corporation specify that each eligible investor must invest at least $25,000 in Class A shares of the corporation;

(e) the articles of the corporation prohibit the payment of any fee or remuneration to a shareholder of the corporation or to any person related to a shareholder;

(f) the articles of the corporation restrict the business of the corporation to,

(i) assisting the development of eligible businesses, creating, maintaining and protecting jobs by providing financial and managerial advice to eligible businesses and by making eligible investments, and

(ii) incorporating and controlling other corporations as the corporation may consider advisable to provide financial, investment or managerial advice and expertise;

(g) the articles of the corporation provide that at least one member of the board of directors of the corporation shall be appointed by a community sponsor of the corporation; and

(h) the corporation meets all other prescribed conditions.  1997, c. 43, Sched. C, s. 10; 1998, c. 34, s. 16; 1999, c. 9, s. 58; 2004, c. 16, s. 1 (2).

Exception

(2) The fees and remuneration referred to in clause (1) (e) and any amounts paid on the purchase of goods and services are deemed not to include,

(a) banking fees and other amounts normally charged by a bank to its customers for providing services in the ordinary course of the bank’s business; and

(b) reasonable salaries and wages paid to employees.  1997, c. 43, Sched. C, s. 10; 2004, c. 16, s. 1 (2).

Entitlement to registration

18.5 (1) A community sponsor is entitled to registration of a corporation by the Minister if all of the following requirements are met:

1. The community sponsor applies for registration under this Part and files the required documents before January 1, 2004.

2. The other requirements of this Part are satisfied.

3. The corporation has received offers from eligible investors to subscribe for its shares for an aggregate amount of not less than $2 million.

4. The corporation has received offers from eligible investors described in clauses (a) and (b) of the definition of “eligible investor” in subsection 18.2 (1) to subscribe for its shares for an aggregate amount greater than 25 per cent of the proposed capitalization of the corporation (as specified in the investment plan referred to in subsection 18.3 (2)).  1999, c. 9, s. 59; 2001, c. 23, s. 14; 2002, c. 22, s. 24; 2004, c. 16, s. 1 (2).

Refusal to register

(2) Subject to section 31, the Minister may refuse to register a corporation if, in the Minister’s opinion, the corporation is not entitled to be registered.  1997, c. 43, Sched. C, s. 10; 2004, c. 16, s. 1 (2).

Same

(3) Subject to section 31, the Minister may refuse to register a corporation if, in the Minister’s opinion, the proposed investments or the actions of the corporation, its officers, directors or shareholders, or of a community sponsor, do not comply with the spirit and intent of this Act and the regulations.  1997, c. 43, Sched. C, s. 10; 2004, c. 16, s. 1 (2).

Issuance of certificate of registration

18.6 On registration of a corporation under this Part, the Minister shall,

(a) endorse on each duplicate of the proposal “Registered/Agréé” and the day, month and year of registration;

(b) file one of the duplicate proposals in the Minister’s office;

(c) place the name of the corporation in the register of investment corporations as a registered community small business investment fund corporation; and

(d) issue to the corporation a certificate of registration to which the Minister shall affix the other duplicate proposal.  1997, c. 43, Sched. C, s. 10; 2004, c. 16, s. 1 (2).

Required investment levels

18.7 A community small business investment fund corporation shall invest in eligible investments,

(a) by the end of the 30th month following the end of its investment period, an amount equal to at least 35 per cent of the amount of equity capital it received on the issue of its Class A shares; and

(b) by the end of the 72nd month following the end of its investment period, an amount equal to at least 70 per cent of the amount of equity capital it received on the issue of its Class A shares.  1997, c. 43, Sched. C, s. 10; 2004, c. 16, s. 1 (2).

Interpretation, eligible investment

18.8 (1) An investment made by a community small business investment fund corporation is an eligible investment if,

(a) the investment is made in a business that is an eligible business when the investment is made;

(b) the investment is,

(i) if the eligible business is a taxable Canadian corporation, the purchase from the eligible business by the community small business investment fund corporation of shares or a qualifying debt obligation issued by the eligible business in exchange for a consideration paid in money,

(ii) if the eligible business is a Canadian partnership, the purchase of an ownership interest in the eligible business or a qualifying debt obligation issued by the eligible business in exchange for a consideration paid in money,

(iii) the purchase of a guarantee provided by the community small business investment fund corporation in respect of a debt obligation that would, if the debt obligation had been issued to the community small business investment fund corporation at the time the guarantee was provided, have been a qualifying debt obligation issued by the eligible business, or

(iv) the purchase of an option or right granted by an eligible business that is a corporation, in conjunction with the issue of a share or a debt obligation that is an eligible investment, to acquire a share of an eligible business that would be an eligible investment if that share were issued at the time that the option or right was granted; and

(c) the investment is not used or intended to be used by the eligible business for the purpose of,

(i) relending,

(ii) investment in land, except land that is incidental and ancillary to the eligible business activity or activities in which the eligible business is primarily engaged,

(iii) reinvestment or the acquisition of any securities of any person,

(iv) subject to subsection (1.1), financing the purchase or sale of goods or services provided to the eligible business by or through a shareholder of the community small business investment fund corporation or a person related to a shareholder,

(v) the payment of dividends,

(vi) the payment of drawings to partners of the eligible business,

(vii) the return of capital to a shareholder or partner of the eligible business,

(viii) the payment of the principal amount of outstanding liabilities owing to shareholders of the community small business investment fund corporation or to persons related to such shareholders,

(ix) carrying on a business outside Ontario, or

(x) any prescribed purpose or use.  1997, c. 43, Sched. C, s. 10; 1998, c. 34, s. 18 (1-3); 1999, c. 9, s. 60 (1); 2004, c. 16, s. 1 (2).

Exception

(1.1) Subclause (1) (c) (iv) does not apply with respect to the purchase of goods or services from a shareholder who is a sponsor of the corporation described in paragraph 2, 3, 4 or 5 of subsection 18.3 (1) or from a person who is related to such a shareholder.  1998, c. 34, s. 18 (4); 2004, c. 16, s. 1 (2).

Amounts of guarantee included in investments

(2) For the purposes of section 18.7 and subsection 20 (5), 25 per cent of the amount of all guarantees provided by a community small business investment fund corporation in respect of debt obligations of an eligible business shall be included in calculating the amount of the investment made by a community small business investment fund in that particular eligible business.  1997, c. 43, Sched. C, s. 10; 1998, c. 34, s. 18 (5); 1999, c. 9, s. 60 (2); 2004, c. 16, s. 1 (2).

Deemed cost

(3) For the purposes of subsection 28.1 (1), the cost to a community small business investment fund corporation of an eligible investment that is a guarantee shall be deemed to be 25 per cent of the aggregate amount of the debt obligations in respect of which the guarantee is provided.  1998, c. 34, s. 18 (6); 2004, c. 16, s. 1 (2).

Dividends and return of capital

18.9 A community small business investment fund corporation shall not pay dividends or authorize any return of capital to an eligible investor within six years after the end of the investment period of the corporation and until at least 70 per cent of the equity capital received by the corporation on the issue of its Class A shares has been invested in eligible investments.  1997, c. 43, Sched. C, s. 10; 2004, c. 16, s. 1 (2).

Actions requiring approval

18.10 (1) A corporation that is or was registered under this Part and that has issued Class A shares shall not liquidate its assets or wind-up within 10 years after the date of its registration under this Part without the prior consent of the Minister.  1997, c. 43, Sched. C, s. 10; 2004, c. 16, s. 1 (2).

Same

(2) The Minister may give his consent subject to terms and conditions that the Minister considers reasonable in the circumstances.  1997, c. 43, Sched. C, s. 10; 2004, c. 16, s. 1 (2).

PART IV
ASSETS, CREDITS AND ADMINISTRATION

Form of assets

19. (1) An investment corporation shall maintain its assets in one or more of,

(a) investments that are eligible investments for the particular investment corporation;

(b) reserves;

(c) investments that were eligible investments at the time they were acquired by the investment corporation;

(d) the shares of any corporation the investment corporation is otherwise permitted under this Act to hold; and

(e) any other prescribed form.  1992, c. 18, s. 19 (1); 1997, c. 43, Sched. C, s. 23 (1); 2004, c. 16, s. 1 (2).

Exception

(1.1) Despite subsection (1), the Minister may permit an investment corporation to maintain assets in an investment that is not an eligible investment,

(a) if the investment is an additional investment in a business that was an eligible business when the corporation first invested in the business;

(b) if the additional investment is made in order to facilitate a financial restructuring of the business; and

(c) if the corporation undertakes (in a form satisfactory to the Minister) to dispose of the additional investment within 36 months after it is made or within such other period as the Minister approves.  1998, c. 34, s. 19 (1); 2004, c. 16, s. 1 (2).

Definition, reserves

(2) For the purposes of subsection (1),

“reserves” means,

(a) property described in any of paragraphs (a), (b), (c), (f) and (g) of the definition of “qualified investment” in section 204 of the Income Tax Act (Canada),

(b) deposits in or guaranteed investment certificates issued by the Province of Ontario Savings Office, or

(c) any other prescribed investments.  1992, c. 18, s. 19 (2); 1997, c. 43, Sched. C, s. 11; 1998, c. 34, s. 19 (2, 3); 2004, c. 16, s. 1 (2).

Note: On a day to be named by proclamation of the Lieutenant Governor, the definition of “reserves” is amended by the Statutes of Ontario, 2002, chapter 8, Schedule I, section 6 by adding “or” at the end of clause (a) and by striking out clauses (b) and (c) and substituting the following:

(b) any other prescribed investments.

See: 2002, c. 8, Sched. I, ss. 6, 24.

Note: On the day the Statutes of Ontario, 2002, chapter 8, Schedule I, section 6 comes into force, the French version of clause (b) is repealed and the following substituted:

b) des autres placements prescrits.

See: 2004, c. 16, ss. 1 (3), 5 (3).

Annual expenses

(3) The annual expenses of an investment corporation shall not exceed a prescribed amount, determined in the prescribed manner.  1992, c. 18, s. 19 (3); 1997, c. 43, Sched. C, s. 23 (1); 2004, c. 16, s. 1 (2).

Investment restriction

20. (1) An investment corporation shall not invest or maintain an investment in a business that is or was at any time an eligible business if the eligible business does not deal at arm’s length from the corporation or any of the directors of the corporation unless,

(a) the eligible business would deal at arm’s length with the corporation but for the corporation’s interest as the holder of investments in the eligible business; or

(b) the investment was approved by special resolution of the shareholders of the corporation before the investment was made.  1997, c. 43, Sched. C, s. 12 (1); 2004, c. 16, s. 1 (2).

Exception

(1.1) Clause (1) (b) does not apply to an investment corporation registered under Part III.1.  1997, c. 43, Sched. C, s. 12 (1); 2004, c. 16, s. 1 (2).

