Acts and Regulations

2016-21 - Small Business Investor Tax Credit Act

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NEW BRUNSWICK
REGULATION 2016-21
under the
Small Business Investor Tax Credit Act
(O.C. 2016-51)
Filed March 4, 2016
1Section 3 of New Brunswick Regulation 2003-39 under the Small Business Investor Tax Credit Act is amended by striking out “a corporation” and substituting “a corporation registered under section 7 of the Act”.
2Section 4 of the Regulation is amended
(a) in subsection (1) by striking out “under the Act” and substituting “under section 7 of the Act”;
(b) in subsection (2) by striking out “a corporation’s total revenue” and substituting “the total revenue of a corporation registered under section 7 of the Act”.
3Section 5 of the Regulation is amended by striking out “a corporation” and substituting “a corporation registered under section 7 of the Act”.
4Subsection 8(1) of the Regulation is amended in the portion preceding paragraph (a) by striking out “a corporation” and substituting “a corporation registered under section 7 of the Act”.
5Subsection 9(1) of the Regulation is amended in the portion preceding paragraph (a) by striking out “a corporation” and substituting “a corporation registered under section 7 of the Act”.
6The Regulation is amended by adding after section 9 the following:
Community economic development plan
9.1For the purposes of paragraph 13.1(1)(c) of the Act, a community economic development plan of a corporation or association applying for registration under section 13.1 of the Act shall contain or make provision for the following:
(a) a mission statement outlining the economic development strategy of the corporation or association and the defined community it intends to serve;
(b) the amount of capital to be raised under the plan;
(c) the proposed use of the funds raised under the plan;
(d) with respect to eligible investors who have agreed to purchase eligible shares of the specified issue, whether directly or through a qualifying trust,
(i) for each eligible investor who is an individual, the full name, social insurance number and residential address of the eligible investor;
(ii) for each eligible investor that is a corporation, the name, business number and head office address of the eligible investor;
(iii) for each eligible investor that is a trust, the name, account number and residential address of the eligible investor;
(iv) the number of shares subscribed for and the amount to be paid by each eligible investor;
(v) the number of shares of the corporation or association held at any time by each eligible investor, and
(vi) a statement signed by each eligible investor certifying that the information in subparagraphs (i) to (v) with respect to the eligible investor is accurate;
(e) a summary of the major business activities and the major revenue sources of the corporation or association; and
(f) the names in full of the directors and officers of the corporation or association and their addresses and background information.
Conditions for registration of a corporation or association registered under section 13.2 of the Act
9.2For the purposes of subparagraph 13.2(1)(a)(v) of the Act, a corporation or association registered under section 13.2 of the Act shall meet the following conditions:
(a) that shares to be issued as part of a specified issue under the plan
(i) are eligible shares as defined under section 1 of the Act and have never been previously issued,
(ii) will only be issued by the corporation or association on being fully paid for, and
(iii) will, immediately following their issue, be registered in the name of each shareholder that purchases them or in the name of a trustee, if the shares are held by the trustee for the benefit of a shareholder;
(b) an investment confirmation is issued to each eligible investor who invests in the corporation or association within 30 days after the investment has been made, setting out the proposed use of the capital to be raised by the specified issue and a summary of the major business activities and revenue sources of the corporation or association;
(c) it is prohibited from redeeming an eligible share in respect of which a tax credit certificate is issued under the Act unless the redemption occurs more than four years after the date on which the eligible share was issued, or the redemption occurs in the circumstances and meets the conditions prescribed under subsection 8(1);
(d) it is prohibited from registering a transfer by the original purchaser or a registered retirement income fund under which the original purchaser or the original purchaser’s spouse is the annuitant, of an eligible share in respect of which a tax credit certificate has been issued under the Act unless the transfer occurs more than four years after the date on which the eligible share was issued, or the transfer occurs in the circumstances and meets the conditions prescribed under subsection 8(1);
(e) it is prohibited from lending money, guaranteeing a loan or providing other financial assistance to any person for the purpose of or in connection with a purchase of eligible shares that are part of a specified issue;
(f) the amount to be paid by each eligible investor shall not be less than $1,000 and, if the eligible investor is a trust or a corporation, the amount shall not be less than $50,000; and
(g) it shall have no fewer than three eligible investors who have agreed to purchase eligible shares of the specified issue.
