2003 Legislative Session: 4th Session, 37th Parliament
FIRST READING
The following electronic version is for informational purposes only.
The printed version remains the official version.
HONOURABLE RICK THORPE
MINISTER OF COMPETITION, SCIENCE
AND ENTERPRISE
HER MAJESTY, by and with the advice and consent of the Legislative Assembly of the Province of British Columbia, enacts as follows:
1 Section 1 (1) of the Small Business Venture Capital Act, R.S.B.C. 1996, c. 429, is amended
(a) by adding the following definitions:
"annuitant", in relation to
(a) a trust governed by a registered retirement savings plan as defined in the Income Tax Act (Canada), means an annuitant as defined in section 146 (1) of that Act, and
(b) a trust governed by a registered retirement income fund as defined in the Income Tax Act (Canada), means an annuitant as defined in section 146.3 (1) of that Act;
"eligible business corporation" means a small business registered under Part 2; , and
(b) by repealing the definitions of "eligible investment", "equity share" and "small business" and substituting the following:
"eligible investment" means an investment permitted by section 10 or prescribed by regulation;
"equity share" means
(a) a share of a class of shares whether or not the share carries voting rights, but does not include a share having prescribed rights and restrictions,
(b) any warrants, options or rights entitling their holders to purchase or acquire the shares referred to in paragraph (a), or
(c) other prescribed securities;
"small business" means a corporation that has no more than 100 employees calculated in the prescribed manner; .
2 Section 1 is amended by adding the following subsection:
(6.1) The annuitant of a trust governed by a
(a) registered retirement savings plan, or
(b) registered retirement income fund
as defined in the Income Tax Act (Canada) is deemed to have purchased, held or disposed of shares that are purchased, held or disposed of by the trust.
3 The following heading is added immediately before section 2:
Part 1 -- Venture Capital Corporation Tax Credits .
4 Sections 2 (1), 3, 21 (4) (d) and 25 (a) are amended by striking out "this Act" wherever it appears and substituting "this Part".
5 Section 3 (1) (e) is repealed and the following substituted:
(e) has authorized capital consisting of only either or both of the following:
(i) common shares without par value having no special rights or restrictions;
(ii) common shares without par value having special rights relating only to the redemption of the shares by the company.
6 Section 6 is amended
(a) by repealing subsection (3) and substituting the following:
(3) The equity capital of a venture capital corporation, including the equity capital referred to in section 9, may be limited to prescribed maximum amounts. , and
(b) by repealing subsection (4).
7 Section 8 (2) and (3) is repealed and the following substituted:
(2) A venture capital corporation must
(a) have a prescribed amount invested in eligible investments within the prescribed time limits, and
(b) keep that amount in eligible investments for at least the prescribed period.
(3) A regulation prescribed for the purposes of subsection (2) may prescribe differently for different circumstances.
8 Section 9 is repealed and the following substituted:
9 If a venture capital corporation proposes to raise additional equity capital under this Part, other than equity capital that has been approved under section 3 (4), it must apply to the administrator who may approve of raising the additional equity capital subject to any conditions that the administrator may determine, including but not limited to
(a) a condition that the shares may only be issued, as the administrator specifies, to
(i) investing entities, or
(ii) persons,
as defined in section 20 (1), and
(b) setting the maximum consideration for which these shares may be issued to those investing entities or persons.
9 Section 10 (1) is repealed and the following substituted:
(1) A venture capital corporation may make an investment in a small business if the following criteria are met:
(a) subject to subsection (1.1), the small business, together with its affiliates, has no more than 100 employees calculated in the prescribed manner;
(b) unless otherwise provided by regulation, at least 75% of the wages and salaries, determined in the prescribed manner, of the small business are or will be paid to employees who regularly report to work at operations located in British Columbia;
(c) the small business is or will be substantially engaged, determined in the prescribed manner, in British Columbia in prescribed business activities;
(d) the investment consists or will consist of
(i) the direct acquisition from the small business of equity shares issued for the purpose of raising new equity capital,
(ii) the acquisition by the venture capital corporation of equity shares issued by the small business in prescribed circumstances under a prospectus, offering memorandum or other disclosure document,
(iii) the acquisition of equity shares of an affiliate of the small business directly from the affiliate, or
(iv) the acquisition of prescribed limited partnership units;
(e) the funds paid by the venture capital corporation for
(i) any equity shares referred to in paragraph (d) (iii) are in turn invested in equity shares of the small business by the affiliate within the time limits prescribed under section 8 (2), or
(ii) any limited partnership units referred to in paragraph (d) (iv) are in turn invested in equity shares in one or more small businesses by the limited partnership within the time limits prescribed under section 8 (2);
(f) the investment is not and will not be prohibited under sections 12 to 15.