Same

(1.2) Subsection (1) does not apply to a community small business investment fund corporation operating within an eligible aboriginal community as defined in subsection 18.2 (1).  1997, c. 43, Sched. C, s. 12 (1); 2004, c. 16, s. 1 (2).

Definition

(1.3) In subsection (1),

“arm’s length” has the meaning set out in subsection 251 (1) of the Income Tax Act (Canada).  1997, c. 43, Sched. C, s. 12 (1); 2004, c. 16, s. 1 (2).

Labour sponsored investment fund corporation

(2) In any of the following circumstances, a labour sponsored investment fund corporation (the “corporation”) shall not invest or maintain an investment in a business that is or was at any time an eligible business for the purposes of Part III:

1. If the corporation controls the business.

2. If the corporation makes all of its investments in the business before January 1, 2000 and makes an investment in the business from equity capital received by the corporation on the issue of its Class A shares, and if the aggregate of all investments made with that equity capital by the corporation in the business exceeds $15 million.

3. If the corporation makes any investment in the business after December 31, 1999 and makes an investment in the business from equity capital received by the corporation on the issue of its Class A shares, and if the aggregate of all investments made with that equity capital by the corporation in the business exceeds the lesser of,

i. 10 per cent of the aggregate equity capital received by the corporation on the issue of its Class A shares that were outstanding when the corporation made its most recent investment in the business, and

ii. $15 million.  1999, c. 9, s. 61 (1); 2004, c. 16, s. 1 (2).

Exception

(3) Paragraph 1 of subsection (2) does not apply if an order by the Minister under section 18 is in force in respect of the business.  1992, c. 18, s. 20 (3); 1999, c. 9, s. 61 (2); 2004, c. 16, s. 1 (2).

Same

(4) Subsection (1) does not apply once the eligible business has been converted into a worker co-operative as contemplated by the business plan of the employee ownership labour sponsored venture capital corporation as approved under this Act.  1994, c. 17, s. 87 (2); 2004, c. 16, s. 1 (2).

Investment restriction

(5) A community small business investment fund corporation shall not invest more than 20 per cent of the equity capital it receives on the issue of its Class A shares in a business that is an eligible business for the purposes of Part III.1.  1999, c. 9, s. 61 (3); 2004, c. 16, s. 1 (2).

(6) Repealed:  1999, c. 9, s. 61 (3).

Material change in investments

21. (1) An investment corporation shall notify the Minister in the form approved by the Minister of any material change in any of its investments within thirty days of the occurrence of the material change.  1992, c. 18, s. 21 (1); 1997, c. 19, s. 11 (1); 1997, c. 43, Sched. C, s. 23 (1); 2004, c. 16, s. 1 (2).

Effect of material change

(2) If there is a material change, the investment by an investment corporation shall remain an eligible investment, with respect to investments made before the material change, for a period of twelve months from the date of the material change.  1992, c. 18, s. 21 (2); 1997, c. 43, Sched. C, s. 23 (1); 2004, c. 16, s. 1 (2).

Interpretation

(3) In this section, a material change occurs if the investment made by an investment corporation ceases to be an eligible investment.  1992, c. 18, s. 21 (3); 1997, c. 43, Sched. C, s. 23 (1); 2004, c. 16, s. 1 (2).

Returns

22. (1) Every investment corporation shall, within six months after the end of each fiscal year of the corporation, complete and file with the Minister a return in the form approved by the Minister setting out as of the end of the fiscal year the information required by the return.  1992, c. 18, s. 22 (1); 1997, c. 19, s. 11 (1); 1997, c. 43, Sched. C, s. 23 (1); 2004, c. 16, s. 1 (2).

Enlargement of time

(2) The Minister may, in his or her discretion, enlarge the time for filing a return under this section.  1992, c. 18, s. 22 (2); 2004, c. 16, s. 1 (2).

Returns required by Minister

23. The Minister may at any time by notice require an investment corporation or a corporation or partnership in which the investment corporation has invested to file within the time specified in the notice a return upon any subject connected with the affairs of the investment corporation and, in the opinion of the Minister, relevant to the administration or enforcement of this Act.  1992, c. 18, s. 23; 1997, c. 43, Sched. C, s. 23 (1); 2004, c. 16, s. 1 (2).

Tax credit

24. (1) The Minister may allow a tax credit under the Income Tax Act or the Corporations Tax Act or an investment credit with respect to equity capital invested by eligible investors in Class A shares issued by an investment corporation.  1992, c. 18, s. 24 (1); 1997, c. 43, Sched. C, ss. 13 (1), 23 (1); 2004, c. 16, s. 1 (2).

Refusal of tax credit

(2) Subject to section 31, if the Minister is of the opinion that the investment corporation or its officers, directors or shareholders are conducting their business and affairs in a manner that is contrary to the spirit and intent of this Act or for the purpose of enabling a person to obtain a tax credit or investment credit to which they would not otherwise be entitled, the Minister may refuse to allow a tax credit under the Income Tax Act or the Corporations Tax Act or to allow an investment credit under this Act.  1997, c. 43, Sched. C, s. 13 (2); 2004, c. 16, s. 1 (2).

Small business investment credit, labour sponsored investment fund

24.1 (1) A labour sponsored investment fund corporation may set aside funds after June 30, 1997 and before January 1, 2001 for the purpose of making an investment in a community small business investment fund corporation and may make the investment after registration of the community small business investment fund corporation under Part III.1.  1997, c. 43, Sched. C, s. 14; 1999, c. 9, s. 62 (1); 2004, c. 16, s. 1 (2).

Investment deadlines

(2) The following deadlines apply for investing funds set aside under subsection (1):

1. Funds set aside before May 5, 1998 must be invested in a community small business investment fund corporation not later than December 31, 1998.

2. Funds set aside after May 4, 1998 and before January 1, 1999 must be invested in a community small business investment fund corporation not later than December 31, 1999.

3. Funds set aside after December 31, 1998 and before January 1, 2000 must be invested in a community small business investment fund corporation not later than December 31, 2000.

4. Funds set aside after December 31, 1999 and before January 1, 2001 must be invested in a community small business investment fund corporation not later than December 31, 2001.  1999, c. 9, s. 62 (2); 2004, c. 16, s. 1 (2).

Investment tax credit

(3) Upon application, the Minister may allow a labour sponsored investment fund corporation to do one of the following things if the corporation sets aside funds for investment in a community small business investment fund corporation, or if the corporation invests in such a corporation before January 1, 2004:

1. The corporation may treat twice the amount set aside or invested as an amount invested in an eligible business that is a small business, for the purpose of determining whether the corporation meets the small business investment requirements of section 18.1;  and it may treat the amount set aside or invested as an amount invested in an eligible investment for the purpose of determining whether the corporation meets the requirements of subsection 17 (1).

2. The corporation may reduce the amount of tax owing under subsection 28 (3) for the calendar year in which the funds are set aside or invested.  The amount of the tax reduction is twice the amount set aside or invested.  1999, c. 9, s. 62 (2); 2001, c. 23, s. 15; 2002, c. 22, s. 25; 2004, c. 16, s. 1 (2).

Cancellation of credit

(3.1) The following rules apply if a labour sponsored investment fund corporation that sets aside funds does not meet the applicable investment deadline set out in subsection (2):

1. On the following date, paragraph 1 of subsection (3) ceases to apply with respect to the funds that are not invested in a community small business investment fund corporation:

i. December 31, 1998, if the investment deadline for the funds set aside is December 31, 1998.

ii. December 31, 1999, if the investment deadline for the funds set aside is December 31, 1999.

iii. December 31, 2000, if the investment deadline for the funds set aside is December 31, 2000.

iv. December 31, 2001, if the investment deadline for the funds set aside is December 31, 2001.

The labour sponsored investment fund corporation is then required to invest the funds, together with any interest earned on them, in eligible investments that are small businesses and to maintain the investments as required by section 18.1.

2. Once the applicable investment deadline has passed, paragraph 2 of subsection (3) shall be deemed never to have applied with respect to the funds set aside by the labour sponsored investment fund corporation.  1999, c. 9, s. 62 (2); 2004, c. 16, s. 1 (2).

Additional credit

(4) If a community small business investment fund corporation makes one or more eligible investments under Part III.1 in a particular year, the Minister may, at the end of the calendar year in which the investment is made, allow the labour sponsored investment fund corporation a credit against the investment requirements of that corporation under subsection 17 (1) and a credit against the small business investment requirements of that corporation under section 18.1, equal to the percentage of the Class A shares of the community small business investment fund corporation held by the labour sponsored investment fund corporation multiplied by the amount invested by the community small business investment fund corporation in eligible investments.  1997, c. 43, Sched. C, s. 14; 1998, c. 34, s. 20 (3); 1999, c. 9, s. 62 (3); 2004, c. 16, s. 1 (2).

Definition

(5) In this section,

“small business” has the same meaning as in subsection 18.1 (1).  1999, c. 9, s. 62 (4); 2004, c. 16, s. 1 (2).

Tax credits and incentives

25. (1) An employee ownership labour sponsored venture capital corporation shall apply to the Minister on behalf of each eligible investor who has paid during the calendar year or within sixty days following the calendar year for Class A shares issued by the corporation for a tax credit certificate in respect of an investment corporation tax credit to be claimed by the eligible investor under the Income Tax Act.  1992, c. 18, s. 25 (1); 1997, c. 43, Sched. C, s. 23 (2); 2004, c. 16, s. 1 (2).

Amount of tax credit

(2) The amount of the credit under subsection (1) that may be claimed by the eligible investor each year is equal to the aggregate of,

(a) 20 per cent of all amounts received by the corporation as equity capital on the issue of the Class A shares, to the extent that the amounts received are attributable to the first $3,500 of each $15,000 received by the corporation from the eligible investor during the time period mentioned in subsection (1); and

(b) 30 per cent of all amounts received by the corporation as equity capital on the issue of the Class A shares, to the extent that the amounts received are attributable to amounts exceeding $3,500 but not exceeding $15,000 of each $15,000 that is received by the corporation from the eligible investor during the time period mentioned in subsection (1).  1994, c. 17, s. 88 (1); 2004, c. 16, s. 1 (2).

Carry forward of tax credit

(2.1) Where an eligible investor has paid an amount that exceeds $15,000 during a calendar year or within 60 days following the end of the calendar year, the amount of the excess may be applied in subsequent taxation years under subsection (2) in determining the amount of the tax credit that may be claimed by the eligible investor in subsequent taxation years so long as no more than $4,150 is claimed as a tax credit in any taxation year.  1994, c. 17, s. 88 (2); 2002, c. 22, s. 26 (1); 2004, c. 16, s. 1 (2).

Part III corporation

(3) A labour sponsored investment fund corporation shall apply to the Minister on behalf of each eligible investor who has subscribed for a Class A share of the corporation during the calendar year or within 60 days after the end of the calendar year for a tax credit certificate in respect of an investment corporation tax credit to be claimed by an eligible investor in respect of that share under the Income Tax Act.  2000, c. 42, s. 7 (1); 2004, c. 16, s. 1 (2).