Fee for application for registration for a corporation or association registered under section 13.2 of the Act
9.3For the purposes of subsection 13.1(2) of the Act, the application fee is $100.
Minimum and maximum amount of capital to be raised by a corporation or association registered under section 13.2 of the Act
9.4For the purposes of paragraph 13.2(2)(a) of the Act, the minimum amount of capital to be raised by a corporation or association registered under section 13.2 of the Act is $10,000 and the maximum amount of capital to be raised within a 12- month period is $3,000,000.
Wages and salaries of a corporation or association registered under section 13.2 of the Act
9.5(1)For the purposes of section 13.4 of the Act, a corporation or association registered under section 13.2 of the Act shall pay at least 75% of its wages and salaries to individuals who are residents of New Brunswick.
9.5(2)Despite subsection (1), if at least 50% of a corporation or association’s total revenue is derived from the sale of its goods and services outside New Brunswick, the corporation or association shall pay at least 50% of its wages and salaries to individuals who are residents of New Brunswick.
Calculation of total assets of a corporation or association registered under section 13.2 of the Act
9.6For the purposes of paragraph 13.5(f) of the Act, the total assets of a corporation or association registered under section 13.2 of the Act and its associated corporations or associations shall be calculated by totalling the net book value of the tangible assets of the corporation or association and its associated corporations or associations as contained in the financial statements attached to the corporation’s or association’s application for registration under section 13.1 of the Act.
Criteria for eligibility of a corporation or association registered under section 13.2 of the Act
9.7For the purposes of paragraph 13.5(i) of the Act, a corporation or association registered under section 13.2 of the Act shall meet the following criteria:
(a) a corporation or association shall comply with any rule or decision respecting community economic development corporations or associations made under the Securities Act in relation to a specified issue of eligible shares;
(b) a corporation’s or association’s securities are not listed on an exchange as defined in subsection 1(1) of the Securities Act or quoted on a quotation and trade reporting system as defined in subsection 1(1) of the Securities Act;
(c) in the case of an association, the association has authorized capital consisting of at least one class of voting equity shares with par value where
(i) the purchase price of the share is not less than its par value, and
(ii) the redemption price payable for the share is a price that does not exceed par value or book value per share, whichever is less;
(d) in the case of an association, all or substantially all of the fair market value of the assets of the association is attributable to
(i) assets used in an active business, or
(ii) shares of a corporation where all or substantially all of the fair market value of the assets of that corporation is attributable to assets of that corporation used in an active business or that the corporation has a constitution that restricts the corporation from operating or carrying on business that is an active business or to evaluating and making investments in one or more active businesses based on a set of criteria defined by the corporation.
Investment requirements
9.8For the purposes of subsection 13.6(1) of the Act, a corporation or association registered under section 13.2 of the Act shall
(a) invest at least 40% of the capital raised in the first 12 months of the closing date of a specified issue,
(b) invest at least 60% of the capital raised in the first 24 months of the closing date of a specified issue,
(c) invest at least 80% of the capital raised in the first 36 months of the closing date of a specified issue, and
(d) restrict the capital raised by a specified issue for administration purposes to 20% or less of the capital raised.
Penalty that may be imposed on a corporation or association registered under section 13.2 of the Act
9.9For the purposes of subsection 13.6(3) of the Act, the amount of the penalty that may be imposed on a corporation or association registered under section 13.2 of the Act for failing to meet the investment requirements referred to in section 9.8 shall be an amount equal to 1/6 of the amount of the shortfall.
7This Regulation comes into force on April 1, 2016.