(1.1) Subsection (1) (a) does not apply in respect of a small business in which a venture capital corporation previously invested at a time when the small business had fewer than 100 employees.
10 Section 11 is repealed.
11 Section 12 (1) is repealed and the following substituted:
(1) Subject to subsection (3), a venture capital corporation must not make or hold an investment in a small business if all or part of the proceeds of that investment are directly or indirectly used or intended to be used by the small business for any of the following purposes:
(a) lending;
(b) investment outside British Columbia;
(c) investment in land, unless the investment is incidental or ancillary to the activities, prescribed for the purposes of section 10 (1) (c), of the small business;
(d) acquiring securities other than equity shares from an affiliate of a small business, or units of a prescribed limited partnership, that complies with the criteria set out in section 10 (1) (d) (iii) and (iv);
(e) purchasing goods or services from
(i) the venture capital corporation,
(ii) a director, officer or shareholder of the venture capital corporation, or
(iii) an associate of a director, officer or shareholder of the venture capital corporation,
other than
(iv) services of the type described in section 3 (1) (f) (ii) that are purchased at fair market value by the small business, or
(v) goods or services that are sold at fair market value to the small business in the ordinary course of the seller's business as a seller of
(f) payment of all or part of a debt obligation, unless
(i) the administrator considers that the payment is necessary for the financial viability of the small business, or
(ii) the debt obligation was incurred with the prior approval of the administrator in anticipation of an investment in the small business by the venture capital corporation;
(g) as part of a transaction or series of transactions directly or indirectly involving any of the following:
(i) the purchase or redemption of previously issued shares of the small business or one of its affiliates;
(ii) the retirement of any part of a liability to a shareholder of the small business or one of its affiliates or to a shareholder's associate or affiliate;
(iii) the payment of dividends;
(iv) except in prescribed circumstances, the funding of all or part of the purchase by the small business of all or a substantial portion of the assets of a proprietorship, partnership, joint venture, trust or corporation;
(v) the funding of all or part of the purchase by the small business of any of the assets of a proprietorship, partnership, joint venture, trust or corporation at a price that is greater than the fair market value of the assets purchased;
(vi) other prescribed events;
(h) other prescribed purposes.
12 Section 14 (2) (c) and (d) is repealed and the following substituted:
(c) a director, officer or shareholder of the venture capital corporation;
(d) a member of any common interest group in respect of the venture capital corporation;
(e) another person, for the purpose of that person making an investment in the venture capital corporation.
13 Section 15 (1) is amended by striking out "$3 million." and substituting "$5 million."
14 Section 17 is repealed and the following substituted:
17 (1) If a small business in which a venture capital corporation has made an eligible investment ceases to conform to section 10 (1) (b) or (c), the venture capital corporation must dispose of the investment within 6 months after the small business ceases to conform to section 10 (1) (b) or (c).
(2) Subsection (1) does not apply if, within the 6 months referred to in subsection (1), the circumstances that caused the non-conformance with section 10 (1) (b) or (c) are changed so that the small business again conforms with section 10 (1) (b) or (c).
(3) The administrator by written order may
(a) relieve a venture capital corporation from the requirement under subsection (1) to dispose of the investment to which subsection (1) applies, or
(b) extend the period within which the disposition must be made for an additional period not exceeding 6 months,
if the administrator is satisfied that
(c) the prescribed requirements, if any, are met,
(d) the small business' non-conformance with section 10 (1) (b) or (c) was not imminent at the time the venture capital corporation made the investment, and
(e) the small business did not use any of the investment proceeds it received for any purposes set out in section 12 before ceasing to conform to section 10 (1) (b) or (c).
15 Section 19 is amended
(a) in subsection (5) by striking out "Minister of Finance and Corporate Relations" in each place it appears and substituting "Minister of Finance",
(b) by repealing subsection (8) and substituting the following:
(8) The administrator may refuse an authorization under subsection (3) if the administrator considers that
(a) the venture capital corporation is contravening or has contravened this Act or the regulations, or
(b) the administrator considers that the venture capital corporation or any of its directors, officers or shareholders are conducting the business or affairs of the venture capital corporation in a manner that is contrary to this Act. , and
(c) in subsection (9) by striking out "or grants under section 20 (6) of this Act".
16 Section 20 is amended
(a) by repealing subsections (3) and (4) and substituting the following:
(3) A venture capital corporation, on behalf of its shareholders who are persons, must apply to the administrator, in a form approved by the administrator, for a tax credit certificate entitling each of those shareholders to a tax credit under section 21 of the Income Tax Act, equal to 30% of the amount received by the venture capital corporation from those shareholders for those shares, in the then current calendar year or, in the case of a shareholder who is an individual and who makes an election referred to in section 21 (16) of the Income Tax Act, in the 60 days immediately following that calendar year.