Amount of tax credit

(4) The amount of the tax credit referred to in subsection (3) that may be claimed for a taxation year shall be determined in accordance with the following rules:

1. The amount of the tax credit deductible in determining the amount of tax payable under the Income Tax Act for the 1991 taxation year is 20 per cent of the lesser of,

i. the total amount of equity capital received by the corporation from the eligible investor after November 6, 1991 and before March 1, 1992 for Class A shares issued by the corporation, and

ii. $3,500.

2. The amount of the tax credit deductible in determining the amount of tax payable under the Income Tax Act for the 1992 taxation year is 20 per cent of the lesser of,

i. the total amount of equity capital received by the corporation from the eligible investor between January 1, 1992 and March 1, 1993 for Class A shares issued by the corporation, other than any portion of the equity capital that was taken into consideration in determining the amount of a tax credit for 1991, and

ii. if the Class A shares were paid for during the first 60 days of 1992, $3,500 if a tax credit was deducted in determining the amount of tax payable under the Income Tax Act for the 1991 taxation year in respect of those Class A shares and $5,000 otherwise.

3. The amount of the tax credit deductible in determining the amount of tax payable under the Income Tax Act for the 1993, 1994 or 1995 taxation year is 20 per cent of the lesser of,

i. the total amount of equity capital received by the corporation from the eligible investor between January 1 of the taxation year and the 60th day of the following year for Class A shares issued by the corporation, other than any portion of the equity capital that was taken into consideration in determining the amount of a tax credit for the previous taxation year, and

ii. $5,000.

4. The amount of the tax credit deductible in determining the amount of tax payable under the Income Tax Act for the 1996 taxation year is the sum of,

i. the lesser of $1,000 and the amount equal to 20 per cent of the equity capital received by the corporation from the eligible investor after 1995 and before May 7, 1996 for Class A shares issued by the corporation, other than any portion of the equity capital that was taken into consideration in determining the amount of a tax credit for the 1995 taxation year, and

ii. the lesser of,

A. the amount by which $525 exceeds the amount, if any, determined under subparagraph i, and

B. the amount equal to 15 per cent of the equity capital received by the corporation from the eligible investor after May 6, 1996 and before March 2, 1997 for Class A shares issued by the corporation.

5. The amount of the tax credit deductible in determining the amount of tax payable under the Income Tax Act for the 1997 taxation year is the lesser of,

i. $525, and

ii. an amount equal to 15 per cent of the equity capital received by the corporation from the eligible investor after 1996 and before March 2, 1998 for Class A shares issued by the corporation, excluding any portion of the equity capital that was taken into consideration in determining the amount of a tax credit for the 1996 taxation year.

6. The amount of the tax credit deductible in determining the amount of tax payable under the Income Tax Act for the 1998, 1999 or 2000 taxation year is the lesser of,

i. $750, and

ii. an amount equal to 15 per cent of the equity capital received by the corporation from the eligible investor, or from a qualifying trust for the eligible investor, after the end of the preceding taxation year and before the day that is 61 days after the end of the taxation year for Class A shares issued by the corporation, excluding any portion of the equity capital that was taken into consideration in determining the amount of a tax credit for the preceding year.

7. If the corporation is a research oriented investment fund during the calendar year in which it issues the Class A shares referred to in subsection (3), the amount of the tax credit deductible in determining the amount of tax payable under the Income Tax Act for any taxation year after 2000 is the lesser of,

i. $1,000, and

ii. an amount equal to 20 per cent of the equity capital received by the corporation from the eligible investor, or from a qualifying trust for the eligible investor, for Class A shares issued by the corporation that are purchased after the end of the preceding taxation year and before the day that is 61 days after the end of the taxation year, excluding any portion of the equity capital that was taken into consideration in determining the amount of a tax credit for the preceding year.

8. If the corporation is not a research oriented investment fund during the calendar year in which it issues the Class A shares referred to in subsection (3), the amount of the tax credit deductible in determining the amount of tax payable under the Income Tax Act for any taxation year after 2000 is the lesser of,

i. $750, and

ii. an amount equal to 15 per cent of the equity capital received by the corporation from the eligible investor, or from a qualifying trust for the eligible investor, for Class A shares issued by the corporation that are purchased after the end of the preceding taxation year and before the day that is 61 days after the end of the taxation year, excluding any portion of the equity capital that was taken into consideration in determining the amount of a tax credit for the preceding year.  1996, c. 24, s. 7; 1998, c. 34, s. 21 (1); 2000, c. 42, s. 7 (2); 2004, c. 16, s. 1 (2).

Tax credit, qualifying financial institution

(4.1) Where a qualifying financial institution, or a specified corporation or insurance corporation related to a qualifying financial institution for the purposes of section 66.1 of the Corporations Tax Act, is the beneficial and registered owner of Class A shares of a community small business investment fund corporation purchased directly from the community small business investment fund corporation before January 1, 2004, the qualifying financial institution may, subject to the approval of the Minister, make an application in a form approved by the Minister for a tax credit under the Corporations Tax Act, and the Minister may allow a tax credit to the financial institution equal to 30 per cent of the amount of equity capital paid to the community small business investment fund corporation on the issue of Class A shares.  1997, c. 43, Sched. C, s. 15; 1998, c. 34, s. 21 (2); 1999, c. 9, s. 63 (1); 2001, c. 23, s. 16 (1); 2002, c. 22, s. 26 (2); 2004, c. 16, s. 1 (2).

Additional credit

(4.2) If a community small business investment fund corporation makes one or more eligible investments under Part III.1 in a particular year, the Minister may allow a tax credit under the Corporations Tax Act to the qualifying financial institution equal to 30 per cent of the amount calculated using the formula,

A × B

in which,

  “A” is the amount invested in the year by the community small business investment fund corporation in eligible investments, and

  “B” is the percentage of Class A shares of the community small business investment fund corporation that are held by the qualifying financial institution or by a specified corporation or insurance corporation related to the qualifying financial institution for the purposes of section 66.1 of the Corporations Tax Act

1998, c. 34, s. 21 (3); 2004, c. 16, s. 1 (2).

Investment incentive

(4.3) A qualifying individual or qualifying corporation may apply for an investment incentive if the individual or corporation is the beneficial and registered owner of Class A shares of a community small business investment fund corporation purchased directly from the corporation before January 1, 2004.  1999, c. 9, s. 63 (2); 2001, c. 23, s. 16 (2); 2002, c. 22, s. 26 (3); 2004, c. 16, s. 1 (2).

Additional incentive

(4.4) A qualifying individual or qualifying corporation may apply for an additional investment incentive if the individual or corporation holds Class A shares of a community small business investment fund corporation that makes one or more eligible investments under this Part.  1999, c. 9, s. 63 (2); 2004, c. 16, s. 1 (2).

Application for incentive

(4.5) An application for an investment incentive or an additional investment incentive shall be made to the Minister and shall be in a form approved by the Minister.  1998, c. 34, s. 21 (4); 2004, c. 16, s. 1 (2).

Same

(4.6) The Minister may authorize a community small business investment fund corporation to apply on behalf of its shareholders for investment incentives and additional investment incentives, and may impose conditions with respect to the authorization.  1998, c. 34, s. 21 (4); 2004, c. 16, s. 1 (2).

Payment of incentives

(4.7) Subject to subsection (4.8), the Minister shall pay the investment incentive and, if applicable, the additional investment incentive to the qualifying individual or qualifying corporation if the Minister is satisfied of the following:

1. That the community small business investment fund corporation and its eligible investors are complying with the corporation’s approved investment plan.

2. That the shares to which the incentive relates do not constitute a type of security that entitles the holder to receive any other financial assistance from a government, municipality or public authority in respect of the acquisition of those shares.

3. That the incentive relates to shares purchased by the individual or corporation directly from the corporation issuing the shares.

4. That such other requirements as may be prescribed are met.  1998, c. 34, s. 21 (4); 1999, c. 9, s. 63 (3, 4); 2004, c. 16, s. 1 (2).

Exception

(4.8) The Minister shall not pay the investment incentive and, if applicable, the additional investment incentive to the qualifying individual or qualifying corporation if the Minister considers that the community small business investment fund corporation, or its directors, officers or shareholders, are conducting the affairs of the corporation in a manner contrary to the spirit and intent of this Act, whether or not this Act or the regulations have been contravened.  1998, c. 34, s. 21 (4); 1999, c. 9, s. 63 (5); 2004, c. 16, s. 1 (2).

Amount of incentive

(4.9) The amount of the investment incentive referred to in subsection (4.3) is the lesser of,

(a) $37,500; and

(b) 7.5 per cent of the amount paid by the qualifying individual or qualifying corporation before January 1, 2004 to the community small business investment fund corporation on the issue of Class A shares.  1998, c. 34, s. 21 (4); 1999, c. 9, s. 63 (6); 2001, c. 23, s. 16 (3); 2002, c. 22, s. 26 (4); 2004, c. 16, s. 1 (2).

Amount of additional incentive

(4.10) The amount of the additional incentive referred to in subsection (4.4) is the lesser of,

(a) $37,500; and

(b) 7.5 per cent of the amount invested by the community small business investment fund corporation in eligible investments under Part III.1 multiplied by the percentage of Class A shares of the corporation that are held by the qualifying individual or qualifying corporation.  1998, c. 34, s. 21 (4); 1999, c. 9, s. 63 (7); 2004, c. 16, s. 1 (2).

Issuance of tax credit certificate

(5) On receipt of an application under subsection (1) or (3), the Minister shall, subject to subsections (6) and (7), issue a tax credit certificate to the eligible investor indicating the amount of the tax credit and the taxation year in respect of which the tax credit may be claimed, unless the Minister considers that the corporation or its directors, officers or shareholders are conducting the business or affairs of the corporation in a manner that is contrary to the spirit and intent of this Act, whether or not there has been a contravention of this Act or the regulations.  1992, c. 18, s. 25 (5); 2004, c. 16, s. 1 (2).

Restriction

(6) No tax credit certificate shall be issued under this section in respect of amounts exceeding the first $150,000 paid to an employee ownership labour sponsored venture capital corporation by an eligible investor in consideration for the issue of Class A shares of the corporation to the eligible investor.  1992, c. 18, s. 25 (6); 2004, c. 16, s. 1 (2).

Qualifications

(7) The Minister shall not issue a tax credit certificate under this section unless the Minister is satisfied that,

(a) the corporation and its eligible investors are complying with the corporation’s investment plan and, in the case of an employee ownership labour sponsored venture capital corporation, the corporation’s business plan and human resources plan as approved;

(b) unless permitted by the regulations, the Class A shares to which the tax credit relates do not constitute a type of security that entitles the holder, in respect of the acquisition of those shares,

(i) to claim a tax credit under the Income Tax Act or the Income Tax Act (Canada), other than a labour sponsored investment fund corporation tax credit under the Income Tax Act or section 127.4 of the Income Tax Act (Canada), against tax otherwise payable,

(ii) to claim a deduction from income under the Income Tax Act or the Income Tax Act (Canada), or

(iii) to receive any other financial assistance from any government, municipality or public authority;

(c) no tax credit has been previously allowed under the Income Tax Act in respect of the shares to which the tax credit certificate relates;

(d) the Class A shares to which the tax credit certificate relates were purchased and acquired directly from the investment corporation issuing the shares; and

(e) there has been compliance with any other prescribed conditions.  1992, c. 18, s. 25 (7); 1997, c. 43, Sched. C, s. 23 (1, 2); 2002, c. 22, s. 26 (5); 2004, c. 16, s. 1 (2).

