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RSNL1990 CHAPTER V-3

VENTURE CAPITAL ACT

Amended:

2004 c36 s47; 2006 c40 s21; 2007 cT-9.1 s5; 2013 c16 s25

CHAPTER V-3

AN ACT RESPECTING VENTURE CAPITAL TAX CREDITS

Analysis



Short title

        1. This Act may be cited as the Venture Capital Act.

1988 c15 s1

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Interpretation

        2. (1) In this Act

             (a)  "acquisition cost amount" means 30% of the money actually paid by a person to a venture capital corporation to acquire equity shares issued to that person by the venture capital corporation;

             (b)  "associate", where used to indicate a relationship with a person, means

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

                     (ii)  a partner of that person,

                    (iii)  a trust or estate in which that person has, in the opinion of the minister, a substantial beneficial interest or as to which that person serves as trustee or in a similar capacity,

                    (iv)  a spouse, parent, son, daughter, brother or sister of that person, or

                     (v)  a relative of that person or of his or her spouse who has the same home as that person;

             (c)  "corporation" means a body corporate incorporated under the Corporations Act;

             (d)  "debt obligation" means a mortgage, bond, debenture, note or other similar obligation of a corporation, whether secured or unsecured;

             (e)  "department" means the Department of Finance;

             (f)  "disposition cost amount" means for each equity share of a venture capital corporation the acquisition cost amount paid for that equity share;

             (g)  "eligible investment" means an investment in a small business that complies with section 9;

             (h)  "equity capital" of a corporation means the amount of consideration paid in money, for which the outstanding equity shares of the corporation are issued;

              (i)  "equity share" means a share of a class of shares of a corporation carrying voting rights under all circumstances and a share of a class of shares carrying voting rights in circumstances that have occurred and are continuing;

              (j)  "Federal Act" means the Income Tax Act (Canada );

             (k)  "minister" means the minister appointed under the Executive Council Act to administer this Act;

              (l)  "person" means a natural person living in the province and includes a trustee, executor, administrator or other legal representative of a natural person and those other persons living in the province that may be prescribed by the regulations;

           (m)  "register" means the register kept under this Act;

             (n)  "security" means a share of a class of shares or a debt obligation of a corporation;

             (o)  "small business" means a small business as defined in the regulations;

             (p)  "tax otherwise payable" means the amount that would be the tax otherwise payable by a person under the Income Tax Act calculated without an addition or deduction being made under section 120.1 of the Federal Act and including tax payable for the year under theIncome Tax Act;

             (q)  "venture capital corporation" means a corporation registered under this Act; and

              (r)  "venture capital tax credit" means a deduction from tax otherwise payable in accordance with section 10 of the Income Tax Act.

             (2)  A corporation is considered to be a subsidiary of another corporation where

             (a)  it is controlled by

                      (i)  that other corporation,

                     (ii)  that other corporation and 1 or more corporations each of which is controlled by that other corporation, or

                    (iii)  2 or more corporations each of which is controlled by that other corporation; or

             (b)  it is a subsidiary of a corporation that is that other's subsidiary.

             (3)  A corporation is considered to be another's holding corporation where that other corporation is its subsidiary.

             (4)  One corporation is considered to be affiliated with another corporation where

             (a)  1 of them is the subsidiary of the other;

             (b)  both are subsidiaries of the same corporation; or

             (c)  each of them is controlled by the same person.

             (5)  Unless otherwise prescribed by the regulations, a corporation is considered to be controlled by another person or corporation or by 2 or more corporations where

             (a)  shares of the first-mentioned corporation carrying more than 50% of the votes for the election of directors are held, other than by way of security only, by or for the benefit of those other persons or by or for the benefit of those other corporations; and

             (b)  the votes carried by the shares mentioned in paragraph (a) are sufficient if exercised to elect a majority of the board of directors of the first-mentioned corporation.

             (6)  In calculating, for the purposes of this Act, the total number of equity shares of a corporation beneficially owned or controlled

             (a)  the total number of equity shares is required to be calculated as the total of all equity shares actually owned or controlled; and

             (b)  where an equity share carries the right to more than 1 vote, each vote carried by the equity share is considered to be as an equity share.

