A-33.01 - Act to promote the capitalization of small and medium-sized businesses

Full text
chapter A-33.01
Act to promote the capitalization of small and medium-sized businesses
CAPITALIZATION OF SMALL AND MEDIUM-SIZED BUSINESSESJune 23 1992June 23 1992
DIVISION I
QUALIFIED INVESTMENT
1. A qualified investment within the meaning of section 2 for which a validation certificate has been issued by the body designated by the Government must be made in a qualified legal person by a qualified investor in order to enable the qualified legal person to avail itself of the tax benefit provided in that respect under the Taxation Act (chapter I-3).
1992, c. 46, s. 1; 1998, c. 17, s. 64; 1999, c. 40, s. 34; 2001, c. 69, s. 12; 2010, c. 37, s. 88.
2. An investment made by a qualified investor in a qualified legal person constitutes a qualified investment if, on the date of investment,
(1)  at least 30% of the total amount of qualified investment consists of common shares with full voting rights of the share capital of the qualified legal person, which were paid in cash and issued to a qualified investor as first purchaser;
(2)  the remaining amount of qualified investment, if any, consists of a qualified convertible bond or other debt security or a qualified convertible preferred share which was paid in cash and issued to the qualified investor mentioned in paragraph 1 of this section, as first purchaser.
1992, c. 46, s. 2; 1993, c. 8, s. 1; 1999, c. 40, s. 34.
3. A qualified legal person is a legal person which, on the date of investment, meets the following requirements:
(1)  it is a legal person;
(2)  it has assets of less than $25,000,000 or a net shareholders’ equity not in excess of $10,000,000, taking into account for that purpose the assets and equity of any legal person associated with the qualified legal person at any time during the 12-month period preceding the investment;
(3)  it has its head office in Québec;
(4)  it has paid, in the last 12 months preceding the date of acquisition or in the months preceding that date in the case of a legal person which has been in operation for less than 12 months, more than 75% of the salaries paid to its employees, within the meaning given to that expression in the Taxation Act (chapter I-3), to employees of an establishment situated in Québec; for that purpose, only salaries paid by the qualified legal person itself shall be considered;
(5)  it operates mainly in one of the sectors of activity determined by regulation;
(6)  it deals at arm’s length with the qualified investor, within the meaning of the regulations, on that date.
The conditions set out in subparagraphs 4 and 5 of the first paragraph must be met by a qualified legal person during the 24 months following the acquisition of a qualified investment.
The legal person, unless authorized by the body designated under section 1, must meet the condition set out in subparagraph 6 of the first paragraph during the entire term of the qualified investment, as defined by regulation.
1992, c. 46, s. 3; 1998, c. 17, s. 64; 1999, c. 40, s. 34; 2001, c. 69, s. 12; 2010, c. 37, s. 89.
4. For the purposes of section 3, where, in the opinion of the body designated under section 1, the investment is made in a fledgling legal person as defined by regulation, the condition set out in subparagraph 4 of the first paragraph of section 3 must be met by that legal person only during the 24 months following the acquisition of a qualified investment and the condition set out in subparagraph 5 of the first paragraph of section 3 must be met within four months after the date of acquisition of the qualified investment.
1992, c. 46, s. 4; 1998, c. 17, s. 64; 1999, c. 40, s. 34; 2001, c. 69, s. 12; 2010, c. 37, s. 90.
5. If it is of the opinion that an investment meets the objectives pursued by this Act, the body designated under section 1 may
(1)  extend, in the case of a fledgling legal person, for the period it considers necessary according to the circumstances, the time limit of 4 months prescribed in section 4 for meeting the requirement set out in subparagraph 5 of the first paragraph of section 3;
(2)  if an application therefor is filed with it before the date of the investment, admit a lower percentage as regards the requirement set out in subparagraph 4 of the first paragraph of section 3, for the last 12 months preceding the date of acquisition of an investment or for the period preceding that date in the case of a legal person which has been in operation for less than 12 months;
(3)  authorize a qualified investor and a qualified legal person to deal otherwise than at arm’s length to the extent that a transaction takes place in order to prevent the bankruptcy of the qualified legal person or for business reasons, such as financial problems, reorganization or financial requirements relating to major events.