Application for tax credit certificate

(8) An application under subsection (1) or (3) shall be made by filing with the Minister,

(a) an application containing the prescribed information signed by the secretary and one authorized officer of the investment corporation that has issued the Class A shares in respect of which a tax credit certificate is sought; and

(b) all additional material prescribed by the Minister.  1992, c. 18, s. 25 (8); 1997, c. 43, Sched. C, s. 23 (1); 2004, c. 16, s. 1 (2).

Agent

(9) The Minister may enter into an arrangement with an investment corporation, upon such terms and conditions as the Minister considers advisable, whereby the corporation is authorized as agent for the Minister to issue tax credit certificates under this section on behalf of the Minister.  1992, c. 18, s. 25 (9); 1997, c. 43, Sched. C, s. 23 (1); 2004, c. 16, s. 1 (2).

(10) Repealed:  1992, c. 18, s. 25 (11).

(11) Spent:  1998, c. 34, s. 21 (5).

Research investment incentive

25.0.1 (1) An eligible investor may apply for a research investment incentive if the investor, or a qualifying trust for the eligible investor, purchases Class A shares issued by a research oriented investment fund after 2000 and before March 2, 2001.  2000, c. 42, s. 8; 2004, c. 16, s. 1 (2).

Application by eligible investor

(2) An application for a research investment incentive shall be made to the Minister and shall be in a form approved by the Minister.  2000, c. 42, s. 8; 2004, c. 16, s. 1 (2).

Same, by corporation

(3) The Minister may authorize a labour sponsored investment fund corporation to apply on behalf of its shareholders for research investment incentives and may impose conditions with respect to the authorization.  2000, c. 42, s. 8; 2004, c. 16, s. 1 (2).

Payment of incentive

(4) Subject to subsection (5), the Minister shall pay the research investment incentive to the eligible investor in an amount that is the lesser of,

(a) $250; and

(b) 5 per cent of the amount paid by the eligible investor, or by the qualifying trust for the eligible investor, after 2000 and before March 2, 2001 to the labour sponsored investment fund corporation on the issue of the Class A shares.  2000, c. 42, s. 8; 2004, c. 16, s. 1 (2).

Exception

(5) The Minister shall not pay the research investment incentive to the eligible investor if the Minister considers that the labour sponsored investment fund corporation that issued the Class A shares, or its directors, officers or shareholders, are conducting the business and affairs of the corporation in a manner that is contrary to the spirit and intent of this Act, whether or not this Act or the regulations have been contravened.  2000, c. 42, s. 8; 2004, c. 16, s. 1 (2).

Certificate of compliance

25.1 (1) On or before January 31, each labour sponsored investment fund corporation shall give the Minister a certificate setting out the status of the corporation’s compliance with the investment requirements of this Act during the previous calendar year.  1999, c. 9, s. 64 (1); 2004, c. 16, s. 1 (2).

Same

(1.1) The certificate must be in a form approved by the Minister.  1999, c. 9, s. 64 (1); 2004, c. 16, s. 1 (2).

Proof of compliance

(2) At the request of the Minister, a labour sponsored investment fund corporation shall give the Minister information and documents sufficient to allow the Minister to determine whether the corporation is complying with this Act.  1999, c. 9, s. 64 (1); 2004, c. 16, s. 1 (2).

Same

(2.1) The information referred to in subsection (2) must be given to the Minister in a form approved by the Minister.  1999, c. 9, s. 64 (1); 2004, c. 16, s. 1 (2).

Failure to deliver certificate

(3) Despite section 25, if a corporation fails to deliver to the Minister a certificate required under subsection (1) at the time required by subsection (1) or the additional information or documentation required under subsection (2) by the date specified in the Minister’s request,

(a) the corporation shall be considered not to be in compliance with sections 17 and 18.1 as of the following date:

1. In the case of a failure to give the Minister the certificate required by subsection (1), January 1 of the year in which the certificate should have been given to him or her.

2. In the case of a failure to give information or documents required by subsection (2) to the Minister, the date on which the information or documents should have been given to him or her;

(b) no further tax credit certificates shall be issued under section 25 in respect of Class A shares issued after the date of the failure to deliver the certificate, information or documentation until the corporation delivers the certificate or provides the information or documentation.  1996, c. 24, s. 8; 1996, c. 29, s. 13 (1); 1999, c. 9, s. 64 (2); 2004, c. 16, s. 1 (2).

Order to stop issuing certificates

(4) If the Minister is of the opinion that a labour sponsored investment fund corporation is not in compliance with section 17 or 18.1 at any particular time, the Minister may stop issuing tax credit certificates in respect of Class A shares of the corporation issued after that particular time or, if the corporation issues tax credit certificates under an arrangement referred to in subsection 25 (9), order the corporation to stop issuing tax credit certificates in respect of Class A shares issued by the corporation after the date of the order until the corporation provides proof to the satisfaction of the Minister that the corporation is in compliance with sections 17 and 18.1.  1996, c. 29, s. 13 (2); 2004, c. 16, s. 1 (2).

Penalty

(5) A corporation shall pay to the Minister a penalty equal to twice the amount of all investment corporation tax credits for which it issues tax credit certificates in respect of Class A shares issued at a time when the corporation is not in compliance with section 17 or 18.1 or is considered under clause (3) (a) not to be in compliance with either of those sections.  1999, c. 9, s. 64 (3); 2004, c. 16, s. 1 (2).

Declaration of non-application

(5.1) The Minister may declare that subsections (3), (4) and (5) do not apply to a corporation if the corporation has reduced its tax liability under subsection 28 (3) for a calendar year to nil as a result of a reduction described in paragraph 2 of subsection 24.1 (3).  1998, c. 34, s. 22; 1999, c. 9, s. 64 (4); 2004, c. 16, s. 1 (2).

Same

(5.2) The declaration applies with respect to such period as the Minister specifies, but the period shall expire no earlier than the end of the calendar year after the calendar year referred to in subsection (5.1).  1998, c. 34, s. 22; 2004, c. 16, s. 1 (2).

Revocation of declaration

(5.3) The Minister may revoke the declaration if the Minister considers that the corporation set aside funds as described in subsection 24.1 (1) for the primary purpose of avoiding the application of subsections (3), (4) and (5).  1998, c. 34, s. 22; 2004, c. 16, s. 1 (2).

Penalty upon revocation

(5.4) If the Minister revokes the declaration, the corporation shall pay a penalty equal to the total amount of all investment corporation tax credits for which it issued tax credit certificates while the declaration was in effect.  1998, c. 34, s. 22; 2004, c. 16, s. 1 (2).

(6) Repealed:  1999, c. 9, s. 64 (5).

Saving

(7) If a labour sponsored investment fund corporation can provide proof to the satisfaction of the Minister that a tax credit certificate in respect of a tax credit was issued at a time when the corporation was in compliance with sections 17 and 18.1, the amount of any penalty payable under this section shall be determined without reference to the tax credit.  1996, c. 24, s. 8; 2004, c. 16, s. 1 (2).

Section 31 does not apply

(8) Section 31 does not apply to any action taken by the Minister under this section.  1996, c. 24, s. 8; 2004, c. 16, s. 1 (2).

Revocation of registration of corporation

26. (1) Subject to section 31, the Minister may revoke the registration of an investment corporation if,

(a) the investment corporation is registered under Part II or III and fails to maintain the required level of eligible investments;

(b) the investment corporation fails to meet the requirements imposed by its articles;

(b.1) the investment corporation fails to comply with section 14.1;

(c) the investment corporation is registered under Part II and becomes a party to a transaction or a series of transactions that result or would result in a direct or indirect change of control of the investment corporation, including an amalgamation, merger, arrangement or winding-up of the corporation, unless,

(i) the date of the transaction or the first transaction in the series of transactions is at least five years after the last date on which a Class A share was issued by the corporation, or

(ii) the action has been approved in advance by the Minister of Enterprise, Opportunity and Innovation;

(d) the investment corporation fails to comply with or contravenes this Act or the regulations;

(e) the Minister is of the opinion that the investment corporation, its officers, directors or shareholders, or the employee organization or a community sponsor connected with it, are conducting their business or affairs in a manner that is contrary to the spirit and intent of this Act or for the purpose of enabling a person to obtain a tax credit or investment credit to which the person would not otherwise be entitled; or

(f) the corporation is an employee ownership labour sponsored venture capital corporation and the corporation is no longer in compliance with its approved business plan.  1992, c. 18, s. 26 (1); O.C. 354/93; 1994, c. 17, s. 89; 1997, c. 43, Sched. C, ss. 16, 23 (1); 2001, c. 23, s. 17; 2002, c. 22, s. 27; 2004, c. 16, s. 1 (2).

Ministerial discretion

(2) If an investment corporation does not comply with this Act or the regulations, but the Minister is of the opinion that the corporation is meeting the spirit and intent of this Act, the Minister may, for such time as the Minister considers appropriate, refrain from revoking the registration of the corporation.  1992, c. 18, s. 26 (2); 1997, c. 43, Sched. C, s. 23 (1); 2004, c. 16, s. 1 (2).

Surrender of registration

(3) Upon the request of a corporation registered under this Act, the Minister may accept the surrender of the registration of the corporation if,

(a) the corporation pays to the Minister the amount, if any, required to be paid under section 27;

(a.1) the corporation pays an amount equal to the amount, if any, that would be owing under subsection 28 (3) calculated as if the year has ended immediately before the corporation’s registration is surrendered; and

(b) the corporation files with the Minister the prescribed information and meets all other prescribed conditions.  1992, c. 18, s. 26 (3); 1999, c. 9, s. 65; 2004, c. 16, s. 1 (2).

Payment of tax credits, special cases

27. (1) An employee ownership labour sponsored venture capital corporation whose registration is revoked by the Minister, that makes a request under section 26 to surrender its registration under this Act or that proposes to wind up or dissolve, shall immediately pay to the Minister an amount of money equal to the lesser of,

(a) the total amount of all tax credits for which tax credit certificates were issued or may be issued under this Act in respect of all Class A shares of the corporation then outstanding which were issued within the five years immediately preceding the date of the revocation, the surrender of registration or the winding up or dissolution; or

(b) the total amount that would be determined for the purposes of clause (a) as the total amount of all tax credits in respect of the Class A shares referred to in clause (a) if the equity capital received by the investment corporation on the issue of each of the shares had been an amount equal to the fair market value of the share at the date of the revocation of registration, the surrender of registration or the winding up or dissolution, and not the amount of equity capital actually received by the corporation.  1992, c. 18, s. 27 (1); 1997, c. 43, Sched. C, ss. 17 (1), 23 (1); 2004, c. 16, s. 1 (2).