             (7)  In determining, for the purposes of this Act, the number of shareholders of a corporation, 2 or more persons holding the same shares or shares jointly are required to be counted as 1 shareholder.

             (8)  In this Act, except where they are at variance with the definitions and interpretations contained in this Act or the regulations, the definitions and interpretations contained in or made by or under the Federal Act and the Income Tax Act apply.

1988 c15 s2; 1989 c12 s32; 2006 c40 s21

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Register

        3. (1) The minister shall maintain a register of venture capital corporations in which the minister shall list corporations registered under this Act.

             (2)  The register shall be made available by the minister for public inspection during normal office hours of the department.

1988 c15 s3

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Registration

        4. (1) A corporation incorporated under theCorporations Act may apply to be registered as a venture capital corporation under this Act by delivering to the minister an application in duplicate not more than 7 years after November 10, 1988.

             (2)  An application mentioned in subsection (1) is required to

             (a)  set out

                      (i)  the name of the corporation,

                     (ii)  the location of its head office in the province,

                    (iii)  prescribed particulars of its capital, share, structure, directors, officers and debt obligations, and

                    (iv)  those other prescribed matters respecting the corporation; and

             (b)  be accompanied by a certified copy of the corporation's articles of incorporation.

             (3)  The application is required to be

             (a)  signed by 2 officers or 1 director and 1 officer of the corporation; and

             (b)  certified by affidavit of 1 of the officers or directors signing the application.

1988 c15 s4

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Conditions of registration

        5. The minister shall not register a corporation under this Act unless the minister is satisfied that

             (a)  the corporation is complying with the Corporations Act;

             (b)  the corporation has never previously carried on business unless it is a corporation registered under the Newfoundland and Labrador Development Corporation venture capital program;

             (c)  the corporation's equity shares may be issued for a total consideration of not less than $100,000 and not more than $5,000,000;

             (d)  the corporation has equity capital in an amount that is not less than the minimum total consideration for which its equity shares are, by paragraph (c), required to be issued;

             (e)  the businesses that the corporation may carry on are restricted by its articles of incorporation to helping the development of small businesses by

                      (i)  providing capital through the acquisition and holding of securities, and

                     (ii)  providing business and managerial expertise to small businesses;

             (f)  the corporation has appointed a trustee acceptable to the minister to administer the trust fund required under section 8; and

             (g)  the corporation meets the other conditions prescribed by regulation.

1988 c15 s5

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Entitlement to registration

        6. (1) Where a corporation

             (a)  complies with sections 4 and 5 and the regulations; and

             (b)  files with the minister the material required by this Act and the regulations,

the corporation is entitled to be registered under this Act.

             (2)  Notwithstanding subsection (1), the minister may

             (a)  refuse to register a corporation where in his or her opinion the applicant is not entitled to registration under subsection (1); and

             (b)  revoke a registration where the venture capital corporation fails to comply with this Act or the regulations.

             (3)  Where, in the minister's opinion, the number of corporations registered under this Act will be sufficient to take up the prescribed amount of money that is payable by way of grant or foregone by way of venture capital tax credit under this Act, the minister may, subject to the approval of the Lieutenant-Governor in Council, by order, suspend

             (a)  the further registration of corporations; or

             (b)  the payment of grants and the allowance of venture capital tax credits,

under this Act for the period of time that the minister may specify in the order.

             (4)  An order made under subsection (3) does not operate

             (a)  to prevent the minister from making a grant or credit where the shares were fully paid for and beneficially owned by the shareholder before the making of the order; or

             (b)  to prevent the carrying forward of a venture capital tax credit under section 23.

             (5)  Where the minister registers a corporation under this Act, the minister shall

             (a)  notify the corporation of the day, month and year of its registration;

             (b)  file 1 of the duplicates of the application in his or her office; and

             (c)  place the name of the corporation in the register.

1988 c15 s6

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Minimum capital and investment

        7. (1) On becoming registered under this Act, a venture capital corporation shall maintain its equity capital in the amount that it is required to have under paragraph 5(d) for the purpose of registration under this Act.

             (2)  Before the end of the 1st 12 months of its registration under this Act, a venture capital corporation shall have at least 70% of its equity capital invested in eligible investments, calculated in the manner prescribed by regulation, and shall maintain an average of at least 70% of its equity capital in eligible investments afterward.

