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This Act has "Not in Force" sections. See the Table of Legislative Changes.

Employee Investment Act

[RSBC 1996] CHAPTER 112

Contents
 1 Definitions and interpretation
Part 1 — Employee Share Ownership Plans
 2 Registration
 3 Criteria for corporation eligibility
 4 Conditions for plan
 5 Additional equity capital
 6 Use of funds
 7 Tax credit
Part 2 — Employee Venture Capital Plans
 8 Registration
 9 Criteria for corporation eligibility
 10 Conditions for plan
 11 Permanent establishment
 12 Limits on equity capital
 13 Minimum investment requirements
 14 Additional equity capital
 15 Eligible investments
 16 Investment for certain purposes prohibited
 17 Control of eligible business
 18 Non-arm's length investments prohibited
 19 Aggregate investment
 20 Action to be taken if investment becomes prohibited
 21 Repealed
 22 Permitted investments and authorized expenses
 23 Investment protection account
 24 Tax credit
 25 Fractional shares
 26 Paid up capital accounts
Part 3 — General
 27 Certification of employee group
 28 Cost sharing
 29 The register
 30 Annual maximum tax credit
 31 Repayment of tax credit — sale of shares
 32 Third party liability
 33 Reporting requirements
 34 Keeping of records
 35 Revocation and suspension of plans
 36 Examination of records
 37 Investigation
 38 Investigator's power at hearing
 39 Report to administrator
 40 General provisions
 41 Extension of time
 41.1 Liability protection
 42 Offences
 43 Limitation period
 44 Regulations and orders

Definitions and interpretation

1  (1) In this Act:

"administrator" means the person designated by the minister to perform the duties of administrator under this Act;

"affiliate", if used to indicate a relationship between corporations, means any corporation where one is the subsidiary of the other, or both are subsidiaries of the same corporation or each of them is controlled by the same person or the same group of persons or one or more members of an associated group of persons;

"annuitant" has the same meaning as "annuitant" in the Income Tax Act (Canada);

"associate", if used to indicate a relationship with a person, means

(a) a corporation of which the person owns, directly or indirectly, shares carrying 10% or more of the voting rights attached to all outstanding shares of the corporation,

(b) a partner of the person,

(c) a participant in a joint venture with the person,

(d) a trust or estate

(i)   in which the person has, in the opinion of the administrator, a substantial beneficial interest, or

(ii)   for which the person serves as trustee or in a similar capacity,

(e) a spouse, parent, grandparent, child, grandchild, brother or sister of the person, or

(f) a parent, grandparent, child, grandchild, brother or sister of the spouse of the person residing in the same residence;

"associated group of persons" means an associated group of persons as defined in the regulations;

"authorized depository" means a person authorized by the administrator to act as an authorized depository under this Act;

"constitution" means the memorandum and articles or other constitutional documents of a corporation;

"debt obligation" includes a mortgage, bond, debenture, note, loan or similar obligation, whether secured or unsecured;

"eligible business" means

(a) a corporation, whether a cooperative association or not, or

(b) a partnership

that

(c) pays at least 50% of its wages and salaries, calculated in the prescribed manner, to employees who regularly work in British Columbia,

(d) has, together with its prescribed affiliates or prescribed associates, less than $50 million in total assets calculated in the prescribed manner,

(e) is not substantially engaged, as determined in the prescribed manner, in any prescribed ineligible activities, and

(f) meets other prescribed criteria;

"eligible employee" means an individual who, at the time of subscribing for a share under this Act, is resident in British Columbia and

(a) is employed by the corporation that has registered an employee share ownership plan, or the predecessor or affiliate of that corporation, on a continuing basis for an average of at least 20 hours each week,

(b) is not a major shareholder of the corporation, and

(c) meets other prescribed conditions;

"eligible investment" means an investment permitted under section 15;

"eligible investor" means an individual who, at the time of subscribing for a share of an employee venture capital corporation,

(a) is resident in British Columbia,

(b) [Repealed 1997-27-11.]

(c) is not a major shareholder of the employee venture capital corporation and, in the case of an employee venture capital corporation that has a restricted constitution, is not a major shareholder of any of the corporations that the employee venture capital corporation is restricted to investing in by its constitution, and

(d) meets other prescribed conditions;

"eligible security" means

(a) a share of any kind,

(b) a debt security that does not have conventional, periodic payments of principal and interest before maturity and that is

(i)   subordinated to the rights of other creditors, other than prescribed creditors, or

(ii)   otherwise substantially at risk, as determined in the prescribed manner,

(c) a partnership interest or unit,

(d) a royalty interest,

(e) a trust unit, if the trust property consists primarily of eligible securities,

(f) a right, option or warrant to acquire a security that is an eligible security,

(g) another security the administrator considers to be similar in character to a security referred to in paragraphs (a) to (f), or

(h) another security as may be prescribed;

"eligible shareholder" means an eligible investor who owns shares purchased under an employee venture capital plan;

"employee group" means those employees who have been certified as an employee group under section 27;

"employee organization" means

(a) a trade union,

(b) an association or federation of trade unions,

(c) a corporation owned and controlled by one or more trade unions or associations or federations of trade unions, or

(d) a prescribed association of employees;

"employee share ownership plan" means a plan containing the provisions referred to in section 4;

"employee shareholder" means an eligible employee who owns shares purchased under an employee share ownership plan;

"employee venture capital corporation" means a corporation registered under section 8;

"employee venture capital plan" means a plan containing the provisions referred to in section 10;

"equity capital" means the consideration in money received by a corporation for the corporation's issued equity shares;

"equity share" means a share of a class of shares that

(a) carry voting rights under all circumstances,

(b) are not restricted in their right to share in the profits of the corporation or in the division of the corporation's assets on its being liquidated, dissolved or otherwise wound up, and

(c) do not have any rights and restrictions prescribed in the regulations;

"investee business" means

(a) a corporation, whether a cooperative association or not, or

(b) a partnership

in which an employee venture capital corporation has previously made an eligible investment;

"major shareholder" means, with respect to a corporation, a person who, together with his or her associates, owns, directly or indirectly, shares carrying 10% or more of the voting rights attached to all outstanding shares of the corporation or shares of the corporation carrying 10% or more of the right to share in the profits of the corporation or in the division of its assets on its being liquidated, dissolved or otherwise wound up;

"plan" means an employee share ownership plan or an employee venture capital plan;

"redeem" includes to purchase or otherwise acquire;

"restricted constitution" means a constitution of a corporation that restricts the corporation to investing only in equity shares of a particular eligible business and affiliates of that eligible business;

"share offering document" means a prospectus, offering memorandum or other material, in a form and containing information satisfactory to the administrator, that is delivered to eligible employees or eligible investors in connection with obtaining subscriptions for shares;

"spouse" means a person who

(a) is married to another person, or

(b) is living with another person in a marriage-like relationship, and has lived in that relationship for a continuous period of 6 months;

"subsidiary" means a corporation that, in respect of another corporation, is controlled, either directly or indirectly, by that other corporation;

"trust" means

(a) a trust governed by a registered retirement savings plan as defined in the Income Tax Act (Canada),

(b) a trust governed by a registered retirement income fund as defined in the Income Tax Act (Canada),

(c) a trust, in a form and on terms approved by the administrator, established for the purpose of acquiring or holding shares issued under a plan, or

(d) other prescribed trusts;

"trust disposition" means a disposition of a share

(a) to a trust for which the transferor or the transferor's spouse is the annuitant or beneficiary,

(b) from a trust to the annuitant or beneficiary of the trust,

(c) from one trust to another trust if both trusts have the same annuitant or beneficiary, or

(d) in other prescribed circumstances.