Repayment of tax credits

(2) A labour sponsored investment fund corporation whose registration is revoked by the Minister shall immediately pay to the Minister an amount of money equal to the lesser of,

(a) the total amount of all tax credits for which tax credit certificates were issued or may be issued under this Act in respect of,

(i) all Class A shares of the corporation then outstanding that were issued and paid for before May 7, 1996 and within the five years immediately preceding the date of revocation, surrender of registration, winding up or dissolution, and

(ii) all Class A shares of the corporation then outstanding that were issued and paid for after May 6, 1996 and within eight years immediately preceding the date of the revocation, surrender of registration, winding up or dissolution; or

(b) the total amount that would be determined for the purposes of clause (a) as the total amount of all tax credits in respect of the Class A shares referred to in clause (a) if the equity capital received by the labour sponsored investment fund corporation on the issue of each of the shares had been an amount equal to the fair market value of the share at the date of the revocation, surrender of registration, winding up or dissolution, and not the amount of equity capital actually received by the corporation.  1997, c. 43, Sched. C, s. 17 (2); 1999, c. 9, s. 66 (1); 2004, c. 16, s. 1 (2).

Same

(2.1) A labour sponsored investment corporation that makes a request under section 26 to surrender its registration under this Act or that proposes to wind up or dissolve shall immediately pay to the Minister an amount of money equal to the total of all amounts, each of which is the amount in respect of a Class A share of the capital stock of the particular corporation outstanding immediately before the particular time that is determined using the formula,

A × B

in which,

  “A” is,

(a) if the original acquisition of the share was before May 7, 1996 and less than five years before the particular time, 4 per cent of the consideration received by the particular corporation for the issue of the share,

(b) if the original acquisition of the share was after May 6, 1996 and less than eight years before the particular time, 1.875 per cent of the consideration received by the particular corporation for the issue of the share, and

(c) in any other case, nil; and

  “B” is,

(a) if the original acquisition of the share was before May 6, 1996, the number obtained when the number of whole years throughout which the share was outstanding before the particular time is subtracted from five, and

(b) in any other case, the number obtained when the number of whole years throughout which the share was outstanding is subtracted from eight. 

1999, c. 9, s. 66 (2); 2004, c. 16, s. 1 (2).

(3) Repealed:  1994, c. 17, s. 90.

Liability of holder

(4) If a person as the holder of a Class A share issued by an employee ownership labour sponsored venture capital corporation within the immediately preceding five years receives an amount in respect of the reduction of the stated capital account attributable to the Class A shares, other than by way of a redemption of the Class A shares, the person shall immediately pay to the Minister an amount of money equal to the tax credit percentage applied to the amount so received.  1997, c. 43, Sched. C, s. 17 (3); 2004, c. 16, s. 1 (2).

Same

(4.1) If a person as the holder of a Class A share issued by a labour sponsored investment fund corporation receives an amount in respect of the reduction of the stated capital account attributable to the Class A shares, the person shall immediately pay to the Minister an amount of money equal to the sum of,

(a) 20 per cent of the amount received in respect of Class A shares issued within the immediately preceding five years and before May 7, 1996; and

(b) 15 per cent of the amount received in respect of Class A shares issued within the immediately preceding eight years and after May 6, 1996.  1997, c. 43, Sched. C, s. 17 (3); 2004, c. 16, s. 1 (2).

Liability of corporation

(5) The investment corporation is jointly and severally liable with its shareholder for all amounts payable by the shareholder under this section and is entitled to deduct or withhold from any amount paid or payable to the shareholder or to otherwise recover from the shareholder all amounts paid by it under this section.  1997, c. 43, Sched. C, s. 17 (3); 2004, c. 16, s. 1 (2).

Reduction of liability

(6) An amount required by the articles of an investment corporation to be deducted and remitted to the Minister on the redemption of a Class A share of the corporation may be reduced by amounts paid under this section that may reasonably be considered to relate to the share being redeemed.  1997, c. 43, Sched. C, s. 17 (3); 2004, c. 16, s. 1 (2).

Debt to the Crown

(7) An amount required to be paid to the Minister under this Act is a debt due to the Crown in right of Ontario.  1992, c. 18, s. 27 (7); 2004, c. 16, s. 1 (2).

Rebate of payments to the Minister

(8) If the Minister is satisfied that an investor has not received all or part of the benefit of an investment corporation tax credit under the Income Tax Act or a tax credit under section 127.4 of the Income Tax Act (Canada), the Minister may make a rebate or payment of all or part of any amount paid or payable to the Minister under this Act, in respect of Class A shares to which the tax credit relates, in such amount and to such person or persons as the Minister considers to be entitled to receive the rebate or payment.  1992, c. 18, s. 27 (8); 1997, c. 43, Sched. C, s. 23 (2); 1999, c. 9, s. 66 (3); 2004, c. 16, s. 1 (2).

Notice of amalgamation or merger, etc.

27.1 (1) A labour sponsored investment fund corporation that has issued Class A shares shall notify the Minister in writing if it proposes an amalgamation or merger.  1999, c. 9, s. 67; 2004, c. 16, s. 1 (2).

Same

(2) The notice must be given at least 30 days before the proposed amalgamation or merger and it must be accompanied by such information and documents as the Minister may request.  1999, c. 9, s. 67; 2004, c. 16, s. 1 (2).

Effect of amalgamation or merger

(3) The following rules apply if at least one of the corporations that is amalgamating or merging is a labour sponsored investment fund corporation immediately before the amalgamation or merger:

1. For the purposes of this Act, the new corporation shall be deemed to be the same corporation as, and a continuation of, each predecessor corporation.

2. The new corporation shall be deemed to have been registered under Part III on the earliest date on which any of the predecessor corporations was registered under this Act.

3. For the purposes of this Act, the new corporation shall be deemed to have issued all Class A shares issued by a predecessor corporation for the amount of equity capital received by the predecessor corporation on the issue of those shares.

4. If a predecessor corporation was authorized to issue a class of shares to which subclause 14 (1) (c) (iii) applies, the new corporation shall be deemed to have received the Minister’s approval to issue substantially similar shares at the time of the amalgamation or merger.

5. Each of the new shares issued by the new corporation upon the amalgamation or merger in replacement of shares that were issued by a predecessor corporation shall be deemed to have been issued at the time that the predecessor corporation issued the replaced shares.  1999, c. 9, s. 67; 2004, c. 16, s. 1 (2).

Effect of certain types of non-compliance

(4) The rules set out in subsection (5) apply,

(a) if, immediately after the amalgamation or merger, the articles of the new corporation do not meet the requirements of clause 14 (1) (c), (d) or (f);

(b) if the new corporation does not comply with subsection 13 (1);

(c) if, immediately before the amalgamation or merger, the registration of a predecessor corporation under this Act was revoked; or

(d) if  the new corporation distributed any property other than its Class A shares to shareholders in exchange for Class A shares of a predecessor corporation.  1999, c. 9, s. 67; 2002, c. 22, s. 28; 2004, c. 16, s. 1 (2).

Same

(5) Subject to subsection (6), the following rules apply in any of the circumstances described in subsection (4):

1. The new corporation shall be deemed to have surrendered its registration under this Act immediately after the amalgamation or merger.

2. The new corporation shall promptly pay to the Minister the amount of money that each predecessor corporation would have been required to pay under subsection 27 (2.1) if it had surrendered its registration under this Act immediately before the amalgamation or merger.  1999, c. 9, s. 67; 2004, c. 16, s. 1 (2).

Exception

(6) The Minister may exempt a new corporation from all or part of subsection (5) upon such conditions as he or she considers appropriate.  1999, c. 9, s. 67; 2004, c. 16, s. 1 (2).

Definitions

(7) In this section,

“new corporation” means the corporation that results from the amalgamation or merger of a predecessor corporation and one or more other corporations; (“nouvelle société”)

“predecessor corporation” means a corporation that is amalgamated or merged and that is or was a labour sponsored investment fund corporation. (“société remplacée”)  1999, c. 9, s. 67; 2004, c. 16, s. 1 (2).

Notice of dissolution, etc.

27.2 (1) A labour sponsored investment fund corporation that has issued Class A shares shall notify the Minister in writing if it proposes to dissolve or wind up.  1999, c. 9, s. 67; 2004, c. 16, s. 1 (2).

Same

(2) The notice must be given at least 30 days before the proposed dissolution or wind-up and it must be accompanied by such information and documents as the Minister may request.  1999, c. 9, s. 67; 2004, c. 16, s. 1 (2).

Investment level tax

28. (1) An employee ownership labour sponsored venture capital corporation that does not meet or maintain the level of eligible investments required by section 9 to be held by the corporation at the end of a particular fiscal year shall immediately pay to the Minister a tax for the year equal to the amount determined using the formula,

T = (A × 20/100) – B

where,

  “T” is the tax payable under this subsection;

  “A” is the amount by which the amount of the corporation’s equity capital received on the issue of its Class A shares that is required by this Act to be maintained in eligible investments as of the end of the fiscal year exceeds the total of all amounts, each of which is the cost to the corporation of an eligible investment held by the corporation at the end of the fiscal year; and

  “B” is the amount of any tax paid by the corporation under this subsection in respect of any preceding year that has not been rebated to the corporation under subsection (2).

1996, c. 29, s. 14 (2); 1999, c. 9, s. 68 (1); 2004, c. 16, s. 1 (2).

Rebate

(2) Upon receipt of an application from an investment corporation that has paid a tax under subsection (1) in respect of a fiscal year, the Minister may rebate the tax without interest to the corporation if,

(a) the application is received within three years after the end of the fiscal year in respect of which the tax was imposed; and

(b) the Minister is satisfied that no later than the end of the second fiscal year ending after the fiscal year in respect of which the tax was imposed the investment corporation maintained throughout a full fiscal year and continues to maintain the level of eligible investments required by this Act to be maintained by the corporation.  1992, c. 18, s. 28 (2); 1997, c. 43, Sched. C, s. 23 (1); 2004, c. 16, s. 1 (2).

Investment level tax, labour sponsored investment fund corporation

(3) A labour sponsored investment fund corporation that does not meet or maintain the level of eligible investments required by section 17 to be held by the corporation at the end of a particular calendar year or that does not comply with the investment restrictions and meet the requirements for eligible investments specified by section 18.1 shall pay to the Minister a tax for the year equal to the amount by which the greater of,

(a) 15 per cent of the amount by which the amount of the corporation’s equity capital received on the issue of its Class A shares that is required by this Act to be maintained in eligible investments as of the end of the calendar year exceeds the total of all amounts, each of which is the cost to the corporation of an eligible investment held by the corporation at the end of the calendar year; and

(b) the aggregate of,

(i) Repealed:  2001, c. 23, s. 18 (1).