1988 c15 s7

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Trust fund

        8. (1) A venture capital corporation shall set aside in a trust fund an amount of money equal to 30% of amounts received by it as equity capital.

             (2)  The trustee mentioned in paragraph 5(f) shall hold the trust fund in trust jointly for

             (a)  the venture capital corporation; and

             (b)  the Crown,

to be dealt with in accordance with this section.

             (3)  While an amount is held in trust under subsection (1), the minister shall permit payment from the trust fund of an amount equal to 3/7 of the purchase price paid by the venture capital corporation to acquire an eligible investment but the minister shall do so only where he or she is satisfied that

             (a)  the purchase price of that eligible investment has been paid in full in money; or

             (b)  the amount permitted to be paid out by the minister will be used by the venture capital corporation in payment of the purchase price of the eligible investment.

             (4)  While an amount is held in trust under subsection (1), the minister may permit payment from the fund to a shareholder of the venture capital corporation of an amount calculated in the manner prescribed by regulation when the venture capital corporation acquires equity shares of its own issue by redemption, purchase or otherwise from the shareholder.

             (5)  Notwithstanding subsection (4), money held in trust under subsection (1) is not to be paid out to a person unless the minister consents in writing to that payment.

             (6)  Interest earned on the trust fund established under subsection (1) is required to be paid to the venture capital corporation.

             (7)  Where the registration of a venture capital corporation is revoked, money then remaining in the trust fund established under subsection (1) is immediately payable to the Crown and

             (a)  the receipt of the minister for the payment of that money to the Crown is a full and sufficient discharge to a trustee for that money or to another person having control of the trust fund; and

             (b)  the payment is a complete discharge to the person making it and for a claim to that payment by a person that claims to be entitled to the money.

             (8)  A person who fails to make the payment to the Crown required by subsection (7) is liable to the Crown for the amount that should have been paid under subsection (7).

1988 c15 s8

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Eligible investments

        9. (1) In this section

             (a)  "corporation" includes an association, partnership or other organization;

             (b)  "non-resident" means

                      (i)  an individual who is not a citizen or permanent resident of Canada ,

                     (ii)  a corporation incorporated, formed or otherwise organized elsewhere than in Canada ,

                    (iii)  a corporation that is controlled directly or indirectly by persons described in subparagraph (i) or (ii),

                    (iv)  a trust in which persons described in subparagraph (i), (ii) or (iii) have more than 50% of the beneficial interest, or

                     (v)  a corporation that is controlled directly or indirectly by a trust described in subparagraph (iv).

             (2)  An investment is an eligible investment where

             (a)  it is made in an eligible small business and 75% or more of the wages and salaries of the small business are paid with respect to operations in the province;

             (b)  it is made in a small business primarily engaged in

                      (i)  prescribed manufacturing and processing,

                     (ii)  prescribed tourism activities,

                    (iii)  prescribed research and development,

                    (iv)  prescribed farming, forestry, fishing and aquaculture activities,

                     (v)  geological, geographical and seismic services,

                    (vi)  printing and publishing,

                   (vii)  mineral exploration, or

                  (viii)  another prescribed business activity;

             (c)  it is the purchase and acquisition from a small business by the venture capital corporation of equity shares issued by the small business but, where the equity shares are issued as part of the transaction involving the purchase or redemption, directly or indirectly, of previously issued shares of the small business or an affiliated corporation, of the small business, it is an eligible investment only to the extent that the investment represents net new equity capital as calculated in the prescribed manner;

             (d)  it is not used by the small business for the purpose of

                      (i)  relending,

                     (ii)  investment in real property except real property that is incidental and ancillary to the principal objects of the small business,

                    (iii)  reinvestment outside Canada ,

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

                     (v)  investment for a prescribed purpose or object;

             (e)  the number of equity shares taken by the venture capital corporation and its affiliated corporations in the small business in which the venture capital corporation and the affiliated corporation invests does not exceed 49%, calculated in accordance with subsection (3), of issued and outstanding equity shares of the small business;