(2) For the purposes of this Act

(a) shares are deemed to be owned by an individual if they are beneficially owned by a corporation controlled by the individual or by an affiliate of that corporation,

(b) a corporation is deemed to own shares that are owned by its affiliates, and

(c) the annuitant or beneficiary of a trust is deemed to have purchased, held or disposed of shares that are purchased, held or disposed of by the trust.

(3) If, under the definition of "affiliate", a person (the "first person") is an affiliate of another person, that other person is an affiliate of the first person.

(4) If, under the definition of "associate", a person (the "first person") is an associate of another person, that other person is an associate of the first person.

(5) For the purposes of this Act

(a) a corporation is deemed to be controlled by a person or group of persons if

(i)   shares of the corporation carrying more than 50% of the outstanding voting rights for the election of the directors are owned directly or indirectly by that person or group of persons, and

(ii)   the voting rights carried by the shares referred to in subparagraph (i) are sufficient, if exercised, to elect a majority of the directors of the corporation, and

(b) a person or group of persons is deemed, other than in prescribed circumstances, to own shares that the person or group of persons would own following the exercise of

(i)   an option, warrant or right, or

(ii)   a conversion right that is attached to a debt obligation or to a share of the corporation.

(6) For the purposes of this Act and subject to subsection (7), if the expression "controlled, directly or indirectly in any manner," is used, a corporation must be considered to be so controlled by another corporation, person or group of persons (the "controller") at any time if, at that time, the controller has any direct or indirect influence that, if exercised, would result in control in fact of the corporation.

(7) If the corporation and the controller are dealing with each other at arm's length and that influence is derived from a franchise, licence, lease, distribution, supply or management agreement or other similar agreement or arrangement, the main purpose of which is to govern the relationship between the corporation and the controller regarding the manner in which a business carried on by the corporation is to be conducted, the corporation must not be considered to be controlled, directly or indirectly in any manner, by the controller merely because of the agreement or arrangement.

(8) A reference in this Act to a series of transactions or events includes any related transactions or events completed in contemplation of the series.

Part 1 — Employee Share Ownership Plans

Registration

2  (1) A corporation that meets the criteria set out in section 3 may apply to have an employee share ownership plan registered under this Part by delivering to the administrator, in a form acceptable to the administrator, an application including all of the following:

(a) the financial statements of the corporation;

(b) a copy of its constitution;

(c) a copy of the employee share ownership plan;

(d) other information that the administrator may require in order to determine compliance with this Act and the regulations.

(2) The administrator must register an employee share ownership plan, with conditions that the administrator considers appropriate, on being satisfied that

(a) the corporation meets the criteria set out in section 3,

(b) the plan complies with the spirit and intent of this Act and the regulations, and

(c) any other prescribed conditions for the registration are met.

(3) If the administrator registers an employee share ownership plan he or she must issue a certificate of registration, and the plan is deemed to be registered under this Part on the date of registration contained in the certificate.

(4) Registration of an employee share ownership plan under this section constitutes approval, as at the date of registration, for the corporation to raise the amount of equity capital referred to in the plan or any other amount that the administrator specifies.

Criteria for corporation eligibility

3  The criteria referred to in section 2 for eligibility of a corporation, whether a cooperative association or not, are that the corporation

(a) is incorporated under the laws of British Columbia or of Canada or, being a corporation incorporated in any other province of Canada, is an extraprovincial company within the meaning of the Business Corporations Act,

(b) pays not less than 25% of the prescribed wages and salaries, calculated in the prescribed manner, of the corporation to employees who regularly work within British Columbia,

(c) together with its affiliates, has not more than $500 million in total assets calculated in the prescribed manner,

(d) has not, during the preceding 2 years, raised more than $5 million in equity capital under

(i)   any registered employee share ownership plan,

(ii)   any other share ownership plan that substantially meets the requirements under section 4 (1) (c), (d) (i) and (h), or

(iii)   combinations of share ownership plans referred to in subparagraph (i) or (ii), and

(e) meets other prescribed conditions.

Conditions for plan

4  (1) Every employee share ownership plan must contain or make provision for at least the following:

(a) the estimated number of eligible employees proposed to be covered by the plan;

(b) the amount of equity capital to be raised under the plan, which must not exceed $5 million in any 2 year period;

(c) that every eligible employee who has been employed by the corporation or its predecessor or affiliate for a period set out in the plan not exceeding 2 years has an equal right to purchase shares under the plan or a prorated right to purchase shares, which takes into account length of service;

(d) subject to section 40 (5), that the shares to be acquired under the plan

(i)   are equity shares,

(ii)   are of only one class and have never previously been issued,

(iii)   will only be issued from the treasury of the corporation on being fully paid for in cash,

(iv)   will, immediately following their acquisition, be registered in the name of each employee that purchases them or in the name of a trustee, if the shares are held by the trustee for the benefit of an employee, and despite the Business Corporations Act, will be held, for 3 years from the date of the purchase, in the custody of an authorized depository and under such terms and conditions as are approved by the administrator, and

(v)   do not have any rights or restrictions prohibited by regulation;

(e) an investment confirmation, to be issued to each new shareholder within 30 days of share registration, setting out at least the following:

(i)   the number of shares acquired;

(ii)   the price paid per share;

(iii)   the total amount paid;

(iv)   the name, address, telephone number and contact person for the authorized depository;

(v)   the procedure for obtaining the tax credit certificate under this Act;

(vi)   any other prescribed information;

(f) a method of establishing the value for the shares by

(i)   an opinion from an independent qualified person,

(ii)   a formula referencing financial information of the corporation, or

(iii)   a formula referencing the trading value of a class of shares trading on a public stock exchange of the corporation,

that applies consistently over the life of the plan and is computed on the basis of fair market value without reference to the tax credit provided for under the Income Tax Act or the Income Tax Act (Canada);

(g) that the corporation must provide to each employee shareholder at least annually

(i)   the value established under paragraph (f), and the basis on which the value is established, and

(ii)   disclosure with respect to major decisions of the corporation that materially affect that value;

(h) that if a shareholder wishes to sell all or a portion of the shares acquired under the plan and the shares are not listed on a stock exchange the corporation must redeem the shares unless

(i)   the shares are bought by a party dealing at arm's length with the shareholder, or

(ii)   the shares are acquired by other eligible employees;

(i) that shares redeemed under paragraph (h) will be at a price at least equal to the value established under paragraph (f);

(j) that share transactions under paragraph (h) may be governed by limits set out in the plan if those limits are based on a reasonable test of ability to pay;

(k) a share offering document;

(l) the use of the equity capital where the use will be contrary to section 6 (a);

(m) such other requirements as may be prescribed.

(2) A plan must not be altered without the prior approval of the administrator and the consent of a majority of the employee shareholders.