1992, c. 46, s. 5; 1998, c. 17, s. 64; 1999, c. 40, s. 34; 2001, c. 69, s. 12; 2010, c. 37, s. 91.
6. No qualified legal person may be the beneficiary of one or more qualified investments for which a validation certificate has been issued by the body designated under section 1 and totalling more than $5,000,000 within the same period of 24 months, taking into account for computing that amount the qualified investments made in a legal person associated with the qualified legal person. However, for the purpose of computing that amount, any excess amount is deemed not to be a qualified investment and qualified investments which have been held for more than 24 months in the qualified legal person and in the legal persons with which it is associated shall not be taken into account.
1992, c. 46, s. 6; 1998, c. 17, s. 64; 1999, c. 40, s. 34; 2001, c. 69, s. 12; 2010, c. 37, s. 92.
7. The body designated under section 1 may refuse to issue a validation certificate in respect of an investment which, though consistent with the literal meaning of this Act and the regulations, does not, in its opinion, meet the objectives pursued by this Act and the regulations.
The body designated under section 1 may in particular refuse to issue a validation certificate in respect of an investment made by a qualified investor where one or more shareholders of the qualified legal person hold a significant interest, as defined by regulation, in the qualified investor.
1992, c. 46, s. 7; 1998, c. 17, s. 64; 1999, c. 40, s. 34; 2001, c. 69, s. 12; 2010, c. 37, s. 93.
8. In all cases where its prior authorization is required by this Act or the regulations, the body designated under section 1 may authorize a transaction, operation or event if it is proved that, notwithstanding the absence of prior authorization, the objectives pursued by this Act and the regulations are achieved.
1992, c. 46, s. 8; 1998, c. 17, s. 64; 2001, c. 69, s. 12; 2010, c. 37, s. 94.
9. A common share with full voting rights is a common share within the meaning of the Taxation Act (chapter I‐3), to which are attached a number of voting rights in the issuing legal person, in all circumstances and regardless of the number of shares held, which is not less than the number attached to any other share of the share capital of the legal person.
1992, c. 46, s. 9; 1999, c. 40, s. 34.
10. A qualified convertible debt security is a bond or other debt security which meets the following requirements:
(1)  it was paid and issued after 19 June 1991, in respect of a debt of a corporation and acquired by a qualified investor for cash consideration;
(2)  it is not guaranteed, directly or indirectly, by the qualified corporation or by any other person;
(3)  it has a minimum term of 60 months and a maximum term of 84 months from the date of the qualified investment;
(4)  it is convertible, under its conditions of issue, at any time within the term of the qualified investment, into common shares carrying full voting rights of the share capital of the qualified corporation;
(5)  it is subject to conversion on or before its maturity date into common shares carrying full voting rights of the share capital of the qualified legal person.
1992, c. 46, s. 10; 1993, c. 8, s. 2; 1999, c. 40, s. 34.
10.1. A qualified convertible preferred share is a preferred share which meets the following requirements:
(1)  it was paid and issued after 14 May 1992 and acquired by a qualified investor for cash consideration;
(2)  it is issued for a minimum term of 60 months;
(3)  it is, under its conditions of issue, convertible at any time within the term of the qualified investment into common shares carrying full voting rights of the share capital of the qualified legal person;
(4)  it is subject to conversion, at or before the end of the eighty-fourth month following the date of the qualified investment, into common shares carrying full voting rights of the share capital of the qualified legal person.
1993, c. 8, s. 3; 1999, c. 40, s. 34.