             (f)  the total of eligible investments made by 2 or more venture capital corporations in a small business does not exceed 49%, determined in accordance with subsection (3), of the issued and outstanding equity shares of the small business;

             (g)  it is made in a small business in which

                      (i)  the total number of equity shares of the corporation beneficially owned, directly or indirectly, by non-residents or over which non-residents exercise control or direction does not exceed 25% of the total number of issued and outstanding equity shares of the corporation, or

                     (ii)  the total number of equity shares of the corporation beneficially owned, directly or indirectly, by a non-resident or over which he, she or it exercises control or direction, together with other shareholders associated with him, her or it, does not exceed 10% of the total number of issued and outstanding equity shares of the corporation; and

             (h)  it is made in a class of eligible small business that is not prohibited by the regulations.

             (3)  In determining the percentage of issued and outstanding equity shares of a small business for the purposes of paragraph (2)(e) or (f)

             (a)  the number of equity shares into which a debt obligation or shares of that small business may be converted;

             (b)  an option or right to purchase equity shares of that small business; and

             (c)  equity shares, convertible debt obligations and options or rights of that small business beneficially owned or held by an associate or affiliated corporation of the venture capital corporation or a shareholder of it or an associate or affiliated corporation of that shareholder,

are required to be included.

             (4)  For the purpose of subparagraph (2)(g)(ii) a shareholder is considered to be associated with another shareholder where

             (a)  1 shareholder is a corporation of which the other shareholder is an officer or director;

             (b)  1 shareholder is a partnership of which the other shareholder is a partner;

             (c)  1 shareholder is a corporation that is controlled directly or indirectly by the other shareholder;

             (d)  both shareholders are corporations and 1 shareholder is controlled, directly or indirectly, by the same individual or corporation that controls, directly or indirectly, the other shareholders;

             (e)  both shareholders are members of a voting trust that relates to shares of a corporation; or

             (f)  both shareholders are associated within the meaning of paragraphs (a) to (e) with the same shareholder.

1988 c15 s9

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Investments

      10. (1) A venture capital corporation shall maintain its assets in

             (a)  eligible investments;

             (b)  liquid reserves;

             (c)  equity shares that were eligible investments when they were acquired by the venture capital corporation;

             (d)  debt obligations of a small business that is an eligible small business when that investment is made;

             (e)  new shares of a business engaged in a prescribed activity where

                      (i)  that new business employs more than the maximum number of employees prescribed for small business, and

                     (ii)  not more than 10% of the equity capital of the venture capital corporation is invested under this paragraph; or

             (f)  another prescribed form.

             (2)  A venture capital corporation shall deposit assets that are maintained as liquid reserves in

             (a)  a chartered bank to which the Bank Act (Canada ) applies;

             (b)  a trust or loan corporation as defined in the Trust and Loan Corporations Act;

             (c)  a credit union incorporated or continued under the Co-operative Societies Act.

             (3)  Notwithstanding subsection (1), a venture capital corporation may maintain a reasonable portion of its assets in equipment and premises necessary to carry out its objects.

1988 c15 s10; 2007 cT-9.1 s5

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Prohibited investments

      11. (1) A venture capital corporation shall have at least 10 persons who

             (a)  hold equity shares in the venture capital corporation; and

             (b)  are dealing at arms length 1 from the other.

             (2)  A shareholder of a venture capital corporation, together with its shareholders and associates and affiliated corporations of its shareholders, shall not hold more than 49% of the issued and outstanding equity shares of that corporation.

             (3)  A venture capital corporation shall not invest or maintain an investment in a security issued by a corporation which is or was a small business where

             (a)  the shares of that corporation are held by

                      (i)  an officer or director or an associate of an officer or director of a venture capital corporation that proposes to invest or has invested in that corporation or an officer or director or an associate of an officer or director of a shareholder of that venture capital corporation, or

                     (ii)  a voting trust where the trust relates to the shares of the venture capital corporation;

             (b)  a venture capital corporation, together with its shareholders and associates and affiliated corporations of its shareholders, would hold more than 49% of the issued and outstanding equity shares of that corporation;

             (c)  the corporation, an associate or affiliated corporation of that corporation, a shareholder of that corporation or an associate or affiliated corporation of that shareholder directly or indirectly provides, by means of a loan, guarantee, the provision of security or otherwise, financial help for the purpose of or in connection with the purchase of shares of the venture capital corporation; or

             (d)  the total of eligible investments made by 2 or more venture capital corporations in that corporation would exceed 49% of the issued and outstanding equity shares of the corporation.