(4) If a venture capital corporation makes an application under subsection (3), the administrator, following the approval of the minister responsible for the Income Tax Act and in accordance with the provisions of section 21 of the Income Tax Act, must issue a tax credit certificate in the amount referred to in subsection (3), unless
(a) the venture capital corporation is contravening or has contravened this Act or the regulations, or
(b) the administrator considers that the venture capital corporation or its directors, officers or shareholders are conducting the business or affairs of the venture capital corporation in a manner that is contrary to this Act.
(b) by repealing subsections (5) and (6),
(c) in subsection (7) by striking out "or authorize payment of a grant under subsection (6)",
(d) in subsection (7) (b) to (d) by striking out "or grant" wherever it appears, and
(e) by adding the following subsections:
(9) A tax credit certificate issued under subsection (4) may be revoked by the administrator if the administrator determines that, at the time the tax credit certificate was issued or at a subsequent time, the venture capital corporation was in contravention of this Act or the regulations.
(10) A certificate that is revoked by the administrator is deemed never to have been issued.
(11) The administrator must promptly give a venture capital corporation
(a) notice of a refusal to issue a tax credit certificate under subsection (4) to the venture capital corporation, and
(b) the reasons for the refusal.
(12) The administrator must promptly give a venture capital corporation and the minister responsible for the administration of the Income Tax Act
(a) notice of revocation of a tax credit certificate issued under subsection (4) to the venture capital corporation, and
(b) the reasons for the revocation.
17 Section 21 is repealed.
18 Section 22 is amended
(a) in subsections (1), (2) (a) and (b), (3) and (5) by striking out "Minister of Finance and Corporate Relations" and substituting "Minister of Finance",
(b) by repealing subsection (3.1) and substituting the following:
(3.1) If the administrator considers that a venture capital corporation has
(a) conducted its business and affairs in a manner consistent with this Act, and
(b) incurred investment losses,
the administrator may reduce the amount that would otherwise be payable under subsection (3) in order to take the investment losses into account. ,
(c) by adding the following subsections:
(3.2) If the administrator considers that a venture capital corporation has
(a) conducted its business and affairs in a manner consistent with this Act, and
(b) held an eligible investment for at least 3 years,
the administrator may reduce the amount that would otherwise be payable under subsection (3) by an amount calculated as follows:
(c) firstly, multiply that amount otherwise payable by the number of days the venture capital corporation held the eligible investment;
(d) secondly, divide the product obtained under paragraph (c) by 1825 to determine the amount of the reduction.
(3.3) If a venture capital corporation has complied with section 8 (2) throughout the period prescribed for the purpose of that section, no amount is payable under this section. , and
(d) by repealing subsection (6) and substituting the following:
(6) The amount to be paid to the Minister of Finance under this section must not be greater than the aggregate amount of the tax credits issued in respect of a venture capital corporation's own shares that are acquired or deemed under this section to be acquired by it.
19 Section 25 (j) is amended by striking out "Minister of Finance and Corporate Relations" and substituting "Minister of Finance".
20 Section 26 is amended
(a) by repealing subsection (1) and substituting the following:
(1) In this section, "third party" means
(a) a director or officer of a
(i) venture capital corporation, or
(ii) small business in which an investment under section 10 was made by a venture capital corporation,
(b) a member of a common interest group that controls a
(i) venture capital corporation, or
(ii) small business
described in paragraph (a), or
(c) a major shareholder of a
(i) venture capital corporation, or
(ii) small business
described in paragraph (a).
(1.1) If a third party authorizes or acquiesces in a
(a) transaction or event, or
(b) series of transactions or events,
that the third party knew or reasonably ought to have known at the time of the authorization or acquiescence would render a venture capital corporation liable to the Minister of Finance to make the payment required under section 22, then the third party is jointly and severally liable for the amount of the payment. , and
(b) in subsection (2) by striking out "or a grant" and by striking out "or a grant, as the case may be".
21 Section 27 is repealed.
22 Section 28 is amended
(a) in subsection (1) by repealing paragraph (e) and by adding the following paragraph:
(f) the corporation has no remaining eligible investments that are subject to section 8 (2). , and
(b) by repealing subsection (3) and substituting the following:
(3) Despite subsections (1) and (2), if the administrator considers that a venture capital corporation is conducting its business and affairs in a manner consistent with this Act, the administrator may do any of the following:
(a) for any time that the administrator considers appropriate, refrain from revoking the registration of the venture capital corporation;
(b) permit registration of the venture capital corporation and, for any time that the administrator considers appropriate, refrain from revoking the registration of the venture capital corporation;
(c) issue a tax credit certificate;
(d) reduce the amount that would otherwise be required to be deposited into the investment protection account referred to in section 19.