(i.1) 15 per cent of the amount by which “C” exceeds “D” where,

“C” is the amount invested by the corporation during the calendar year in eligible businesses that are listed companies, and

“D” is the limit on investments in listed companies that is imposed by subsection 18.1 (5), and

(ii) 15 per cent of the amount by which the amount of the corporation’s equity capital received on the issue of Class A shares after May 6, 1996 that is required by subsection 18.1 to be invested at the end of the calendar year in eligible businesses that are small businesses exceeds the total of all amounts, each of which is a cost to the corporation of an eligible investment in an eligible business that is a small business held by the corporation at the end of the calendar year,

exceeds,

(c) the amount of any tax paid by the corporation under this subsection, other than an amount described in subclause 28 (3) (b) (i.1), in respect of any preceding year that has not been rebated to the corporation under subsection (4).  1996, c. 29, s. 14 (4); 1999, c. 9, s. 68 (2, 3); 2001, c. 23, s. 18 (1-3); 2004, c. 16, s. 1 (2).

Same

(3.1) The corporation shall pay the tax required by subsection (3) no later than the day on which it is required to give the Minister the certificate required by subsection 25.1 (1) or the information required by subsection 25.1 (2), whichever applies.  1999, c. 9, s. 68 (4); 2004, c. 16, s. 1 (2).

Rebate

(4) Upon receipt of an application from a labour sponsored investment fund corporation that has paid a tax under subsection (3) with respect to a calendar year, the Minister may rebate the tax without interest to the corporation if,

(a) the application is received within three years after the end of the calendar year with respect to which the tax was imposed; and

(b) the Minister is satisfied that the corporation is maintaining the level of eligible investments required by section 17 and is complying with the investment restrictions and meeting the requirements for eligible investments specified by section 18.1.  1996, c. 29, s. 14 (4); 1998, c. 34, s. 23; 1999, c. 9, s. 68 (5); 2004, c. 16, s. 1 (2).

Definitions

(5) In this section,

“listed company” and “small business” have the same meaning as in subsection 18.1 (1).  2001, c. 23, s. 18 (4); 2004, c. 16, s. 1 (2).

Investment level tax, shareholder in community small business investment corporation

28.1 (1) Subject to subsection (1.1), a shareholder in a community small business investment fund corporation that does not meet the level of eligible investments required by section 18.7 to be held by the corporation at the end of a particular year shall immediately pay to the Minister a tax for the year equal to the amount determined using the formula,

T = [(P × A) – B] × C/D

where,

  “T” is the tax payable by the shareholder under this subsection;

“P” is,

(a) 15 per cent if the shareholder is a labour sponsored investment fund corporation,

(b) 30 per cent if the shareholder is a qualifying financial institution or a specified corporation or insurance corporation related to the qualifying financial institution for the purposes of section 66.1 of the Corporations Tax Act, or

(c) 7.5 per cent if the shareholder is a qualifying individual or qualifying corporation;

  “A” is the amount by which,

(a) the amount of the community small business investment fund corporation’s equity capital received on the issue of its Class A shares that is required by this Act to be invested in eligible investments at the end of the year,

exceeds,

(b) the total of all amounts, each of which is the cost to the corporation of an eligible investment held by the corporation at the end of the year;

  “B” is the amount of any tax paid by the shareholder under this subsection in respect of any prior year that has not been rebated to the shareholder under subsection (2);

  “C” is percentage of the equity capital received by the corporation on the issue of its Class A shares that are held by the shareholder; and

  “D” is the percentage of the equity capital received by the corporation on the issue of all Class A shares that are held by eligible investors.

1997, c. 43, Sched. C, s. 18; 1998, c. 34, s. 24 (1, 2); 1999, c. 9, s. 69 (1, 2); 2004, c. 16, s. 1 (2).

Maximum amount

(1.1) A shareholder who is a qualifying individual or qualifying corporation is not required to pay tax under subsection (1) in an amount greater than $37,500 less the total of all amounts paid under that subsection that have not been rebated.  1998, c. 34, s. 24 (3); 1999, c. 9, s. 69 (3); 2004, c. 16, s. 1 (2).

Tax rebate

(2) Upon receipt of an application from a shareholder of a community small business investment fund corporation who has paid a tax under subsection (1) with respect to a year, the Minister may rebate the tax without interest to the shareholder if the corporation meets the investment requirements for the year within the year following the year in respect of which the tax was imposed.  1997, c. 43, Sched. C, s. 18; 2004, c. 16, s. 1 (2).

Tax payable

29. (1) An amount payable under this Act to the Minister or the Crown by an investment corporation or any other corporation shall be deemed to be a tax imposed on the corporation under Part II of the Corporations Tax Act, payable on the date the liability arises, for the purposes of collection and enforcement under that Act.  1992, c. 18, s. 29 (1); 1997, c. 43, Sched. C, s. 23 (1); 2004, c. 16, s. 1 (2).

Corporations Tax Act applies

(2) For the purposes of subsection (1), sections 98 to 108 of the Corporations Tax Act apply and for the purpose,

(a) “corporation” means person; and

(b) “tax” means an amount payable under this Act to the Minister or the Crown in right of Ontario.  1992, c. 18, s. 29 (2); 2004, c. 16, s. 1 (2).

Notice of demand

30. (1) If an amount is payable to the Minister or the Crown or is deemed to be so payable under this Act, the Minister may, by notice of demand in writing to the person by whom the payment is owing or claimed to be owing, demand payment immediately or in such number of days as are specified in the demand, and, if the payment is not made as demanded, the Minister may recover and collect the amount by any of the remedies or procedures provided for in this Act.  1992, c. 18, s. 30 (1); 2004, c. 16, s. 1 (2).

Effect

(2) Even if an objection or other proceeding under section 31 has been commenced or may be commenced, every amount demanded under subsection (1) remains payable and recoverable until the demand therefor is revoked in writing by the Minister.  1992, c. 18, s. 30 (2); 2004, c. 16, s. 1 (2).

Notice of proposal by Minister

31. (1) The Minister shall serve notice of a proposal by the Minister,

(a) to refuse to register a corporation under this Act;

(b) to revoke the registration of an investment corporation;

(c) Repealed:  1999, c. 9, s. 70.

(d) to refuse to make a rebate under section 28; or

(e) to refuse to issue a tax credit certificate or allow an investment credit under this Act.  1992, c. 18, s. 31 (1); 1997, c. 43, Sched. C, ss. 19, 23 (1); 1999, c. 9, s. 70; 2004, c. 16, s. 1 (2).

Service of notice of proposal

(2) The Minister shall serve the notice under subsection (1) upon the corporation in the prescribed manner, together with written reasons for the proposal.  1992, c. 18, s. 31 (2); 2004, c. 16, s. 1 (2).

Deemed service

(3) If the Minister has not registered a corporation under this Act within four months of the date on which all material and information required by this Act to be filed as part of or with the application, the Minister shall be deemed to have served a notice of proposal under subsection (1) to refuse to register the corporation.  1992, c. 18, s. 31 (3); 2004, c. 16, s. 1 (2).

Notice of objection

(4) A person or group served with a notice of proposal under subsection (1) may, within sixty days from the day of mailing of the proposal or the date upon which the Minister has been deemed under subsection (3) to have refused registration, serve on the Minister a notice of objection in duplicate in the form approved by the Minister setting out the reasons for the objection and all relevant facts.  1992, c. 18, s. 31 (4); 1997, c. 19, s. 11 (1); 2004, c. 16, s. 1 (2).

Service of notice of objection

(5) A notice of objection under this section shall be served by being sent by registered mail addressed to the Minister.  1992, c. 18, s. 31 (5); 2004, c. 16, s. 1 (2).

Idem, acceptance

(6) The Minister may accept a notice of objection under this section even though it was not served in the required manner.  1992, c. 18, s. 31 (6); 2004, c. 16, s. 1 (2).

When Minister may carry out proposal

(7) If notice of objection is not served under subsection (4), the Minister may carry out the proposal stated in the notice under subsection (1).  1992, c. 18, s. 31 (7); 2004, c. 16, s. 1 (2).

Reconsideration by Minister

(8) Upon receipt of the notice of objection, the Minister shall with all due dispatch reconsider the proposal objected to and confirm, vary or abandon the proposal, and the Minister shall notify the person making the objection of the Minister’s action by registered mail.  1992, c. 18, s. 31 (8); 2004, c. 16, s. 1 (2).

Decision

(9) A decision of the Minister under subsection (8) is final and is not subject to appeal except if the decision involves the interpretation of a provision of this Act, or involves an issue solely of law.  1992, c. 18, s. 31 (9); 2004, c. 16, s. 1 (2).

Application to Divisional Court

(10) In a dispute over a decision or action of the Minister under subsection (8), the Minister may, if the dispute involves the interpretation of a provision of this Act or involves an issue solely of law in which no facts are in dispute or involves the proper inference to be drawn from facts that are not in dispute, agree in writing with the disputing party as to the undisputed facts and thereafter apply to the Divisional Court to have the issue in dispute determined, and, if the Minister does not make the application within ten weeks of the date upon which the undisputed facts have been agreed upon in writing, the other party to the dispute may apply to the court to have the issue determined.  1992, c. 18, s. 31 (10); 2004, c. 16, s. 1 (2).

Audits and investigations

32. (1) For any purpose related to the administration or enforcement of this Act or the regulations, a person authorized by the Minister may, at all reasonable times, enter any premises or place where a business is carried on or property is kept or anything is done in connection with an investment corporation or an eligible business, or books and records of an investment corporation or an eligible business are or should be kept and,

(a) audit or examine the books and records and any account, voucher, letter, telegram, or other document that relates or may relate to the registration, operations, expenditures or investments of an investment corporation or an eligible business;

(b) examine any property, process or matter, an examination of which may assist in the determination of any question related to the registration, operations, expenditures or investments of an investment corporation or an eligible business; and

(c) require the president, manager, secretary, or any officer, director, agent, partner, employee or representative of an investment corporation or an eligible business to provide reasonable assistance with the audit or examination, and to answer questions relating to the audit or examination either orally or, if required, in writing, on oath or by statutory declaration.  1992, c. 18, s. 32 (1); 1997, c. 43, Sched. C, s. 23 (1); 2004, c. 16, s. 1 (2).

Demand for information

(2) The Minister may, for any purpose related to the administration or enforcement of this Act or the regulations, by registered letter or by demand served personally, require from a person, partnership, syndicate, trust or corporation, or from an officer or agent thereof, the production of letters, accounts, invoices, statements, financial or otherwise, ledgers, journals, computer programs and data files, minute books, or other books of account, documents or information in the possession or control of such person, partnership, syndicate, trust or corporation which may assist the Minister in determining whether an investment corporation or an eligible business has complied with the requirements of this Act or the regulations, and production thereof shall be made within such reasonable time as is stipulated in the letter or demand.  1992, c. 18, s. 32 (2); 1997, c. 43, Sched. C, s. 23 (1); 2004, c. 16, s. 1 (2).