Additional equity capital

5  (1) If a corporation proposes to raise equity capital under an employee share ownership plan in addition to the equity capital approved under section 2 (4), it must apply to the administrator who may approve that additional equity capital, subject to any conditions the administrator considers appropriate, if the administrator is satisfied that

(a) the corporation meets the criteria referred to in section 3,

(b) the plan is being implemented in accordance with this Act and the regulations, and

(c) the equity capital approval would not result in the total aggregate of the tax credits exceeding any limits prescribed under section 30.

(2) An approval under subsection (1) is deemed to be an approved change to the plan.

Use of funds

6  A corporation must not use funds received from the approved issue of shares under an employee share ownership plan for which tax credits under the Income Tax Act have been or will be claimed

(a) unless otherwise specifically provided for in the plan, for

(i)   lending, other than in the ordinary course of business,

(ii)   acquiring securities, other than in the ordinary course of business,

(iii)   funding of all or part of the purchase by the corporation of all or a substantial portion of the assets of an existing proprietorship, partnership, joint venture, trust or corporation,

(iv)   making any payment, including a payment for the purchase of goods or services and the payment of dividends and the repayment of shareholder debt, to a shareholder, director or officer of the corporation or any of its affiliates,

(v)   investing in land, unless the use of the land is incidental or ancillary to the activities of the corporation, and

(vi)   the purchase or redemption of previously issued shares of the corporation or one of its affiliates,

(b) for purchasing services or assets provided by the Crown or an agency or corporation of the Crown, if

(i)   those services or assets are to be used in all or in part in a business or activity that is the same or similar to the activity previously carried on by the Crown or the agency or corporation of the Crown, and

(ii)   the corporation has received, either directly or indirectly, any financial assistance from any government, municipality or public authority with respect to the acquisition of those services or assets,

(c) as part of a transaction or series of transactions directly or indirectly involving the funding of all or part of the purchase by the corporation of any services or assets at a price that is greater than the fair market value of the services or assets purchased, or

(d) for other prescribed purposes.

Tax credit

7  (1) A corporation must apply, on behalf of each of its eligible employees, to the administrator for a tax credit certificate entitling each of those eligible employees to a tax credit under section 13.1 of the Income Tax Act, equal to 20% of the amount received by the corporation, in that calendar year or within 60 days immediately following that calendar year, for shares issued to those eligible employees by the corporation under a registered employee share ownership plan.

(2) On receipt of an application under subsection (1), the administrator must, subject to subsections (2.1) and (3), following the approval of the minister responsible for the administration of the Income Tax Act and in accordance with section 13.1 of the Income Tax Act, issue a tax credit certificate in the amount referred to in subsection (1), unless the administrator 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.

(2.1) If the administrator has made an order under section 40 (5) (c) in respect of the registered employee share ownership plan and the amount referred to in subsection (1) exceeds $2 000 for the calendar year or the 60 days immediately following that calendar year, the administrator must

(a) issue a tax credit certificate in the amount of $2 000 for the year,

(b) issue tax credit certificates in subsequent years in an amount not exceeding $2 000 per year until the aggregate of the tax credit certificates issued in respect of that year equals the amount referred to in subsection (1) for that year, and

(c) after all tax credit certificates have been issued under paragraphs (a) and (b), issue tax credit certificates in accordance with this section for any amounts referred to in subsection (1) that are received by the corporation in the subsequent years.

(3) The administrator must not issue a tax credit certificate under subsection (2) or (2.1) unless the administrator is satisfied that

(a) the corporation and its eligible employees are complying with a registered employee share ownership plan and any conditions pertaining to it,

(b) the shares have been acquired in accordance with a registered plan,

(c) other than where prescribed, the shares 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 under section 13.1 of the Income Tax Act or section 127.4 of the Income Tax Act (Canada), against tax 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,

(d) [Repealed 2004-51-11.]

(e) no tax credit has been previously allowed for those shares under the Income Tax Act or the Income Tax Act (Canada),

(f) [Repealed 2003-4-1.]

(g) except if the administrator has made an order under section 40 (5) (c), the sum of the shareholder's aggregate entitlements in respect of all tax credit certificates applied for in the year is $2 000 or less, and

(h) any other prescribed conditions have been complied with.

Part 2 — Employee Venture Capital Plans

Registration

8  (1) A corporation that meets the criteria set out in section 9 may apply for registration under this Part by delivering to the administrator, in a form acceptable to the administrator, an application including all of the following:

(a) the financial statements of the corporation;

(b) a copy of its constitution;

(c) a copy of the employee venture capital plan;

(d) other information that the administrator may require in order to determine compliance with this Act and the regulations.

(2) The administrator must register the corporation, with conditions that the administrator considers appropriate, on being satisfied that

(a) the corporation meets the criteria set out in section 9,

(b) the employee venture capital plan complies with the spirit and intent of this Act and the regulations, and

(c) any other prescribed conditions for the registration are met.

(3) If the administrator registers a corporation, he or she must issue a certificate of registration, and the employee venture capital corporation and employee venture capital plan is deemed to be registered under this Part on the date of registration contained in the certificate.

(4) Registration of an employee venture capital corporation under this section constitutes approval, as at the date of registration, for the employee venture capital corporation to raise the amount of equity capital referred to in the plan or any other amount that the administrator specifies.

Criteria for corporation eligibility

9  The criteria referred to in section 8 for eligibility of a corporation for registration as an employee venture capital corporation are that the corporation

(a) is incorporated under the laws of British Columbia,

(b) is sponsored by an employee organization or an employee group,

(b.1) is managed by a person who does not manage any other employee venture capital corporation,

(c) has a name that includes "(EVCC)" immediately before the word or abbreviation required by section 23 (1) of the Business Corporations Act,

(d) has never previously carried on business other than business related to obtaining registration under this Part,

(e) has, or will have immediately after registration and afterwards, equity capital of at least $25 000,

(f) has authorized share structure consisting of shares without par value,

(g) has a constitution that

(i)   restricts the business of the corporation to

(A)  making investments permitted under this Act and providing business expertise, managerial expertise or financial support to eligible businesses in which the employee venture capital corporation has made or proposes to make an eligible investment, and

(B)  providing information to and educating employees as to the role of capital in business, the value of equity investments to an employee and the rights and obligations of corporations and their shareholders,

(ii)   restricts the issue of the shares to eligible investors, and

(iii)   prohibits the corporation from lending money, guaranteeing loans or providing other financial assistance to

(A)  its shareholders, or

(B)  any employee organization, and

(h) meets other prescribed conditions.