23 The following Part is added:
Part 2 -- Eligible Business Corporation Tax Credits
28.1 In this Part:
"additional equity capital" means additional equity capital raised by an eligible business corporation under an approval granted to it under section 28.3 by the administrator;
"eligible investor" means
(a) a corporation to which section 2 (2) of the Income Tax Act applies, or
(b) an individual to whom section 2 (1) of the Income Tax Act applies.
28.2 (1) On application by a small business, in a form approved by the administrator, the administrator may register the small business as an eligible business corporation, if satisfied that the applicant
(a) conforms to paragraphs (a) to (c) of section 10 (1),
(b) has equity capital of at least $25 000, and
(c) meets other prescribed requirements.
(2) On registration of a small business as an eligible business corporation, the administrator must issue a certificate of registration, in a form approved by him or her, and record in the certificate the date of registration.
28.3 (1) An eligible business corporation may apply to the administrator for approval to raise additional equity capital and the administrator may grant the approval, subject to subsection (2) and to any conditions that the administrator may impose, if the administrator is satisfied that the capital will consist of equity shares that
(a) are without par value,
(b) do not carry rights and restrictions attached to the shares that
(i) create a debt between the holder or beneficial owner of the shares and any other person,
(ii) entitle the holder or beneficial owner of the shares to reduce the impact of any loss the holder or beneficial owner sustains in holding or disposing of the share,
(iii) provide the holder or beneficial owner of the share with the right to require the eligible business corporation to repurchase the shares before the expiry of 5 years after the date of issue, or
(iv) are prohibited by regulation,
(c) do not carry 50% or more of the votes for the election of directors of the eligible business corporation, and
(d) are fully paid for in cash.
(2) It is a condition of an approval under subsection (1) to raise additional equity capital that the eligible business corporation must not issue any of the shares comprised in the additional equity capital to a person that, at any time during the 2 years immediately preceding the date of issue, has disposed of a share of any class of shares issued by the eligible business corporation.
28.4 (1) An eligible investor must not make or hold an investment in an eligible business corporation if, as a result of that investment, the aggregate of all amounts received by that eligible business corporation from all eligible investors, directly or indirectly, would be greater than $5 million.
(2) For the purposes of subsection (1), if in the opinion of the administrator one of the reasons for the separate existence of 2 or more eligible business corporations is to increase the amount received from one or more eligible investors, the eligible business corporations are deemed to be one eligible business corporation.
28.5 (1) Subject to subsection (2), an eligible investor must not make or hold an investment in an eligible business corporation if the eligible investor, either alone or in conjunction with one or more of the eligible investor's
(a) associates or affiliates,
(b) shareholders or their associates or affiliates,
(c) directors or their associates, or
(d) officers or their associates,
will own, directly or indirectly, shares carrying 50% or more of the votes for the election of directors of the eligible business corporation or will, in any manner, control the eligible business corporation.
(2) If the administrator considers that an eligible business corporation in which an eligible investor has invested is in financial difficulty, the administrator may permit that eligible investor to temporarily control the eligible business corporation, under circumstances and on terms and conditions that the administrator may determine.
28.6 (1) The administrator may suspend or revoke the registration under this Part of an eligible business corporation if, in the opinion of the administrator, the eligible business corporation
(a) has contravened this Act or the regulations,
(b) has not complied with a condition referred to in subsection (2) (a),
(c) has misrepresented any information to the administrator or to staff of the administrator, either knowingly or through circumstances amounting to negligence,
(d) has applied any proceeds of additional equity capital for a use prohibited under section 28.93, or
(e) at any time during the 5 years immediately following the date on which the eligible business corporation raises any additional equity capital, the eligible business corporation does not conform to section 10 (1) (b) or (c).
(2) If the administrator suspends a registration under subsection (1), the administrator may
(a) attach conditions to be complied with by the suspended eligible business corporation during the period of suspension, and
(b) reinstate the registration with or without conditions.
(3) An eligible business corporation or an associate, affiliate, director, officer or shareholder of an eligible business corporation must not provide, directly or indirectly, as part of any transaction or series of transactions, a loan, loan guarantee or any other financial assistance to any person for the purpose of, or in connection with, a purchase of shares that are part of any additional equity capital.
(4) An eligible business corporation must not redeem a share for which a tax credit certificate has been issued under this Part, unless the redemption occurs
(a) more than 5 years after the date of issue of the share, or
(b) in prescribed circumstances.