             (4)  A venture capital corporation shall not invest in a small business where the proceeds of that investment are used or are intended to be used, in whole or in part, to finance the purchase of goods or services provided to the small business by or through a shareholder of the venture capital corporation or an associate or affiliated corporation of that shareholder unless the goods or services are provided in the ordinary course of business by

             (a)  a shareholder of the venture capital corporation; or

             (b)  an associate or affiliated corporation of that shareholder,

who is ordinarily engaged in providing those goods or services.

1988 c15 s11

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Material change

      12. (1) In this section, a material change occurs where the investment of a venture capital corporation stops being an eligible investment.

             (2)  A venture capital corporation shall notify the minister in the prescribed form of a material change in its eligible investments within 30 days of the date of the material change.

             (3)  Where there is a material change, the investment by a venture capital corporation remains an eligible investment for a period of 2 years from the date of the material change or another period of time that the minister may allow either in general terms or with respect to 1 or more specific cases.

             (4)  Notwithstanding subsection (3), where, as a result of a material change, an investment becomes an ineligible investment under paragraph 11(3)(a) the venture capital corporation shall immediately dispose of the investment.

1988 c15 s12

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Restrictions on dispositions

      13. A venture capital corporation shall not transfer or grant equity shares or an option or right to acquire equity shares of a small business or of a corporation that has stopped being a small business or an eligible investment without first granting to other holders of the equity shares of that small business or corporation the right to acquire the whole or a part of the equity shares, option or right on the same terms and conditions.

1988 c15 s13

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Filing of financial statements

      14. Within 6 months following its 1st and subsequent years of operation as a venture capital corporation, the corporation shall file with the minister its financial statements and auditor's report on those financial statements.

1988 c15 s14

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Information

      15. (1) Within 90 days after each anniversary of the date of its registration, a venture capital corporation shall prepare, verify and file with the minister a return, in the form required by the minister, setting out, as of its anniversary date, the information required by that return.

             (2)  A venture capital corporation shall notify the minister, in the form required by the minister, of action involving

             (a)  the payment of a dividend on the equity shares of the corporation;

             (b)  the purchase, surrender, redemption or conversion of an equity share of the corporation;

             (c)  the disposition of an eligible investment; or

             (d)  the proposed amendment of its articles of incorporation;

             (e)  the winding up or dissolution of the corporation,

at least 21 days before carrying out the proposed action.

             (3)  The minister may extend the time for filing a notice or return under subsections (1) and (2).

             (4)  The minister may require

             (a)  a venture capital corporation; or

             (b)  a corporation in which a venture capital corporation has invested for the purpose of obtaining a grant or a venture capital tax credit under this Act,

to supply to him or her, within a time to be specified by him or her, information or material, or further information or material, respecting an aspect of the venture capital corporation's or corporation's share or capital structure, directors, officers, business or affairs that the minister considers necessary for the administration or enforcement of this Act and the regulations.

             (5)  The minister may require information submitted under subsection (4) to be verified by affidavit or another means that the minister may require.

1988 c15 s15

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Eligibility for investment incentives

      16. (1) Where a person complies with this Act the minister may make a venture capital tax credit to that person.

             (2)  Unless a venture capital corporation has established and maintained a trust in accordance with section 8, the minister shall not allow a venture capital tax credit under this Act to a shareholder of that corporation.

             (3)  Where the minister is of the opinion that the venture capital corporation, its officers or directors, or its shareholders are conducting their business and affairs

             (a)  in a manner that is contrary to the spirit and intent of this Act; or

             (b)  for the purpose of obtaining a grant or venture capital tax credit under this Act to which they would not otherwise be entitled,

the minister may

             (c)  revoke the registration of the venture capital corporation; or

             (d)  refuse to pay a grant or allow a venture capital tax credit under this Act.

             (4)  A person shall not receive or be entitled to receive a venture capital tax credit under this Act where that person acquired a security of a venture capital corporation which received a loan under the venture capital program administered by Newfoundland and Labrador Development Corporation Limited as a result of that person's acquisition of the security.