Search warrant

(3) Where an officer or employee of the Ministry of Finance has reasonable and probable grounds to believe that a contravention of this Act or the regulations has occurred, the person may secure a search warrant pursuant to section 158 of the Provincial Offences Act.  1992, c. 18, s. 32 (3); 1994, c. 17, s. 91 (1); 2004, c. 16, s. 1 (2).

Powers of inquiry

(4) The Minister may, for any purpose related to the administration or enforcement of this Act or the regulations, authorize any person, whether or not that person is an officer of the Ministry of Finance, to make such inquiry as that person deems necessary with reference to the administration or enforcement of this Act or the regulations.  1992, c. 18, s. 32 (4); 1994, c. 17, s. 91 (1); 2004, c. 16, s. 1 (2).

Idem

(5) For the purpose of an inquiry under subsection (4), the person authorized to conduct the inquiry has all the powers of a commission under Part II of the Public Inquiries Act, which part shall apply to an inquiry under subsection (4) as if it were an inquiry under that Act.  1992, c. 18, s. 32 (5); 2004, c. 16, s. 1 (2).

Copies

(6) If a book, record, or other document has been examined or produced under this section, or has been seized under section 158 of the Provincial Offences Act, the person by whom it is seized or examined, or to whom it is produced or any officer of the Ministry of Finance may make, or cause to be made, one or more certified copies thereof, and a copy certified by a person authorized by the Minister pursuant to this section is admissible in evidence and has the same probative force as the original document would have had if it had been proven in the ordinary way.  1992, c. 18, s. 32 (6); 1994, c. 17, s. 91 (1); 2004, c. 16, s. 1 (2).

Definition, eligible business

(7) For the purposes of this section and sections 33 and 34,

“eligible business” includes a corporation and partnership referred to in section 11.  1992, c. 18, s. 32 (7); 2004, c. 16, s. 1 (2).

(8) Repealed:  1994, c. 17, s. 91 (2).

Requirement to keep books and records

33. (1) Every investment corporation and every eligible business shall keep records and books of account at its permanent establishment in Ontario, or at such other place as is designated by the Minister, in such form and containing such information as will enable the Minister to verify that the investment corporation or eligible business has complied with this Act and the regulations.  1992, c. 18, s. 33 (1); 1997, c. 43, Sched. C, s. 23 (1); 2004, c. 16, s. 1 (2).

Order to keep records and books of account

(2) The Minister may require an investment corporation or eligible business that has failed to prepare and maintain adequate records and books of account for the purposes of this Act to prepare and maintain such records and books of account as the Minister specifies.  1992, c. 18, s. 33 (2); 1997, c. 43, Sched. C, s. 23 (1); 2004, c. 16, s. 1 (2).

Compliance with order

(3) The investment corporation or eligible business shall prepare and maintain the records and books of account specified in the order by the Minister.  1992, c. 18, s. 33 (3); 1997, c. 43, Sched. C, s. 23 (1); 2004, c. 16, s. 1 (2).

Retention of books and records

(4) Every investment corporation and every eligible business required by this Act to keep records and books of account shall, until permission for their disposal is obtained from the Minister, retain every such record or book of account and every document or voucher necessary to verify the information in such records and books of account.  1992, c. 18, s. 33 (4); 1997, c. 43, Sched. C, s. 23 (1); 2004, c. 16, s. 1 (2).

Offence

34. (1) Every person is guilty of an offence who,

(a) makes, or assists in making a statement in any document required by or for the purposes of this Act or the regulations that, at the time and in light of the circumstances under which it was made, is false or misleading in respect of any material fact, or that omits to state any material fact the omission of which makes the statement false or misleading;

(b) makes, or assists in making false or misleading entries in the records or books of account of an investment corporation or an eligible business;

(c) knowingly fails to record material particulars in the records or books of account of an investment corporation or an eligible business;

(d) fails to comply with an order, decision, direction, requirement or demand made under this Act or the regulations; or

(e) contravenes this Act or the regulations.  1992, c. 18, s. 34 (1); 1997, c. 43, Sched. C, s. 23 (1); 2004, c. 16, s. 1 (2).

Penalty

(2) Every person who is guilty of an offence under subsection (1) is liable on conviction to a fine of not less than $1,000 and not more than $20,000, or to imprisonment for a term of not more than two years, or to both such fine and imprisonment.  1992, c. 18, s. 34 (2); 2004, c. 16, s. 1 (2).

Penalty, disclosure document

(3) Every person convicted of an offence described in clause (1) (a) in respect of a disclosure document is liable on conviction to a fine of not less than $5,000 and not more than $1,000,000 or to imprisonment for a term of not more than two years, or both such fine and imprisonment, and not as provided in subsection (2).  1992, c. 18, s. 34 (3); 2004, c. 16, s. 1 (2).

Exception

(4) No person is guilty of an offence under clause (1) (a) or (b) if the person did not know that the statement or entry was false or misleading, and in the exercise of reasonable diligence could not have known that the statement or entry was false or misleading.  1992, c. 18, s. 34 (4); 2004, c. 16, s. 1 (2).

Failure to comply with demand

(5) Every person who fails to comply with a demand issued under subsection 32 (2) is guilty of an offence and is liable on conviction to a fine of $200 for each day on which the offence occurs or continues.  1992, c. 18, s. 34 (5); 2004, c. 16, s. 1 (2).

Failure to file return

(6) Every investment corporation that fails to file a return at the time and in the manner required by section 22 or 23 is guilty of an offence and is liable on conviction to a fine of $200 for each day on which the offence occurs or continues.  1992, c. 18, s. 34 (6); 1997, c. 43, Sched. C, s. 23 (1); 2004, c. 16, s. 1 (2).

Compliance

(7) Every person who hinders, molests, or interferes with a person authorized by the Minister to perform a duty under this Act or the regulations, or who prevents or attempts to prevent a person authorized by the Minister from doing anything which that person is authorized to do, is guilty of an offence and on conviction is liable to a fine of not less than $1,000 and not more than $10,000.  1992, c. 18, s. 34 (7); 2004, c. 16, s. 1 (2).

Failure to keep records

(8) A investment corporation or an eligible business that fails to comply with a requirement by the Minister to prepare or maintain records and books of account is guilty of an offence and on conviction is liable to a fine of $200 for each day on which the offence occurs or continues.  1992, c. 18, s. 34 (8); 1997, c. 43, Sched. C, s. 23 (1); 2004, c. 16, s. 1 (2).

Officers, etc., of corporations

(9) If a corporation commits an offence against this Act, an officer, director, employee, shareholder or agent of the corporation who directed, authorized, assented to, acquiesced in, or participated in the commission of the offence is guilty of the offence and on conviction is liable to the punishment provided for the offence whether or not the corporation has been prosecuted or convicted.  1992, c. 18, s. 34 (9); 2004, c. 16, s. 1 (2).

Limitation period

(10) A proceeding in respect of an offence under this Act shall not be commenced later than six years after the date when the offence was, or is alleged to have been, committed.  1992, c. 18, s. 34 (10); 2004, c. 16, s. 1 (2).

Application to court by Minister

35. (1) The Minister may apply to the Ontario Court (General Division) for an order against a person who fails to comply with or contravenes this Act or the regulations.  1992, c. 18, s. 35 (1); 2004, c. 16, s. 1 (2).

Nature of order

(2) An order under subsection (1) may direct the person to comply with, or may restrain the person from contravening, one or more specific provisions of this Act or the regulations, or the court may make such further or other order as the court considers appropriate in the circumstances.  1992, c. 18, s. 35 (2); 2004, c. 16, s. 1 (2).

Persons affected by order

(3) An order under subsection (1) may be directed also to any one or more of,

(a) the directors and senior officers of the person if the person is a corporation;

(b) the partners, if the person is a partnership;

(c) the members who comprise the person, if the person is an unincorporated association, unincorporated syndicate, unincorporated organization or a trust;

(d) the directors and senior officers of a corporation that is a partner or member mentioned in clause (b) or (c); and

(e) the partners of a partnership that is a member mentioned in clause (c).  1992, c. 18, s. 35 (3); 2004, c. 16, s. 1 (2).

Effect of other remedy or penalty

(4) An order may be made under subsection (1) despite any other remedy or penalty under this Act or the Securities Act.  1992, c. 18, s. 35 (4); 2004, c. 16, s. 1 (2).

Appeal

(5) An appeal lies to the Divisional Court from an order under subsection (1).  1992, c. 18, s. 35 (5); 2004, c. 16, s. 1 (2).

Cease trade order

36. (1) The Minister, in the circumstances specified in subsection (2), may order that trading cease in respect of the Class A shares or any of them or any other shares of a prescribed class of an employee ownership labour sponsored venture capital corporation for such period of time as is specified in the order.  1992, c. 18, s. 36 (1); 2004, c. 16, s. 1 (2).

Conditions precedent

(2) The Minister may make an order under subsection (1) if the Minister is entitled under this Act to revoke the corporation’s registration under this Act.  1992, c. 18, s. 36 (2); 1994, c. 17, s. 92; 2004, c. 16, s. 1 (2).

Limitations

(3) An order under subsection (1) may be made subject to such limitations as the Minister imposes when making the order.  1992, c. 18, s. 36 (3); 2004, c. 16, s. 1 (2).

Appeal

(4) An appeal lies to the Divisional Court from an order under subsection (1).  1992, c. 18, s. 36 (4); 2004, c. 16, s. 1 (2).

37. Repealed:  1994, c. 17, s. 93.

38. Repealed:  1994, c. 17, s. 93.

Disclosure document

39. (1) A specified employee ownership corporation or selling security holder on whose behalf a distribution of Class A shares or shares of a prescribed class is made shall send a disclosure document by prepaid mail to the purchaser of each such share either before or forthwith after agreeing to sell the share to the purchaser.  1992, c. 18, s. 39 (1); 2004, c. 16, s. 1 (2).

Delivery

(2) A disclosure document sent by prepaid mail in accordance with subsection (1) shall be deemed conclusively to have been received in the ordinary course by mail by the person to whom it was addressed.  1992, c. 18, s. 39 (2); 2004, c. 16, s. 1 (2).

Civil liability

40. (1) A purchaser of a Class A share of an employee ownership labour sponsored venture capital corporation or of a share of a prescribed class of such a corporation who suffers a loss due to misrepresentation in the disclosure document by which the share was offered has a right of action for damages for the loss.  1992, c. 18, s. 40 (1); 2004, c. 16, s. 1 (2).

Reliance on misrepresentation

(2) For the purposes of subsection (1), the purchaser shall be deemed to have relied on the misrepresentation in purchasing the share.  1992, c. 18, s. 40 (2); 2004, c. 16, s. 1 (2).

Other right

(3) The right of action under subsection (1) is in addition to and without derogation from any other right the purchaser may have at law other than the right of rescission provided in subsection (6).  1992, c. 18, s. 40 (3); 2004, c. 16, s. 1 (2).