(5) An eligible business corporation must not register a transfer of a share for which a tax credit has been issued under this Act if the transferor of the share is
(a) the original purchaser of the share, or
(b) a registered retirement savings plan or registered retirement income fund of which plan or fund the original purchaser of the share or his or her spouse is a beneficiary or annuitant,
unless the transfer occurs
(c) more than 5 years after the date of issue of the share, or
(d) in prescribed circumstances.
28.7 (1) If, under section 28.6, the administrator revokes the registration of an eligible business corporation after it has raised additional equity capital, the small business whose registration as an eligible business corporation has been revoked must pay to the Minister of Finance, subject to subsection (2), an amount equal to the aggregate of all the amounts of tax credits issued for the additional equity capital.
(2) For the purpose of this section, the Lieutenant Governor in Council may prescribe an amount less than the amount described in subsection (1), in which case the small business must pay to the Minister of Finance that lesser amount.
(3) If, under section 28.6, the administrator revokes the registration of an eligible business corporation before the eligible business corporation has raised additional equity capital, the administrator must not issue the tax credit certificate referred to in section 28.95.
28.8 (1) In this section, "third party" means
(a) a director or officer of a small business that is or was registered as an eligible business corporation,
(b) a member of a common interest group that controls a small business described in paragraph (a), or
(c) a major shareholder of a small business described in paragraph (a).
(2) If a third party authorizes or acquiesces in a
(a) transaction or event, or
(b) series of transactions or events
that the third party knew or reasonably ought to have known at the time of the authorization or acquiescence would render the eligible business corporation liable to the Minister of Finance to make the payment required under section 28.7, then the third party is jointly and severally liable for the amount of the payment.
28.9 (1) On the written request of an eligible business corporation, the administrator may cancel the eligible business corporation's registration under this Part if
(a) it pays to the Minister of Finance the aggregate of all the amounts of tax credits issued in the immediately preceding 5 years for shares issued by it as part of an issue of additional equity capital, and
(b) it meets prescribed requirements.
(2) If the administrator considers that an eligible business corporation that makes the request under subsection (1)
(a) has conducted its business and affairs in a manner consistent with this Act, and
(b) for at least 3 years has complied with this Part in relation to all the shares for which a tax credit has been issued,
the administrator may reduce the amount that would otherwise be payable under subsection (1) by an amount calculated as follows:
(c) firstly, multiply that amount otherwise payable by the number of days during which the shares referred to in paragraph (b) remained outstanding;
(d) secondly, divide the product obtained under paragraph (c) by 1825 to determine the amount of the reduction.
28.91 (1) Except in prescribed circumstances, if an eligible business corporation, within 5 years after it issues a share for which a tax credit certificate was issued under this Part, redeems, acquires or cancels the share, then the person who held the share immediately before the redemption, acquisition or cancellation must pay to the Minister of Finance an amount equal to the tax credit allowed for the share.
(2) The Lieutenant Governor in Council may make regulations requiring persons who owe money payable to the Minister of Finance under subsection (1) to pay interest on the money at a prescribed rate and calculated from a prescribed date.
(3) If the administrator considers that an eligible business corporation
(a) has conducted its business and affairs in a manner consistent with this Act, and
(b) for at least 3 years, has not redeemed, acquired or cancelled a share issued by it for which a tax credit certificate was issued under this Part,
the administrator may reduce the amount that would otherwise be payable under this section by an amount calculated as follows:
(c) firstly, multiply that amount otherwise payable by the number of days during which the share referred to in paragraph (b) remained outstanding;
(d) secondly, divide the product obtained under paragraph (c) by 1825 to determine the amount of the reduction.
28.92 (1) If a person, within 5 years after the date of purchasing a share for which a tax credit has been issued under this Part and in a transaction other than a redemption, acquisition or cancellation referred to in section 28.91, disposes of a share for which a tax credit was issued under this Part, then the person must pay to the Minister of Finance an amount equal to the tax credit allowed for the share.
(2) The Lieutenant Governor in Council may make regulations requiring persons who owe money payable to the Minister of Finance under subsection (1) to pay interest on the money at a prescribed rate and calculated from a prescribed date.