             (5)  Where a venture capital corporation does not comply with this Act or the regulations, but the minister is of the opinion that the corporation is meeting the spirit and intent of the Act, the minister may, for a time that the minister considers appropriate, refrain from revoking the registration of a corporation.

1988 c15 s16

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Investment incentives

      17. (1) A person who is the beneficial and registered owner of equity shares of a venture capital corporation may apply in the form provided by the minister for a venture capital tax credit.

             (2)  The minister shall not pay a grant under this Act or allow a venture capital tax credit under this Act unless the equity shares are purchased directly from the venture capital corporation issuing the equity shares.

             (3)  An application made under subsection (1) is required to be accompanied by

             (a)  a certificate containing the prescribed information signed by the secretary and 1 authorized officer of the venture capital corporation that has issued the equity shares with respect to which a grant or venture capital tax credit is sought; and

             (b)  the additional material that the minister may request.

             (4)  Where the person, applying for a venture capital tax credit under this section is the registered, but not the beneficial, owner of equity shares of a venture capital corporation, the minister may set the terms and conditions relating to the beneficial ownership of the shares that are to be complied with in order to entitle the person to the venture capital tax credit.

             (5)  In order to be eligible for the tax credits under this Act, a person shall acquire the equity shares of a venture capital corporation before January 1, 1996.

1988 c15 s17

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Deduction of credit

      18. (1) For the 1988 and subsequent taxation years, a person may apply for and the minister may allow a venture capital tax credit for a taxation year in an amount not exceeding the least of

             (a)  an amount equal to the least of

                      (i)  the total of all amounts, each of which is the acquisition cost amount of an equity share of a venture capital corporation that is acquired by that person during the taxation year,

                     (ii)  the amount by which

                            (A)  the venture capital tax credit balance of that person at the end of that taxation year,

exceeds

                            (B)  the amount determined under subparagraph 20(b)(i),

and

                    (iii)  $3,000; and

             (b)  the unused venture capital tax credit of that person at the end of the immediately preceding taxation year.

             (2)  The unused venture capital tax credit of a person at the end of a taxation year is the amount by which the total of

             (a)  the unused venture capital tax credit at the end of the immediately preceding taxation year; and

             (b)  the amount determined under paragraph (1)(a) for the taxation year,

exceeds the amount deducted by that person under subsection (1) for the taxation year.

             (3)  The unused venture capital tax credit of a person who is not living in the province on the last day of a taxation year is considered to be nil.

1988 c15 s18

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Venture capital tax credit balance

      19. The venture capital tax credit balance of a person at the end of a taxation year is the amount by which the total of

             (a)  the venture capital tax credit balance of that person at the end of the immediately preceding taxation year; and

             (b)  the amount determined under subparagraph 18(1)(a)(i) for the taxation year,

exceeds

             (c)  the total of the disposition cost amounts of equity shares of a venture capital corporation previously acquired by that person that are disposed of by that person during the taxation year.

1988 c15 s19

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Payment on disposition

      20. Where in a taxation year a person disposes of equity shares of a venture capital corporation, the person shall pay to the minister an amount of tax equal to the lesser of

             (a)  the total of the disposition cost amounts of the equity shares of venture capital corporations previously acquired by that person that are disposed of by that person during the taxation year; and

             (b)  the amount by which

                      (i)  the amount by which the total of the amount of the venture capital tax credit determined in accordance with section 18 for the immediately preceding 2 taxation years exceeds the amount determined under this section for the immediately preceding taxation year,

exceeds

                     (ii)  the venture capital tax credit balance at the end of the taxation year.