DIVISION II
QUALIFIED INVESTORS
11. The following are qualified investors:
(1)  any body, institution, partnership or legal person which is a designated venture capital legal person, recognized as such by regulation;
(2)  any private legal person publicly known as a venture capital legal person which meets the conditions prescribed by regulation;
(3)  any other investor which is an authorized venture capital legal person, according to the criteria established by regulation, recognized as such by the body designated under section 1.
1992, c. 46, s. 11; 1998, c. 17, s. 64; 1999, c. 40, s. 34; 2001, c. 69, s. 12; 2010, c. 37, s. 95.
DIVISION III
VALIDATION CERTIFICATE
12. The body designated under section 1 shall issue a validation certificate in respect of a qualified investment if the investment meets the requirements of this Act and the regulations.
No validation certificate shall be issued pursuant to the first paragraph after 9 May 1995. However, the body designated under section 1 may issue a validation certificate in the following cases:
(1)  in respect of a qualified investment made on or before 9 May 1995, if the investment meets the requirements of this Act and the regulations and if
(a)  the application for the validation certificate in respect of the qualified investment meets all the requirements of the Act and the regulations and is filed with the body on or before 30 September 1995, and
(b)  the amount of the qualified investment certified in the validation certificate does not exceed the amount specified in that respect in the application referred to in subparagraph a;
(2)  in respect of a qualified investment made on or before 31 December 1995, if the application for the validation certificate was made on or before 9 May 1995.
1992, c. 46, s. 12; 1995, c. 63, s. 1; 1996, c. 39, s. 1; 1998, c. 17, s. 64; 2001, c. 69, s. 12; 2010, c. 37, s. 96.
13. The body designated under section 1 shall issue a validation certificate to the qualified legal person as well as confirmation of the granting of the validation certificate to the qualified investor, attesting in particular the amount of the qualified investment for which a validation certificate has been issued pursuant to this Act and the regulations.
1992, c. 46, s. 13; 1998, c. 17, s. 64; 1999, c. 40, s. 34; 2001, c. 69, s. 12; 2010, c. 37, s. 97.
14. The body designated under section 1 may revoke a validation certificate granted in respect of a qualified investment if the qualified investor or the qualified legal person
(1)  contravenes the provisions of this Act or the regulations;
(2)  has furnished false information or documents;
(3)  has filed an application for the revocation of its validation certificate.
The notice of revocation of the validation certificate shall indicate the date of the revocation giving the reasons therefor and shall be sent to the head office of the qualified legal person by registered mail.
1992, c. 46, s. 14; 1998, c. 17, s. 64; 1999, c. 40, s. 34; 2001, c. 69, s. 12; 2010, c. 37, s. 98; I.N. 2016-01-01 (NCCP).
15. A validation certificate is revoked by operation of law upon the occurrence of any of the following events with regard to the qualified legal person during the term of the qualified investment:
(1)  upon the qualified legal person’s dissolution;
(2)  upon adoption or approval, by the shareholders, of a resolution to wind up the qualified legal person, except with the prior authorization of the body designated under section 1;
(3)  upon the qualified legal person’s being placed under a winding-up order for a reason other than bankruptcy or insolvency;
(4)  upon the qualified legal person’s being placed under a receiving order pursuant to the Bankruptcy and Insolvency Act (R.S.C. 1985, c. B-3) or having made an assignment of its property within the meaning of the said Act.
1992, c. 46, s. 15; 1998, c. 17, s. 64; 1999, c. 40, s. 34; 2001, c. 69, s. 12; 2010, c. 37, s. 99.
16. The Minister is authorized to cancel the revocation of a validation certificate if, in his opinion and taking the circumstances into account, the revocation would entail disproportionate consequences.
1992, c. 46, s. 16.
DIVISION IV
INFORMATION AND REPORTS
17. The body designated under section 1 may, in addition to the information, documents and reports prescribed by regulation, require from the qualified legal person and qualified investor any information or document that, in its opinion, may enlighten it as to the advisability of issuing a validation certificate in respect of an investment made in a legal person.