28.93 An eligible business corporation must not use, directly or indirectly, any funds raised by an issue of shares for which tax credits have been or are entitled to be claimed under section 28.95 for any of the following purposes:
(a) lending;
(b) investment outside British Columbia;
(c) investment in land, unless the investment is incidental or ancillary to the business activities, referred to in section 10 (1) (c), of the eligible business corporation;
(d) acquiring securities other than equity shares from an affiliate of a eligible business corporation that complies with the criteria set out in section 10 (1) (a) to (c);
(e) purchasing goods or services from
(i) an eligible investor whose investment is in the eligible business corporation, or
(ii) an associate of an eligible investor whose investment is in the eligible business corporation
other than goods or services that are sold at fair market value to the eligible investor in the ordinary course of the seller's business as a seller of such goods or services on the open market;
(f) payment of all or part of a debt obligation, unless
(i) the administrator considers that the payment is necessary for the financial viability of the eligible business corporation, or
(ii) the debt obligation was incurred with the prior approval of the administrator in anticipation of an investment in the eligible business corporation by an eligible investor;
(g) as part of a transaction or series of transactions directly or indirectly involving any of the following:
(i) the purchase or redemption of previously issued shares of the eligible business corporation or one of its affiliates;
(ii) the retirement of any part of a liability to a shareholder of the eligible business corporation or one of its affiliates or to a shareholder's associate or affiliate;
(iii) the payment of dividends;
(iv) except in prescribed circumstances, the funding of all or part of the purchase by the eligible business corporation of all or a substantial portion of the assets of a proprietorship, partnership, joint venture, trust or corporation;
(v) the funding of all or part of the purchase by the eligible business corporation of any of the assets of a proprietorship, partnership, joint venture, trust or corporation at a price that is greater than the fair market value of the assets purchased;
(vi) other prescribed events;
(h) other prescribed purposes.
28.94 An eligible business corporation that in any calendar year has raised additional equity capital must apply to the administrator, in a form approved by the administrator, for tax credit certificates entitling each eligible investor, in relation to additional equity capital, to a tax credit under section 21 of the Income Tax Act equal to 30% of the amount received by the eligible business corporation in that calendar year or, in the case of a shareholder who is an individual and who makes an election referred to in section 21 (16) of the Income Tax Act, within 60 days after the end of that calendar year, for the shares that were
(a) part of the additional equity capital, and
(b) issued to the eligible investors.
28.95 (1) The administrator, following the approval of the minister responsible for the administration of the Income Tax Act and in accordance with section 21 of that Act, must issue a tax credit certificate in the amount calculated in accordance with section 28.94 to each of the eligible investors referred to in section 28.94 if the administrator is satisfied as to all of the following matters:
(a) the eligible business corporation is conducting its business or affairs in a manner consistent with this Act;
(b) the eligible business and its eligible investors are complying with this Act and the regulations;
(c) no tax credit under this section has been previously allowed or paid for the shares;
(d) the equity capital, that is the subject of the application for the tax credit, consists of equity capital of the eligible business corporation that has been approved in accordance with section 28.3;
(e) the shares, for which the eligible business corporation applies to the administrator for tax credits, are not a type of security that entitles its holders to claim a tax credit against tax payable under the Income Tax Act (Canada) for the purchase of the security;
(f) the eligible investor shareholders acquire the shares directly from the eligible business corporation or its agent acting in that behalf;
(g) the eligible investor shareholder, if an individual, is resident in British Columbia at the date of subscribing for the shares;
(h) any other prescribed conditions are met.
(2) A tax credit certificate issued under this section may be revoked by the administrator, if the administrator considers that, at the time the tax credit certificate was issued or at a subsequent time, the eligible business corporation was in contravention of this Act or the regulations.
(3) If the administrator refuses to issue a tax credit certificate under this section, the administrator must promptly give notice of that refusal, together with reasons for the refusal, to the eligible business corporation.
(4) If the administrator revokes a tax credit certificate issued under this section, the administrator must promptly give notice of that revocation, together with reasons for the revocation, to the eligible business corporation and to the minister responsible for the administration of the Income Tax Act.
28.96 If a person has received, directly or indirectly, the benefit of a tax credit to which the person is not entitled, the person must repay the amount of the benefit forthwith to the Minister of Finance.
28.97 (1) Within 6 months after its fiscal year end, an eligible business corporation must prepare an annual report in a form approved by the administration and file the report with the administrator accompanied by each of the following:
(a) a copy of the register of allotments, members and transfers of the eligible business corporation;
(b) a copy of the most recent financial statements of the eligible business corporation that have been reviewed by a chartered accountant, certified general accountant or other person who is a licensed or registered member of an accounting association;
(c) a copy of the most recent annual report filed with the registrar of companies.
(2) An eligible business corporation must comply with subsection (1) in each of the 5 consecutive fiscal years following the date of its most recent issue of shares as part of the raising of additional equity capital.
24 The following heading is added immediately before section 29:
Part 3 -- General .
25 The following section is added:
29.1 (1) The Lieutenant Governor in Council may prescribe, for any year, an amount to be known as the annual maximum venture capital tax credit.