Conditions for plan

10  (1) Every employee venture capital plan must contain or make provision for at least the following:

(a) the estimated number of eligible investors proposed to be covered by the plan;

(b) the amount of equity capital to be raised under the plan;

(c) if the employee venture capital plan is for a corporation that does not have a restricted constitution, that every eligible investor has an equal right to purchase shares under the plan;

(d) if the employee venture capital plan is for a corporation that has a restricted constitution, that every eligible investor who has, for a period set out in the plan of not more than 2 years, been employed by the eligible business referred to in the corporation's constitution or an affiliate of that eligible business, has an equal right, or a prorated right based on length of service, to purchase shares under the plan;

(e) that the shares to be issued under the plan

(i)   are equity shares,

(ii)   are of only one class and have never previously been issued,

(iii)   will only be issued from the treasury of the corporation on being fully paid for in cash,

(iv)   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, and

(v)   do not have any rights or restrictions prohibited by regulation;

(f) an investment confirmation, to be issued to each new shareholder within 30 days of share registration, setting out at least the following:

(i)   the number of shares acquired;

(ii)   the price paid per share;

(iii)   the total amount paid;

(iv)   the procedure for obtaining the tax credit certificate under this Act;

(v)   any other prescribed information;

(g) a method of establishing the value for the shares by

(i)   an independent opinion from a qualified person, or

(ii)   a formula referencing financial information of the corporation,

that applies consistently over the life of the plan and is computed on the basis of fair market value without reference to the tax credit provided for under the Income Tax Act or the Income Tax Act (Canada);

(h) that the corporation must provide to each shareholder at least annually

(i)   the value established under paragraph (g), and the basis on which the value is established, and

(ii)   disclosure with respect to major decisions of the corporation that materially affect that value;

(i) that if a shareholder wishes to sell all or a portion of the shares acquired under the plan and the shares are not listed on a Canadian stock exchange the corporation must redeem the shares unless

(i)   the shares are bought by a party dealing at arm's length with the shareholder, or

(ii)   the shares are acquired by other eligible investors;

(j) that shares redeemed under paragraph (i) will be at a price at least equal to the value established under paragraph (g);

(k) that share transactions under paragraph (i) may be governed by limits set out in the plan if those limits are based on a reasonable test of ability to pay;

(l) a share offering document;

(m) an investment plan including

(i)   the corporation's investment policy and philosophy, and

(ii)   if known,

(A)  the names of the eligible businesses in which the corporation intends to invest,

(B)  the amount and timing of the intended investment, and

(C)  any special conditions or rights to be associated with the equity shares to be acquired;

(n) the criteria under which persons subscribing for shares will qualify as eligible investors;

(n.1) a corporate governance plan that includes

(i)   any prescribed governance policies and practices, and

(ii)   any other governance policies and practices established by the corporation;

(o) such other requirements as may be prescribed.

(2) An employee venture capital plan must not be altered without the prior approval of the administrator and the consent of a majority of the eligible shareholders.

Permanent establishment

11  (1) In this section, "permanent establishment" has the same meaning as in the Income Tax Act.

(2) An employee venture capital corporation must establish a permanent establishment in Canada within 30 days after being registered and must afterward maintain a permanent establishment in Canada.

(3) An employee venture capital corporation

(a) may establish and maintain only one permanent establishment in Canada, and

(b) must not establish or maintain a permanent establishment outside of Canada.

Limits on equity capital

12  (1) The equity capital of an employee venture capital corporation, including the equity capital referred to in section 14, must not exceed $5 million if it is not a reporting issuer as defined in the Securities Act.

(2) If the Lieutenant Governor in Council considers it to be in the public interest, he or she, by order with or without conditions, may

(a) exempt an employee venture capital corporation specified in the order from the $5 million limit under subsection (1), and

(b) specify another limit applicable to that employee venture capital corporation.

Minimum investment requirements

13  (1) An employee venture capital corporation with a restricted constitution

(a) must invest an amount equal to at least 80% of any equity capital it has raised during its fiscal year in eligible investments no later than the end of its next fiscal year, and

(b) must afterwards keep at least the amount invested under paragraph (a) in eligible investments.

(2) An employee venture capital corporation that does not have a restricted constitution

(a) must invest an amount equal to at least a prescribed percentage of the equity capital it has raised during its fiscal year in accordance with a prescribed schedule, and

(b) must afterwards keep at least the prescribed percentage of the equity capital referred to in paragraph (a) in eligible investments.

(3) For the purposes of subsections (1) and (2), the amount invested in eligible investments must be ascertained using the cost, determined in the prescribed manner, of the investment.

(4) Despite subsection (2), the Lieutenant Governor in Council may postpone prescribing both the percentage and the schedule referred to in subsection (2) for a period not exceeding one year following the coming into force of this section, in order to allow for consultation as to the intended regulations under subsection (2).

(5) For the period before the Lieutenant Governor in Council prescribes the percentage and the schedule referred to in subsection (2) (a), the administrator by written order must specify for the purposes of subsection (2), and keep available for public inspection, both the percentage and the schedule referred to in subsection (2) (a).

Additional equity capital

14  (1) If a corporation proposes to raise equity capital under an employee venture capital plan in addition to the capital approved under section 8 (4), it must apply to the administrator who may approve that additional capital, subject to any conditions the administrator considers appropriate if the administrator is satisfied that

(a) the corporation meets the criteria referred to in section 9,

(b) the plan is being implemented in accordance with this Act and the regulations, and

(c) the equity capital approval would not result in the total aggregate of the tax credits exceeding any limits prescribed under section 30.

(2) An approval under subsection (1) is deemed to be an approved change to the employee venture capital plan.

Eligible investments

15  (1) An investment by an employee venture capital corporation is an eligible investment if the following requirements are met at the time the investment is made:

(a) the investment consists of the acquisition

(i)   of eligible securities of an eligible business directly from the eligible business,

(ii)   in prescribed circumstances, of eligible securities of an eligible business from an agent or broker acting as an underwriter for the eligible business,

(iii)   of eligible securities of an affiliate or associate of an eligible business directly from the affiliate or associate, and the funds paid by the employee venture capital corporation for the eligible securities are in turn invested in eligible securities of the eligible business by the affiliate or associate either directly or indirectly through one or more other affiliates or associates,

(iv)   of eligible securities of an eligible business or an affiliate or associate of an eligible business from an existing investor who owns those securities, and the administrator considers that the purchase of the eligible securities will

(A)  result in job preservation,

(B)  assist the eligible business in dealing with the departure of an employee investor or a venture capital investor,

(C)  facilitate an orderly succession if an owner of an eligible business is retiring, or

(D)  provide some other substantial economic benefit to the eligible business or to British Columbia, or

(v)   of eligible securities in other prescribed circumstances;

(b) subject to paragraph (a) (iv) and section 40 (5), the acquisition of the eligible securities was or will be for cash, for the purposes of directly or indirectly raising additional capital for an eligible business;

(c) the investment is not prohibited under sections 16 to 19;

(d) in the case of an employee venture capital corporation that has a restricted constitution, the investment is in equity shares of the eligible business or affiliated businesses referred to in the employee venture capital corporation's constitution;

(e) such other requirements as may be prescribed.

(2) If an eligible security acquired as an eligible investment  is converted or exchanged for another eligible security of the same investee business or an affiliate or associate of the investee business, the eligible security acquired on the conversion or exchange is an eligible investment.