1988 c15 s20

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Certain dispositions

      21. Where in this section referred to as the "particular time", a person

             (a)  disposes of equity shares in a venture capital corporation, in this section referred to as the "old security", that had previously been acquired by a venture capital corporation at a time before the particular time

                      (i)  as a consequence of the death of the person, or

                     (ii)  as a result of a transaction described in section 85.1, 86 or 87 of the Federal Act in respect of equity shares of a venture capital corporation, and the person receives no consideration for the old security other than an equity share of the same or another venture capital corporation, in this subsection referred to as the "new security"; or

             (b)  is considered by section 50 of the Federal Act to have disposed of an equity share that had previously been acquired at a time before the particular time,

the following rules apply:

             (c)  the person is considered not to have disposed of the old security at the particular time;

             (d)  in the case of a disposition to which subparagraph (a)(ii) applies

                      (i)  each new security is considered to be an equity share of a venture capital corporation acquired by the person at the same time as the old security, and

                     (ii)  the disposition cost amount of each new security is an amount equal to the quotient obtained when the disposition cost amount of the old security determined immediately before the particular time is divided by the number of new securities issued for each old security.

1988 c15 s21

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Claiming tax credit

      22. (1) A person who is allowed a venture capital tax credit under this Act is entitled, in accordance with those procedures that may be set by the minister, to apply the venture capital tax credit allowed under section 10 of the Income Tax Act.

             (2)  Where a person claims a venture capital tax credit under section 10 of the Income Tax Act for a taxation year with respect to a venture capital tax credit allowed under this Act, the annual return required under the Income Tax Act for the taxation year is required to be accompanied by a completed form certified by the minister.

1988 c15 s22

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Carry forward on tax credit

      23. (1) Where a person has been allowed a venture capital tax credit under this Act for a taxation year and the amount of venture capital tax credit so allowed exceeds the amount of tax payable by that person for that taxation year, the person may carry forward and deduct the unused balance of the venture capital tax credit from tax otherwise payable by the person in 1 or more of his or her 7 subsequent taxation years.

             (2)  Where a venture capital tax credit has been allowed under this Act, and

             (a)  an unused balance of the venture capital tax credit remains after the expiry of the last taxation year in which the venture capital tax credit may be deducted under subsection (1); or

             (b)  where the person to whom the venture capital tax credit has been allowed has died,

the person is entitled to apply to the minister for a grant equal to the amount of the unused balance of the venture capital tax credit and the minister may pay a grant in that amount.

1988 c15 s23

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Recapture

      24. (1) Where a venture capital corporation

             (a)  proposes to wind up or dissolve;

             (b)  has its registration revoked; or

             (c)  purchases or otherwise acquires any of its equity shares,

the venture capital corporation shall immediately pay to the Crown an amount of money calculated according to the rules set out in this section.

             (2)  Where a venture capital corporation purchases or otherwise acquires 1 of its equity shares for a total consideration that

             (a)  is equal to or greater than that for which the share was issued, the venture capital corporation shall pay to the Crown an amount of money equal to 30% of the consideration paid to the corporation by the shareholder for the share at the time the share was issued; and

             (b)  is less than that for which the share was issued, the venture capital corporation shall pay to the Crown an amount equal to 30% of the gross consideration paid by the corporation for the purchase or acquisition of the share.

             (3)  Where the registration of a venture capital corporation is revoked or where the corporation proposes to wind up or dissolve, the venture capital corporation shall pay to the Crown an amount equal to 30% of the value of its shareholders' equity to an amount not exceeding the total of the grants or venture capital tax credits made or allowed by the minister in respect of equity shares then issued and outstanding at the time of the revocation, winding up or dissolution, calculated in the manner prescribed by regulation.

             (4)  Where

             (a)  a venture capital corporation proposes to wind-up or dissolve; or

             (b)  the registration of a venture capital corporation is revoked for failure to comply with section 7,

it shall pay to the Crown, in addition to the amount set out in subsection (3), an amount equal to the interest earned on money paid into the trust fund established by the corporation in accordance with section 8, and not paid out in accordance with subsection 8(3) from the date of registration of the corporation under this Act.

             (5)  Where the minister is satisfied that the venture capital corporation has conducted its business in accordance with the spirit and intent of this Act, the minister may, on application by the corporation, order that subsection (1) does not apply to the corporation.

             (6)  A venture capital corporation shall not make an application and the minister shall not make an order under subsection (5) until a period of at least 5 years has expired from the date of the purchase of the shares from the venture capital corporation with respect to which the application is made.