(2) If in any year the minister considers that, in respect of the issue of
(a) equity capital approved under section 3 (4),
(b) equity capital approved under section 9, and
(c) additional equity capital approved to be raised under section 28.3
in that year, the total of the amounts that will be
(d) payable under section 21 (3) or (5) of the Income Tax Act,
(e) paid under section 21 (3) or (5) of the Income Tax Act,
(f) deductible under section 21 of the Income Tax Act, and
(g) deducted under section 21 of the Income Tax Act
will be greater than the annual maximum venture capital tax credit prescribed under subsection (1) of this section, the administrator must not approve, for the remainder of that year,
(h) any issue of equity capital under section 9 of this Act in respect of shares that are proposed to be issued to persons as defined in section 20 (1) of this Act, or
(i) the raising of any additional equity capital under section 28.3 of this Act in respect of shares that are proposed to be issued to eligible investors.
(3) If in any year the minister considers that, in respect of the issue of
(a) equity capital approved under section 3 (4),
(b) equity capital approved under section 9, and
(c) equity capital approved to be raised under section 28.3 of this Act
in that year, the total of the amounts that will be
(d) payable under section 21 (3) or (5) of the Income Tax Act,
(e) paid under section 21 (3) or (5) of the Income Tax Act,
(f) deductible under section 21 of the Income Tax Act, and
(g) deducted under section 21 of the Income Tax Act,
will be greater than the aggregate of the annual maximum venture capital tax credit prescribed under subsection (1),
(h) the minister may suspend further registrations of venture capital corporations and eligible business corporations under this Act for that year, and
(i) the administrator must not approve, for the remainder of that year, of any additional issue of additional equity capital under section 9 of this Act or of the raising of additional equity capital under section 28.3 of this Act.
26 Section 30 is repealed and the following substituted:
30 (1) During normal business hours, the administrator or a person designated by the administrator may make an examination of the affairs of
(a) a venture capital corporation or eligible business corporation,
(b) a corporation that was a venture capital corporation or eligible business corporation, or
(c) a small business, corporation or other entity, or an affiliate of the small business, corporation or other entity, in which a venture capital corporation has made an investment,
for the purpose of determining whether or not the venture capital corporation, eligible business corporation or corporation that was a venture capital corporation or eligible business corporation is complying with or has complied with this Act and the regulations.
(2) For the purposes of determining compliance under this Act, the administrator or person making the examination under this section
(a) is entitled to unrestricted access without charge to all records, securities cash and savings institution accounts of
(i) the venture capital corporation, eligible business corporation, small business, corporation or other entity being examined, or
(ii) an affiliate of any of them, and
(b) may make copies of any record or security to which he or she is entitled to unrestricted access.
Income Tax Act
27 Section 21 of the Income Tax Act, R.S.B.C. 1996, c. 215, is amended
(a) in subsection (1) by repealing the definition of "venture capital tax credit" and substituting the following:
"venture capital tax credit" means the aggregate of the tax credit amounts shown on all venture capital tax credit certificates issued
(a) to a taxpayer that is a corporation, for share purchases made during a taxation year, or
(b) to a taxpayer who is an individual, for
(i) share purchases made during a calendar year, and
(ii) if the taxpayer makes and files an election under subsection (16), share purchases made within the first 60 days after the end of a calendar year. ,
(b) in subsection (1) by adding the following definition:
"venture capital tax credit certificate" means a tax credit certificate issued under section 20 (4) or 28.95 of the Small Business Venture Capital Act by the administrator under that Act; , and
(c) by adding the following subsections:
(16) An individual taxpayer may make, and file with the minister, an election, in the form and containing the information required by the Commissioner of Income Tax, to treat a share purchase made within the first 60 days after the end of a calendar year as having been made in the immediately preceding calendar year and not in the calendar year of purchase, in which case the purchase is deemed to have been made in that immediately preceding calendar year.
(17) A venture capital tax credit certificate that is revoked by the administrator under the Small Business Venture Capital Act is deemed never to have been issued.
28 This Act comes into force by regulation of the Lieutenant Governor in Council.
SECTION 1: [Small Business Venture Capital Act, amends section 1 (1)]
SECTION 2: [Small Business Venture Capital Act, adds section 1 (6.1)] equates the annuitant or beneficiary of a trust to the trust itself in relation to shares purchased or disposed of.
SECTION 3: [Small Business Venture Capital Act, enacts heading to Part 1] adds a Part title, and so forms "Part 1 -- Venture Capital Corporation Tax Credits" from sections 2 to 28 of the Act. This is consequential to the addition by this Bill of Part 2, dealing separately with eligible business corporation investment tax credits.
SECTION 4: [Small Business Venture Capital Act, amends sections 2, 3, 21 and 25] is consequential to the amendment made by section 3 of this Bill.
SECTION 5: [Small Business Venture Capital Act, repeals and replaces section 3 (1) (e)] changes one of the criteria for registration of a company as a venture capital corporation to allow additionally for no par value common shares special rights relating only to redemption of the shares.