Persons liable

(4) Subsection (1) applies only if the share was purchased during the prescribed period of distribution of such shares and the misrepresentation was a misrepresentation at the time of purchase of the share.  1992, c. 18, s. 40 (4); 2004, c. 16, s. 1 (2).

Idem

(5) The right of action under subsection (1) lies against,

(a) the employee ownership labour sponsored venture capital corporation, or the security holder, on whose behalf the distribution is made;

(b) every person who was a director of the employee ownership labour sponsored venture capital corporation at the time the disclosure document was filed with the Minister;

(c) every person whose consent has been filed with the Minister in compliance with the regulations, but only with respect to any report, opinion or statement made by the person; and

(d) any other person who signed the disclosure document.  1992, c. 18, s. 40 (5); 1994, c. 17, s. 94; 2004, c. 16, s. 1 (2).

Rescission

(6) The purchaser may elect to rescind the purchase of the share, if the share was purchased from the employee ownership labour sponsored venture capital corporation or the security holder on whose behalf the distribution was made, in which case subsection (1) does not apply in respect of the corporation or security holder, but the right of rescission is in addition to and without derogation from any other right the purchaser may have at law.  1992, c. 18, s. 40 (6); 2004, c. 16, s. 1 (2).

Application of Securities Act

(7) Subsections 130 (2) to (9) of the Securities Act apply with necessary modifications in respect of an action under this section and, for the purpose, a reference to a prospectus shall be deemed to be a reference to a disclosure document.  1992, c. 18, s. 40 (7); 2004, c. 16, s. 1 (2).

Time limit, rescission

(8) No action to rescind the purchase of a share mentioned in this section shall be commenced later than 180 days after the date of the transaction that gave rise to the cause of action.  1992, c. 18, s. 40 (8); 2004, c. 16, s. 1 (2).

Time limit, other

(9) No action mentioned in this section, other than to rescind the purchase of a share, shall be commenced later than the earlier of,

(a) 180 days after the plaintiff first had knowledge of the facts giving rise to the cause of action; or

(b) three years after the date of the transaction that gave rise to the cause of action.  1992, c. 18, s. 40 (9); 2004, c. 16, s. 1 (2).

Transitional rule

(10) This section does not apply in respect of an employee ownership labour sponsored venture capital corporation and each selling security holder of the employee ownership labour sponsored venture capital corporation in respect of sales of securities occurring after the date that the corporation becomes a reporting issuer.  1992, c. 18, s. 40 (10); 2004, c. 16, s. 1 (2).

Delegation by Minister

41. The Minister may delegate in writing any of the Minister’s duties or powers under this Act to any public servant.  1992, c. 18, s. 41; 2004, c. 16, s. 1 (2).

No action against Commission, etc.

42. (1) No action or other proceeding for damages shall be instituted against the Commission, the Director, any member, employee or agent of the Commission, or any person delegated to carry out any of the Minister’s duties or powers under this Act for any act done in good faith in the execution or intended execution of his or her duty or for any alleged neglect or default in the execution in good faith of his or her duty.  1992, c. 18, s. 42 (1); 2004, c. 16, s. 1 (2).

Liability of Crown

(2) Subsection (1) does not by reason of subsections 5 (2) and (4) of the Proceedings Against the Crown Act relieve the Crown of liability in respect of a tort committed by a person mentioned in subsection (1) to which it would otherwise be subject, and the Crown is liable under that Act for any such tort in a like manner as if subsection (1) had not been enacted.  1992, c. 18, s. 42 (2); 2004, c. 16, s. 1 (2).

Immunity re compliance

43. No person has any right or remedy and no proceeding lies or shall be brought against another person for an act or omission of such other person done or omitted in compliance with this Act, the regulations or a direction, decision, order, ruling or other requirement made or given under this Act or the regulations.  1992, c. 18, s. 43; 2004, c. 16, s. 1 (2).

Payroll deduction plan

44. (1) A group of at least fifty employees of an employer may apply to the employer for the establishment of a payroll deduction plan by the employer for the purpose of the purchase by the employees of Class A shares of an employee ownership labour sponsored venture capital corporation.  1992, c. 18, s. 44 (1); 1997, c. 43, Sched. C, s. 20; 2004, c. 16, s. 1 (2).

Establishment

(2) An employer who receives an application under subsection (1) shall cause the payroll deduction plan to be established and administered in accordance with such terms and conditions as may be agreed by the employees and the employer.  1992, c. 18, s. 44 (2); 2004, c. 16, s. 1 (2).

Issuance of shares

(3) No payroll deduction plan under which funds are held and invested in Class A shares of an employee ownership labour sponsored venture capital corporation and no agreements or arrangements in connection therewith shall,

(a) permit the issue of a Class A share of the employee ownership labour sponsored venture capital corporation to or for the benefit of any person other than the employee from whose remuneration an amount has been deducted under the plan for the purchase of the share; or

(b) permit the issue of the share by the employee ownership labour sponsored venture capital corporation before the full purchase price of the share has been paid by the employee either directly or through the payroll deduction plan.  1992, c. 18, s. 44 (3); 1997, c. 43, Sched. C, s. 20; 2004, c. 16, s. 1 (2).

Definition, employee

(4) For the purposes of this section,

“employee”, of an employer, means an individual other than a trust who has been employed on a continuing basis for an average of at least fifteen hours each week by the employer and,

(a) continues to be so employed on a year-round basis or as a regular seasonal employee of the employer, or

(b) has been temporarily laid off within the meaning of the Employment Standards Act, 2000.  1992, c. 18, s. 44 (4); 2002, c. 22, s. 29; 2004, c. 16, s. 1 (2).

Regulations

45. (1) The Lieutenant Governor in Council may make regulations,

(a) Repealed:  1997, c. 19, s. 11 (2).

(b) requiring any person to make information returns respecting any class of information required in assessing compliance with this Act;

(c) defining any word or expression used in this Act that has not already been expressly defined in this Act;

(d) prescribing conditions that a corporation must meet prior to registration;

(e) prescribing the method of determining the amount of equity capital of an investment corporation;

(f) prescribing the method of calculation to be used in determining the percentage of wages and salaries paid in Ontario for the purposes of determining whether an investment is an eligible investment or a business is an eligible business;

(g) prescribing greater percentage rates than the rates set out in this Act for calculating the amount of tax credits with respect to Class A shares of employee ownership labour sponsored venture capital corporations;

(h) requiring votes to be taken and specifying procedures for taking the votes on any preliminary matter involving the expenditure of money by eligible employees of an eligible business or the making of any commitment affecting those employees when the matter relates to the formation of an employee ownership labour sponsored venture capital corporation;

(i) prescribing any rate of interest that is to be prescribed or the method by which the rate and the interest are to be calculated;

(j) prescribing terms and conditions that shall be included or that shall not be included in the terms and conditions of payroll deduction plans established or maintained for the purpose of the purchase of shares of employee ownership labour sponsored venture capital corporations, and governing the establishment, operation and administration of such plans;

(k) prescribing any matter required or permitted by this Act to be prescribed by the regulations;

(l) providing that the amount of the tax credit in respect of any of the 1997 or a subsequent taxation year shall not be determined in accordance with paragraph 5 of subsection 25 (4) and prescribing the rules for determining the tax credit for that year;

(m) providing that the tax payable under subsection 28 (3) shall not be equal to the amount determined by the formula set out in that subsection and prescribing the rules for determining the tax payable under that subsection.  1992, c. 18, s. 45 (1); 1996, c. 24, s. 10; 1997, c. 19, s. 11 (2); 1997, c. 43, Sched. C, ss. 21, 23 (1); 2004, c. 16, s. 1 (2).

Idem

(2) The Minister may make regulations,

(a) Repealed:  1997, c. 19, s. 11 (2).

(b) prescribing any matter required or permitted by this Act to be prescribed by the Minister.  1992, c. 18, s. 45 (2); 1997, c. 19, s. 11 (2); 2004, c. 16, s. 1 (2).

Idem

(3) The Lieutenant Governor in Council, on the recommendation of the Minister, may make regulations governing specified employee ownership corporations and the trading of securities of specified employee ownership corporations and, without limiting the generality of the foregoing,

(a) designating the person or persons responsible for the administration or enforcement of regulations made under this subsection and prescribing and governing their duties and responsibilities in respect of that designation;

(b) prescribing rules and procedures that shall govern the preparation, filing, receipt, distribution and delivery of disclosure documents in respect of such corporations;

(c) prescribing the form and content of disclosure documents or of any type or types of disclosure documents in respect of such corporations;

(d) prescribing and governing the ongoing disclosure and proxy obligations of such corporations and rules and procedures that shall govern such corporations in relation to such obligations;

(e) governing or prohibiting transfers of or trading in shares or any class of shares of such corporations;

(f) governing the timing of distributions of shares or any class of shares of such corporations;

(g) prohibiting representations or solicitations or both in respect of shares or any class of shares of such corporations;

(h) governing take-over bids, issuer bids and insider reporting in respect of shares or any class of shares of such corporations;

(i) prescribing the nature of the advice to be given and the qualifications that must be held by independent advisers who provide advice to employees in respect of proposed applications for registration under this Act;

(j) exempting any person, class of persons or class of shares, in whole or in part, with or without conditions, from this Act, the Business Corporations Act, the Securities Act or a regulation made under any of them, in respect of such corporations, if the Minister determines that the person, class of persons or class of shares complies with the intent of this Act;

(k) varying the application of this Act in respect of any person, class of persons or class of shares, if the Minister determines that the person, class of persons or class of shares complies with the intent of this Act.  1992, c. 18, s. 45 (3); 1994, c. 17, s. 95; 2004, c. 16, s. 1 (2).

Idem, retroactivity

(4) A regulation is, if it so provides, effective with reference to a period before it was filed.  1992, c. 18, s. 45 (4); 2004, c. 16, s. 1 (2).

Forms, etc.

45.1 (1) The Minister may approve the use of forms for any purpose of this Act and the forms may provide for such information to be furnished as the Minister may require.  1997, c. 19, s. 11 (3); 2004, c. 16, s. 1 (2).

Fees

(2) The Minister may establish and charge fees for anything that the Minister or the Ministry is required or authorized to do under this Act.  1997, c. 19, s. 11 (3); 2004, c. 16, s. 1 (2).

Money

46. The money required for the purposes of this Act shall, until the 31st day of March, 1992 and subject to the approval of the Treasury Board, be paid out of the Consolidated Revenue Fund and thereafter shall be paid out of the money appropriated therefor by the Legislature.  1992, c. 18, s. 46; 2004, c. 16, s. 1 (2).

Part V (ss. 47-54) Repealed:  1997, c. 43, Sched. C, s. 22.

Part VI (ss. 55, 56) Repealed:  2002, c. 22, s. 30.

Part VII (ss. 57-59) Repealed:  2002, c. 22, s. 31.

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