Investment for certain purposes prohibited

16  (1) An employee venture capital corporation must not use funds raised through the issue of equity shares with respect to which tax credits have been or are entitled to be claimed under section 13.1 of the Income Tax Act to make or hold an investment in an eligible business if all or part of the proceeds of that investment are directly or indirectly used or intended to be used by the eligible business

(a) for lending, other than in exchange for eligible securities of an affiliate or an associate which is an eligible business,

(b) for acquiring securities other than

(i)   eligible securities from an affiliate or an associate which is an eligible business, or

(ii)   eligible securities approved by the administrator under section 17 (2),

(c) for making any payment with respect to the purchase of goods or services from, the payment of dividends to or the repayment of shareholder debt to a director, officer or shareholder of the employee venture capital corporation or from or to an associate of a director, officer or major shareholder of the employee venture capital corporation,

(d) for purchasing services or assets provided by the Crown or an agency or corporation of the Crown, if

(i)   those services or assets are to be used in all or in part in a business or activity that is the same or similar to the activity previously carried on by the Crown or the agency or corporation of the Crown, and

(ii)   the corporation has received, either directly or indirectly, any financial assistance from any government, municipality or public authority with respect to the acquisition of those services or assets,

(e) as part of a transaction or series of transactions directly or indirectly involving, other than as part of a proposal accepted under section 17 (2),

(i)   the purchase or redemption of previously issued shares of the eligible business or one of its affiliates,

(ii)   the retirement of any part of a liability to a shareholder of the eligible business or one of its affiliates,

(iii)   the payment of dividends, or

(iv)   the funding of all or part of the purchase by the eligible business of all or a substantial portion of the assets of an existing proprietorship, partnership, joint venture, trust or corporation,

(f) for funding all or part of the purchase by the eligible business of any services or assets at a price that is greater than the fair market value of the services or assets purchased, or

(g) for other prescribed purposes.

(2) Despite subsection (1), the administrator may order, in respect of a particular eligible investment, that the eligible business may use all or part of the proceeds from the investment by an employee venture capital corporation for one or more of the purposes described in subsection (1) if the administrator is satisfied that the use would assist in the overall growth and development of the eligible business.

Control of eligible business

17  (1) Subject to subsection (2), an employee venture capital corporation that does not have a restricted constitution must not make or hold an investment in an eligible business if

(a) 50% or more of the shares carrying votes for the election of directors of the eligible business are owned, directly or indirectly, by, or

(b) the eligible business is controlled, directly or indirectly, in any manner, by

the employee venture capital corporation or it and any other employee venture capital corporation or venture capital corporation registered under the Small Business Venture Capital Act, either alone or in conjunction with one or more of its or their

(c) associates or affiliates,

(d) shareholders or their associates or affiliates,

(e) directors or their associates, or

(f) officers or their associates.

(2) Subsection (1) does not apply to the making or holding of an investment in an eligible business if

(a) the administrator is satisfied that the investment will result in substantial employee participation in the

(i)   start up and operation of a new business, or

(ii)   restructuring of ownership of an existing business to facilitate transfer of control from a person or a group of persons if the restructuring will result in widely dispersed ownership by persons resident in Canada, or

(b) the administrator is satisfied that the eligible business is or will be in financial difficulty.

(3) The administrator may set conditions with respect to the making or holding of an investment under subsection (2).

Non-arm's length investments prohibited

18  (1) An employee venture capital corporation must not make or hold an investment in an eligible business if a major shareholder of the employee venture capital corporation is, or was at any time during the 2 years immediately preceding the investment,

(a) a major shareholder of the eligible business,

(b) an associate of a major shareholder of the eligible business,

(c) a voting trust where the trustee votes shares of the eligible business, or

(d) the eligible business or an associate or affiliate of the eligible business.

(2) An employee venture capital corporation must not make or hold an investment in an eligible business if the eligible business or an associate, affiliate, director, officer or shareholder of the eligible business provides or has provided, directly or indirectly, as part of any transaction or series of transactions, a loan, guarantee or any other financial assistance to a person who is, or was at any time during the 2 years immediately preceding the investment,

(a) the employee venture capital corporation,

(b) an associate or affiliate of the employee venture capital corporation,

(c) a director, officer or major shareholder of the employee venture capital corporation, or

(d) a member of a group of persons that controls the employee venture capital corporation.

Aggregate investment

19  (1) An employee venture capital corporation must not make or hold an investment in an eligible business if, as a result of that investment, the aggregate of all amounts received directly or indirectly by that eligible business from the employee venture capital corporation would exceed $10 million within a 2 year period.

(2) Subsection (1) does not apply if the amount that the eligible business receives in excess of $10 million within a 2 year period is an investment made or held by an employee venture capital corporation that

(a) is invested in accordance with section 22 (1) (c), and

(b) does not have to be invested in eligible investments under the terms of the corporation's employee venture capital plan.

Action to be taken if investment becomes prohibited

20  If an investment of an employee venture capital corporation becomes prohibited under sections 16 to 19, the employee venture capital corporation must, within 6 months after the investment became prohibited, dispose of that investment unless, within the 6 month period, the circumstances that caused the investment to become prohibited change so that the investment is no longer prohibited under those sections.

Repealed

21  [Repealed 1997-27-19.]

Permitted investments and authorized expenses

22  (1) An employee venture capital corporation must not make or hold any investments other than investments in

(a) eligible investments,

(b) liquid reserves on deposit in British Columbia at a savings institution,

(c) a security, as defined in the Securities Act,

(i)   of an eligible business or an affiliate or associate of an eligible business,

(ii)   of an investee business or an affiliate or associate of an investee business, or

(iii)   issued to the employee venture capital corporation on the disposition of an eligible investment or an investment permitted under this section

if, at the date of the investment, the money invested in the security is not required under the Act to ever be invested in eligible investments,

(d) the investment protection account under section 23,

(e) securities, as defined by the Trustee Act, that are issued by the government or the government of Canada, or

(f) any other prescribed investment.

(2) The annual expenses of an employee venture capital corporation must not exceed a prescribed amount, determined in the prescribed manner.

Investment protection account

23  (1) At the time of each receipt of equity capital for which a tax credit certificate will be applied for under this Act or on the disposition of an equity share that is or was an eligible investment, an employee venture capital corporation must pay or cause to be paid into an investment protection account that meets the criteria and complies with the conditions established by the administrator an amount equal to 30% of the consideration received by the employee venture capital corporation for the equity shares, unless the administrator is satisfied that the employee venture capital corporation will immediately make an eligible investment equal to or greater than the consideration received.

(2) If an employee venture capital corporation has made or proposes to immediately make an investment and the administrator is satisfied that

(a) the investment qualifies as an eligible investment, and

(b) the eligible business and the employee venture capital corporation and their directors, officers and shareholders are conducting their business and affairs in accordance with the spirit and intent of this Act,

the administrator must authorize payment out of the investment protection account to the employee venture capital corporation or its nominee, with or without conditions the administrator may require, of an amount equal to the least of the following:

(c) the amount the employee venture capital corporation has requested to be released from the investment protection account;

(d) either

(i)   if the amount paid or to be paid for the eligible investment is represented by equity raised by the employee venture capital corporation before July 30, 1996, 50% of the amount paid or to be paid for the eligible investment, or

(ii)   if the amount paid or to be paid for the eligible investment is represented by equity raised by the employee venture capital corporation on or after July 30, 1996, 37.5% of the amount paid or to be paid for the eligible investment;

(e) the amount in the account.

(3) If

(a) the administrator certifies that money is payable to the Crown under section 31 or 32, and

(b) there is money in the investment protection account to pay all or part of the amount payable,

the money must be paid to the Minister of Finance.

(4) Income earned on money in the investment protection account is payable to the employee venture capital corporation.

(5) Despite subsection (4), the administrator may require an employee venture capital corporation to pay or cause to be paid to the Crown all or part of the income earned in respect of the investment protection account if

(a) the registration of the corporation is revoked under section 35, or

(b) the corporation fails to comply with section 13.