SECTION 6: [Small Business Venture Capital Act, amends section 6] recasts section 6 (3) of the Act to remove the specific limits on the equity capital that may be raised by a venture capital corporation and to, instead, enable the Lieutenant Governor in Council prescribe maximum amounts.
SECTION 7: [Small Business Venture Capital Act, repeals and replaces section 8 (2) and (3)] transfers from the Act to the regulations the requirements to have and keep a certain amount invested in eligible investments for a set period.
SECTION 8: [Small Business Venture Capital Act, re-enacts section 9] recasts the provision relating to the approvals for raising additional equity capital by venture capital corporations, for clarity, and to refer to "this Part", as a consequence of the addition by this Bill of Part 2.
SECTION 9: [Small Business Venture Capital Act, repeals and replaces section 10 (1) and adds subsection (1.1)] recasts the section of the Act that sets out the criteria for investments by a venture capital corporation in a small businesses. Under the recast section,
SECTION 10: [Small Business Venture Capital Act, repeals section 11] removes the requirement for a venture capital corporation to tender its equity shares in a small business first to all of the shareholders of the small business before it accepts an offer to purchase the shares.
SECTION 11: [Small Business Venture Capital Act, repeals and replaces section 12 (1)] clarifies prohibited uses of the proceeds of venture capital corporation investments in the small businesses that receive the proceeds.
The changes made are intended to ensure that the proceeds of investments in small businesses by venture capital corporations are used for expansion activities of the small businesses.
SECTION 12: [Small Business Venture Capital Act, repeals and replaces section 14 (2) (c) and (d) and adds paragraph (e)] prohibits a small business from providing financial assistance to a shareholder or another person who proposes to make an investment in a venture capital corporation.
SECTION 13: [Small Business Venture Capital Act, amends section 15 (1)] increases the maximum aggregate amount of investments that a single small business may receive from venture capital corporations to $5 million from $3 million.
SECTION 14: [Small Business Venture Capital Act, re-enacts section 17] recasts the section to clarify the subsections that require investments that become non-conforming to be disposed of. Further, a provision is added to enable the administrator to grant the described relief respecting the disposal of the non-conforming investments in the circumstances that are set out.
SECTION 15: [Small Business Venture Capital Act, amends section 19] updates a ministerial reference, recasts section 19 of the Act to remove a reference to "spirit and intent" and to make subsection (8) consistent with section 20 (4) of the Act and, as a consequence to the amendments to section 20 of the Act made by this Bill, removes a reference to grants under that section.
SECTION 16: [Small Business Venture Capital Act, amends section 20]
SECTION 17: [Small Business Venture Capital Act, repeals section 21] repeals the provision respecting the annual maximum venture capital incentive as a consequence of moving its subject matter into section 29.1 of the Act, a provision common to Parts 1 and 2 of the Act as amended.
SECTION 18: [Small Business Venture Capital Act, amends section 22]
SECTION 19: [Small Business Venture Capital Act, amends section 25 (j)] updates a ministerial reference.
SECTION 20: [Small Business Venture Capital Act, amends section 26] extends the liability to repay venture capital corporation tax credits to persons within the definition of "third party" if they knowingly contribute to contraventions under the Act that lead to the repayment of venture capital corporation tax credits and makes a change consequential to the elimination of grants.
SECTION 21: [Small Business Venture Capital Act, repeals section 27] repeals the section respecting forgiveness of liability to repay tax credits or grants at any time after expiry of 5 years. This facilitates the orderly redemption of shareholder investments upon maturity.
SECTION 22: [Small Business Venture Capital Act, amends section 28] allows the administrator to suspend or revoke the registration of a venture capital corporation if it has no remaining eligible investments and recasts subsection (3) to remove a reference to "spirit and intent".
SECTION 23: [Small Business Venture Capital Act, enacts Part 2]
SECTION 24: [Small Business Venture Capital Act, enacts Part 3 heading] adds a Part title, and so forms "Part 3 -- General" from sections 30 to 37 of the Act. This is consequential to the addition by this Bill of Part 2.
SECTION 25: [Small Business Venture Capital Act, enacts section 29.1] provides for an annual maximum venture capital incentive in respect of the incentives under Part 1 of the Act for venture capital corporations and Part 2 of the Act for eligible business corporations. This maximum incentive is now made applicable for both venture capital corporations dealt with in Part 1 and for eligible business corpo rations dealt with in Part 2.
SECTION 26: [Small Business Venture Capital Act, re-enacts section 30] allows for the examination of eligible business corporation's financial records including the records of an associate or small business that was previously registered as an eligible business corporation.
Income Tax Act
SECTION 27: [Income Tax Act, amends section 21]
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