A qualified legal person and a qualified investor shall, upon the written request of the body designated under section 1 and within the time fixed therein, furnish to it any information and any document it may require.
1992, c. 46, s. 17; 1998, c. 17, s. 64; 1999, c. 40, s. 34; 2001, c. 69, s. 12; 2010, c. 37, s. 100.
18. The body designated under section 1 or, as the case may be, the Minister, shall send to the Minister of Revenue the information the latter deems necessary where the body grants or revokes a validation certificate or where the Minister cancels the revocation thereof.
1992, c. 46, s. 18; 1998, c. 17, s. 64; 2001, c. 69, s. 12; 2010, c. 37, s. 101.
19. The body designated under section 1 shall keep a register containing the following information:
(1)  the name of the qualified legal persons in respect of which an investment has been subject of a validation certificate;
(2)  the date on which the validation certificate the body grants takes effect;
(3)  the addresses of their head offices;
(4)  the amount of the qualified investment;
(5)  the name of the qualified investor and the address of its head office.
1992, c. 46, s. 19; 1998, c. 17, s. 64; 1999, c. 40, s. 34; 2001, c. 69, s. 12; 2010, c. 37, s. 102.
DIVISION V
REGULATIONS
20. The Government may make regulations to
(1)  determine the information, authorizations, attestations, reports or documents that a legal person or investor must furnish to the body designated under section 1 and the time at which they must be filed, and determine the form of such reports, authorizations and attestations and the information they must contain;
(2)  determine what constitutes the assets of a legal person and its shareholders’ equity, including those of a legal person associated with the legal person, and the method of computing them;
(3)  determine the sectors of activity in which a legal person referred to in section 3 is required to operate, except the activities it determines;
(4)  define the expressions “associated legal persons”, “fledgling legal person”, “significant interest”, “employee”, “arm’s length”, “related legal person”, “related persons”, “publicly known” and “term of qualified investment”;
(5)  determine for the purposes of this Act the meaning of “designated venture capital legal person” and establish the criteria according to which the body designated under section 1 may recognize a “legal person publicly known as a venture capital legal person” and an “authorized venture capital legal person”;
(6)  determine the conditions which must be met by a qualified legal person and a qualified investor during the term of a qualified investment;
(7)  while ensuring that the objectives of this Act with regard to the promotion of capitalization are respected and maintained, require that certain transactions be subject to the prior authorization of the body designated under section 1 in respect of
(a)  the sector of activity in which a qualified legal person is required to operate during the term of a qualified investment;
(b)  the use of funds resulting from a qualified investment by a qualified legal person;
(c)  substantial cash outflows that may be made by a qualified legal person;
(8)  determine tariffs of duties and fees payable to the body designated under section 1 in respect of any act performed by it under this Act.
1992, c. 46, s. 20; 1994, c. 3, s. 1; 1998, c. 17, s. 64; 1999, c. 40, s. 34; 2001, c. 69, s. 12; 2010, c. 37, s. 103.
DIVISION VI
FINAL PROVISIONS
21. The Minister of Economic Development, Innovation and Export Trade is responsible for the administration of this Act.
1992, c. 46, s. 21; 1994, c. 16, s. 51; 1999, c. 8, s. 20; 2003, c. 29, s. 135; 2006, c. 8, s. 31.
22. The regulations made pursuant to section 20 of this Act between 23 June 1992 and 30 September 1992 may provide that they apply from any date not prior to 20 June 1991.
1992, c. 46, s. 22.
23. This Act has effect with respect to any qualified investment made after 19 June 1991.
1992, c. 46, s. 23.
24. (Omitted).
1992, c. 46, s. 24.
REPEAL SCHEDULE

In accordance with section 9 of the Act respecting the consolidation of the statutes and regulations (chapter R-3), chapter 46 of the statutes of 1992, in force on 1 March 1993, is repealed, except section 24, effective from the coming into force of chapter A-33.01 of the Revised Statutes.