(6) If an employee venture capital corporation acquires shares of its own issue and the administrator is satisfied that no tax credits under section 13.1 of the Income Tax Act or section 127.4 of the Income Tax Act (Canada) have been or will be issued in respect of those shares, the administrator may authorize the payment out of the investment protection account to the employee venture capital corporation or its nominee of an amount equal to the lesser of

(a) 40% of the amount for which the shares acquired were originally issued, or

(b) the amount deposited in the investment protection account in respect of the shares acquired.

Tax credit

24  (1) An employee venture capital corporation must apply, on behalf of each of its eligible investors, to the administrator for a tax credit certificate entitling each of those eligible investors to a tax credit under section 13.1 of the Income Tax Act, equal to 15% of the amount received by the corporation, in that calendar year or within 60 days immediately following that calendar year, for shares issued to those eligible investors by the corporation under a registered employee venture capital plan.

(2) On receipt of an application under subsection (1), the administrator must, subject to subsection (2.1) and (3), following the approval of the minister responsible for the administration of the Income Tax Act and in accordance with section 13.1 of the Income Tax Act, issue a tax credit certificate in the amount referred to in subsection (1), unless the administrator 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.

(2.1) If the administrator has made an order under section 40 (5) (d) in respect of the registered employee venture capital plan and the amount referred to in subsection (1) exceeds $2 000 for the calendar year or the 60 days immediately following that calendar year, the administrator must

(a) issue a tax credit certificate in the amount of $2 000 for the year,

(b) issue tax credit certificates in subsequent years in an amount not exceeding $2 000 per year until the aggregate of the tax credit certificates issued in respect of that year equals the amount referred to in subsection (1) for that year, and

(c) after all tax credit certificates have been issued under paragraphs (a) and (b), issue tax credit certificates in accordance with this section for any amounts referred to in subsection (1) that are received by the corporation in the subsequent years.

(3) The administrator must not issue a tax credit certificate under subsection (2) or (2.1) unless the administrator is satisfied that

(a) the corporation and its eligible investors are complying with a registered employee venture capital plan and any conditions pertaining to it,

(b) the shares have been acquired in accordance with a registered plan,

(c) other than where prescribed the shares 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 under section 13.1 of the Income Tax Act or section 127.4 of the Income Tax Act (Canada), against tax 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,

(d) no tax credit has been previously allowed for those shares under the Income Tax Act or the Income Tax Act (Canada),

(e) [Repealed 2000-9-9.]

(f) except if the administrator has made an order under section 40 (5) (d), the sum of the shareholder's aggregate entitlements in respect of all tax credit certificates applied for in the year is $2 000 or less, and

(g) any other prescribed conditions have been complied with.

Fractional shares

25  An employee venture capital corporation, subject to its memorandum, notice of articles or articles,

(a) may allot or issue fractional shares for any purpose, and

(b) may purchase or redeem any of its fractional shares and need not consolidate them into whole shares.

Paid up capital accounts

26  (1) An employee venture capital corporation may elect to maintain a separate paid up capital account for each class and series of shares that it issues, and must, from the date of that election, maintain those accounts in accordance with this section.

(2) An employee venture capital corporation must add to the paid up capital account maintained for a class or series of shares

(a) the full amount, without supplement or deduction, of any consideration received by the employee venture capital corporation for the issue of shares of that class or series of shares, whether those shares were issued before or after the creation of the account, and

(b) any other amounts, including, without limitation, amounts credited to a retained earnings or other surplus account that may be approved,

(i)   in the case of an employee venture capital corporation that has outstanding shares of more than one class or series of shares, by special resolution, or

(ii)   in any other case, by the directors.

(3) Despite subsection (2) (a), if it is authorized to do so by a special resolution, an employee venture capital corporation may, in respect of a specific issue of shares, add less to the paid up capital account maintained for the class or series of shares out of which the shares were issued than the full amount of the consideration it received for the issue of those shares.

(4) An employee venture capital corporation must not reduce the balance in any paid up capital account except as provided for in this section.

(5) An employee venture capital corporation must deduct from the paid up capital account maintained for a class or series of shares

(a) if shares of that class or series of shares are purchased, redeemed or otherwise acquired by the employee venture capital corporation and are subsequently cancelled, the amount of the paid up capital that is attributable to those purchased, redeemed or acquired shares, and

(b) the amount by which capital in respect of those shares is reduced under section 74 of the Business Corporations Act.

(6) On a conversion, exchange or change of issued shares of an employee venture capital corporation into shares of another class or series of shares of the employee venture capital corporation, the employee venture capital corporation must

(a) deduct from the paid up capital account maintained for the class or series of shares of which the shares converted, exchanged or changed formed a part, the amount of the paid up capital that is attributable to those converted, exchanged or changed shares, and

(b) add to the paid up capital account maintained for the class or series of shares into which the shares were converted, exchanged or changed

(i)   an amount equal to the amount referred to in paragraph (a), and

(ii)   any additional consideration the employee venture capital corporation receives as a result of the conversion, exchange or change.

(7) For the purposes of subsections (5) (a) and (6) (a), the amount of paid up capital that is attributable to the shares referred to in those subsections as having been purchased, redeemed, acquired, converted, exchanged or changed, as the case may be, is the result obtained by

(a) multiplying the balance in the paid up capital account maintained for the class or series of shares of which the shares referred to in subsections (5) (a) and (6) (a) formed a part by the number of the shares of that class or series of shares that were purchased, redeemed, acquired, converted, exchanged or changed, and

(b) dividing the result of the calculation referred to in paragraph (a) by the number of issued shares of that class or series of shares that were outstanding immediately before the purchase, redemption, acquisition, conversion, exchange or change.

Part 3 — General

Certification of employee group

27  (1) A group of employees who the administrator considers are or will be eligible investors or eligible employees may apply to the administrator for certification as an employee group for the purposes of this Act.

(2) The administrator may certify, with or without conditions, not more than one employee group with respect to each employee share ownership plan or employee venture capital plan.

Cost sharing

28  (1) A corporation that meets the requirements of section 3 or 9 and that has not more than 150 employees, calculated in the prescribed manner, and an employee group, may each apply in a form and manner satisfactory to the administrator for reimbursement, in accordance with subsection (2), of their costs relating to the negotiation, evaluation and implementation of an employee share ownership plan or employee venture capital plan.

(2) If the administrator approves an application under subsection (1), the government must reimburse the corporation and the employee group for 50% of their respective costs up to a prescribed maximum amount, if the administrator is satisfied that

(a) the corporation and the employee group are complying with the spirit and intent of the Act, and

(b) the costs incurred comply with any prescribed terms and conditions.

(3) Only one application for each corporation and employee group may be approved by the administrator in any calendar year.

The register

29  (1) The administrator must maintain a register containing the information required by subsection (3).

(2) The register must be open for public inspection during normal business hours at places in British Columbia determined by the administrator.

(3) The register must contain the following information:

(a) the name and registered office of each corporation that caused a plan to be registered and the place at which all documents, other than documents containing financial information of the corporation, pertaining to the plan may be examined;

(b) the date that the plan was registered;

(c) a contact name and address for any employee group associated with the plan if any;

(d) other information that may be prescribed.

Annual maximum tax credit

30  (1) The Lieutenant Governor in Council, for any year, may make regulations as follows:

(a) prescribing an amount as the annual maximum employee investment tax credit;

(b) subdividing the annual maximum employee investment tax credit into smaller annual maximum amounts, that may differ from each other, and allocating each of those smaller annual maximum amounts for corporations according to which of the criteria specified under paragraph (c) apply to them;

(c) for paragraph (b), specifying criteria applicable to corporations, which criteria may differentiate among corporations on any basis the Lieutenant Governor in Council considers appropriate, including but not limited to one or more of the following:

(i)   whether the corporations have or do not have restricted constitutions;

(ii)   whether the corporations are corporations with employee share ownership plans registered under Part 1 or are corporations registered under Part 2 as employee venture capital corporations;

(iii)   the value, or the reported value, of the total consolidated assets of each of the corporations;

(iv)   the level of the approved equity capital of each of the corporations;

(d) authorizing the administrator, in circumstances and on conditions that may be prescribed, to reallocate part of an amount allocated under paragraph (b) for corporations, regardless of which of the criteria prescribed under paragraph (c) apply to the corporations.

(2) The administrator must register a plan only if satisfied that the amounts that will be deductible or deducted under section 13.1 of the Income Tax Act during a particular year

(a) do not exceed the annual maximum employee investment tax credit for that year, and

(b) are within the allocations made under subsection (1).

(3) If, because of a regulation made under subsection (1) or a reallocation referred to in subsection (1) (d), continuation of plans registered under this Act would result in the level of the approved equity capital, for the corporations to which the plans apply, exceeding

(a) the annual maximum employee investment tax credit, or

(b) a smaller annual maximum amount allocated under subsection (1) (b) for corporations meeting criteria applicable to them as specified under subsection (1) (c),

the administrator must amend the plans by reducing the corporations' approved equity capital to reflect the regulation or reallocation, with effect as of the effective date of the regulation or reallocation, as the case may be.

(4) An agreement, arrangement or approval, whether made before or after the coming into force of this subsection, is, and has always been, without effect to the extent, if any, that it requires or required or purports or purported to require the government, the administrator or any person on behalf of either of them, in relation to a plan or intended plan or to a tax credit or intended tax credit,

(a) to do anything inconsistent with this Act or the regulations,

(b) to exercise a discretion under this Act in a specified manner, or

(c) to take any action toward achieving a specific outcome under this Act.

Repayment of tax credit — sale of shares

31  (1) If a person receives, directly or indirectly, the benefit of all or part of a tax credit in respect of which the person is not entitled, the person must immediately pay the amount of the benefit to the Minister of Finance.

(2) Subject to subsection (3), a shareholder who disposes of shares in respect of which a tax credit was allowed under section 13.1 of the Income Tax Act, must repay or cause to be repaid to the Minister of Finance an amount equal to the tax credits allowed in respect of those shares under section 13.1 of the Income Tax Act or a lesser amount determined under the regulations in prescribed circumstances

(a) if the shares were issued under an employee share ownership plan and the disposition is made within 3 years after the date of the issue of the shares, or

(b) if the shares were issued under an employee venture capital plan and the disposition is made within 5 years after the date of the issue of the shares.

(3) Subsection (2) does not apply if

(a) the disposition is a trust disposition, or

(b) a tax credit repayment under subsection (2) had previously been made in respect of the shares disposed of.

(4) A person who acquires the beneficial ownership in the shares under a disposition referred to in subsection (2) is jointly and severally liable with the persons referred to in subsections (2) and (5) to make the repayment referred to in subsection (2).

(5) If the person who acquires the shares or the beneficial ownership in the shares under a disposition referred to in subsection (2) is an associate or an affiliate of the corporation whose shares are being disposed of, that corporation is jointly and severally liable with the persons referred to in subsections (2) and (4) to make the repayment referred to in subsection (2).

Third party liability

32  (1) A director or officer of the corporation, a member of a group of persons that controls the corporation or a shareholder who controls the corporation who provides information that

(a) the person knew or ought to have known was false or misleading at the time of providing the information, and

(b) formed in whole or in part the basis for which a tax credit certificate was issued under this Act

is jointly and severally liable with a person from whom the repayment is due under section 31 (1).

(2) A director or officer of the corporation, a member of a group of persons that controls the corporation or a shareholder who controls the corporation who authorizes, permits or acquiesces in a transaction or series of transactions or events that the person knew or ought to have known at the time of authorization, permission or acquiescence would render a corporation incapable of making a payment under section 23 (5) is jointly and severally liable with the corporation for the amount of the repayment.

(3) A director or officer of the corporation, a member of a group of persons that controls the corporation or a shareholder who controls the corporation who authorizes, permits or acquiesces in a transaction or series of transactions or events that result in the acquisition of a person's shares by the corporation or an associate or affiliate of the corporation is jointly and severally liable with the persons referred to in section 31 (4) and (5) for the amount of the repayment owing.

Reporting requirements

33  (1) Within 180 days after the end of each of the corporation's fiscal years beginning after the end of the first fiscal year in which a plan is registered under section 2 or 8, as the case may be, the corporation that applied for registration must prepare and file with the administrator an annual return setting out the information required by the regulations.

(2) Unless otherwise ordered by the administrator, subsection (1) does not apply

(a) in the case of a corporation that has registered an employee share ownership plan, after 3 years have elapsed since the date of release of all shares held in custody under section 4, or

(b) in the case of an employee venture capital corporation, after the fifth year following the payment of all funds from the investment protection account under section 23.

Keeping of records

34  (1) Each corporation that has had a plan registered and each employee group must maintain records in the form and containing the information that the administrator considers necessary to determine that this Act and the regulations are being complied with.

(2) The corporation must keep the records at its records office or at another place in British Columbia that is approved by the administrator.

Revocation and suspension of plans

35  (1) The administrator may suspend, for a period of up to 3 months, or revoke the registration of a plan or an employee venture capital corporation if

(a) the registration of the plan was obtained through fraud or through giving of false or misleading information by the corporation, employee group or anyone associated with the plan,

(b) the corporation fails to comply with this Act, the regulations or the plan, whether or not the failure constitutes an offence, or

(c) the administrator 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 and the regulations or the plan, whether or not there has been a contravention of this Act, the regulations or the plan.

(2) The administrator must not revoke a registration without first notifying by registered mail his or her intent to the corporation that registered the plan and giving it, its representative and other persons that would be affected by the revocation the opportunity of making comment and, if required, being heard.

(3) If a plan has been suspended under subsection (1), but the administrator, following a review, considers that the plan is being conducted in a manner that is consistent with the spirit and intent of this Act, the regulations and the plan, he or she may remove the suspension, either generally or subject to the conditions that he or she considers appropriate.

(4) Despite subsection (2), the administrator may

(a) revoke the registration of an employee share ownership plan, if the corporation that registered the plan and a majority of the employee shareholders request the revocation, or

(b) revoke the registration of an employee venture capital corporation, if the corporation requests the revocation.

Examination of records

36  (1) For the purpose of determining compliance with this Act and the regulations, the administrator or a person designated by the administrator may, during normal business hours, make an examination of the affairs of

(a) a corporation that has registered a plan, a person who is or was a shareholder of the corporation,

(b) an employee group, or

(c) an eligible business.

(2) The administrator or person making the examination under this section is entitled, for the purposes of determining compliance with this Act and the regulations, to examine the records and securities of a person or other entity referred to in subsection (1), and may make copies of those records and securities.

Investigation

37  (1) The administrator by order may appoint a person to make whatever investigation the administrator considers appropriate for the administration of this Act and in the order must determine the scope of the investigation.

(2) On application by the administrator or by an investigator appointed under subsection (1), and on being satisfied by information on oath that it is necessary and in the public interest for any purpose relating to an investigation under subsection (1), the Supreme Court may make an order authorizing the investigator

(a) to enter into the premises or on the land of a person at any reasonable time for the purpose of carrying out an inspection or examination,

(b) to require the production of any records, securities or things and to inspect or examine them, and

(c) on giving a receipt, to remove any records, securities or things inspected or examined under paragraph (b) for the purpose of further inspection or examination.

(3) An application for an order under subsection (2) must be made in the prescribed manner.

(4) Unless the Supreme Court otherwise directs, an application for an order under subsection (2) may be

(a) made without notice to any person, and

(b) heard in private.

(5) Inspection or examination under subsection (2) must be completed as soon as practical and the records, securities or things must be promptly returned to the person who produced them.

(6) A person must not withhold, destroy, conceal or refuse to give any information or produce any record, security or thing reasonably required under this section by the investigator.

Investigator's power at hearing

38  (1) An investigator appointed under section 37 has the same power

(a) to summon and enforce the attendance of witnesses,

(b) to compel witnesses to give evidence on oath or in any other manner, and

(c) to compel witnesses to produce records, securities and things

as the Supreme Court has for the trial of civil actions.

(2) The failure or refusal of a witness

(a) to attend,

(b) to take an oath,

(c) to answer questions, or

(d) to produce the records, securities and things in the person's custody or possession

makes the witness, on application to the Supreme Court, liable to be committed for contempt as if in breach of an order or judgment of the Supreme Court.

Report to administrator

39  Every person appointed under section 37 must provide the administrator with a complete report of the investigation made including any transcript of evidence and material in the person's possession relating to the investigation.

General provisions

40  (1) If the administrator does not register a plan or a corporation, or if the administrator does not approve additional equity capital, issue a tax credit certificate or authorize a payment under this Act, for which application is made, within 45 days after receipt of the application, the administrator is deemed to have refused it.

(2) A calculation or determination under this Act may be based on projections that the administrator considers to be appropriate.

(3) An amount required to be paid to the Minister of Finance under this Act is a debt due to the Crown.

(4) If a person does not comply with this Act or the regulations but the administrator considers that the person is carrying out his or her business and affairs in a manner consistent with the spirit and intent of this Act and the regulations, the administrator may do all or any of the following:

(a) permit registration of a corporation or plan;

(b) for any time that the administrator considers appropriate, refrain from revoking the registration of the corporation or plan;

(c) issue a tax credit certificate under section 7 or 24 or approve a payment under section 28;

(c.1) increase the amount that may be released from the investment protection account referred to in section 23;

(d) reduce the amount that would otherwise be required to be deposited into the investment protection account referred to in section 23.

(5) If the administrator is satisfied that an investment will result in substantial employee participation in the restructuring of ownership of an existing business

(a) to facilitate transfer of control from a person or a group of persons if the restructuring will result in widely dispersed ownership by persons resident in Canada, or

(b) if the business is or will be in financial difficulty

the administrator may, with or without conditions, order

(c) that section 4 (1) (d) (i) to (iii) does not apply in respect of a particular employee share ownership plan, or

(d) that section 15 (1) (b) does not apply in respect of a particular employee venture capital plan.

(6) If the administrator issues an order under subsection (5) in respect of a particular employee share ownership plan or employee venture capital plan, the administrator may issue tax credit certificates

(a) under section 7 to each eligible employee who purchases equity shares under the employee share ownership plan, equal in aggregate to 20% of the amount paid by the eligible employee for the shares, but not exceeding $2 000 per year, or

(b) under section 24 to each eligible investor who purchases equity shares under the employee venture capital plan, equal in aggregate to 15% of the amount paid by the eligible investor for the shares, but not exceeding $2 000 per year.

Extension of time

41  The administrator may extend, with or without conditions, the time limit for doing anything under this Act and may grant the extension even if the time limit to be extended has expired.

Liability protection

41.1  (1) In this section, "protected person" means any of the following:

(a) the government;

(b) an employee, agent or minister of the government;

(c) the administrator;

(d) a person designated or appointed under this Act by the administrator;

(e) a person acting on behalf of or under the direction of the administrator.

(2) Subject to subsection (3), no legal proceeding for damages lies or may be commenced or maintained against a protected person because of anything done or omitted

(a) in the performance or intended performance of any duty under this Act, or

(b) in the exercise or intended exercise of any power under this Act.

(3) Subsection (2) does not apply to a protected person in relation to anything done or omitted by that person in bad faith.

Offences

42  (1) A person commits an offence if the person does any of the following:

(a) makes a statement in any record, report, return, application, form or other document or information filed or furnished under this Act to the administrator or to a person conducting an examination, inquiry or investigation under section 36 that, at the time and in the light of the circumstances under which the statement is made, is false or misleading with respect to a material fact or that omits to state a material fact, the omission of which makes that statement false or misleading;

(b) wilfully withholds, destroys or conceals a record or security referred to in section 36 (2);

(c) impedes the investigator from entering premises under section 37 (2) (a);

(d) authorizes, permits or acquiesces in respect of a share purchase, transfer or redemption that is contrary to a provision of this Act or the regulations;

(e) contravenes section 34 or 37 (5);

(f) fails to comply with section 33.

(2) If a corporation is convicted of an offence under subsection (1) (a) to (f),

(a) the court may impose a fine of up to $100 000, and

(b) every director or officer of the corporation who authorized, permitted or acquiesced in the offence also commits the offence.

(3) An individual who is convicted of an offence under subsection (1) (a) to (e), is liable to a maximum fine of $50 000 or to imprisonment for not more than one year, or to both the fine and imprisonment.

(4) A person does not commit an offence under this section in relation to a statement made if the person did not know that the statement was false or misleading and, in the exercise of reasonable diligence, could not have known that the statement was false or misleading.

(5) Section 5 of the Offence Act does not apply to this Act.

Limitation period

43  Proceedings for an offence under this Act must not be commenced more than 2 years after the facts on which the proceedings are based first come to the knowledge of the administrator.

Regulations and orders

44  (1) The Lieutenant Governor in Council may make regulations referred to in section 41 of the Interpretation Act.

(2) Without limiting subsection (1), the Lieutenant Governor in Council may make regulations as follows:

(a) governing any matter that may be prescribed under this Act;

(b) defining any word or expression used but not defined in this Act;

(c) requiring any person to supply information or returns respecting any matter required in assessing compliance with this Act;

(d) establishing periods of time to be taken into account in calculations or determinations under this Act, and varying periods set by this Act;

(e) prescribing a method of establishing for purposes of this Act the value of assets of corporations with employee share ownership plans registered under Part 1 or corporations registered under Part 2 as employee venture capital corporations.

(3) The administrator may, by order, extend the time limit for doing anything under this Act, and may grant the extension even if the time limit to be extended has expired.

(4) The regulations under subsections (1) and (2) may provide differently for corporations with different levels of approved equity capital.

(5) The Lieutenant Governor in Council may, if the Lieutenant Governor in Council considers it in the public interest to do so and with or without conditions, order, in respect of a particular employee venture capital plan, that any or all of sections 9 (a) to (d) and (g) (ii), 10 (1) (e) and 13 do not apply.