             (7)  A venture capital corporation that reduces its stated capital under the Corporations Act is, for the purposes of this section, considered to have acquired equity shares for a total consideration equal to the amount by which its equity capital exceeds the greater of

             (a)  the stated capital of the corporation after the reduction; and

             (b)  the value of the shareholders' equity calculated in the manner prescribed by regulation.

1988 c15 s24

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Share certificate

      25. A share certificate with respect to equity shares issued by a venture capital corporation is required to conspicuously state on its face the words "The value of the shares represented by this certificate may be significantly affected by recapture provisions under theVenture Capital Act".

1988 c15 s25

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Demand

      26. (1) Where an amount is payable to the Crown or is considered to be payable to the Crown under this Act, the minister may, by notice of demand in writing to the person by whom that payment is owing or claimed to be owing, demand payment immediately or within that number of days that are specified in the demand and, where the payment is not made as demanded, the minister may recover and collect the amount of that payment by the remedies or procedures provided for in this Act or by another means allowed by law.

             (2)  Notwithstanding that an objection or other proceeding under section 27 has been started or may be started, an amount demanded to be paid under subsection (1) remains payable and recoverable unless the demand for payment is revoked in writing by the minister.

1988 c15 s26

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Proposal by minister

      27. (1) Where the minister proposes to

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

             (b)  revoke the registration of a venture capital corporation; or

             (c)  refuse to pay a grant or allow a venture capital tax credit under this Act,

the minister shall serve notice of his or her proposal, together with written reasons for it, on the applicant or registrant.

             (2)  Where the minister has not registered a corporation under section 5 within 4 months of the date on which the corporation delivered a proposal under section 4, the minister is considered to have refused registration under paragraph (1)(a).

             (3)  Where a person objects to the proposal under subsection (1) that is served on that person or to a deemed refusal under subsection (2), he or she may, within 60 days from

             (a)  the day of mailing of the proposal; or

             (b)  the date on which the minister is considered to have refused registration under subsection (2),

serve on the minister a notice of objection in duplicate and in the form required by the minister setting out the reasons for the objection and relevant facts.

             (4)  A person shall serve his or her notice of objection under this section by sending it by registered mail addressed to the minister.

             (5)  The minister may accept a notice of objection under this section notwithstanding that it was not served in the manner required.

             (6)  Where an applicant or registrant does not serve a notice of objection under subsection (3), the minister may carry out the proposal stated in his or her notice under subsection (1).

             (7)  On receipt of the notice of objection, the minister shall as soon as possible

             (a)  reconsider the proposal objected to and confirm, vary or abandon the proposal; and

             (b)  notify the person making the objection of his or her action by registered mail.

1988 c15 s27

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Determination of question

      28. Where a dispute over a decision or action of the minister under subsection 27(7) involves

             (a)  the interpretation of this Act or the regulations;

             (b)  an issue of law in which no facts are in dispute; or

             (c)  the proper inference to be drawn from facts that are not in dispute,

the disputing party may appeal to a judge of the Trial Division to have the issue in dispute determined.

1988 c15 s28

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Inspectors

      29. The minister may appoint or designate those inspectors, officers and other persons that the minister considers necessary to carry out this Act and the regulations.

1988 c15 s29

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Investigations

      30. (1) For the purposes of enforcing and administering this Act and the regulations, an inspector appointed or designated under section 29, may, at reasonable times, enter into a premises or place where business is carried on, property is kept or anything is done in connection with a business that is, or books or records that are, or should be, kept under this Act and may

             (a)  audit or examine the books and records and an account, voucher, letter, telegram or other document that relates or may relate to

                      (i)  the information that is or should be in the books or records, or

                     (ii)  the amount of a grant or venture capital tax credit made or given under this Act;

             (b)  examine property described by an inventory or property, a process or matter an examination of which may, in his or her opinion, help him or her in determining the accuracy of an inventory or in ascertaining the information that is or should be in the books or records or the amount of a grant or venture capital tax credit made or given under this Act;

             (c)  require a person

                      (i)  to whom a grant or venture capital tax credit is or may be given under this Act, or

                     (ii)  who is liable to pay to the Crown an amount under this Act,

or, where the person is a partnership or corporation, require a partner or the president, manager, secretary or a director, agent or representative of that person and another individual on the premises or place to give him or her reasonable help with his or her audit or examination and to answer questions relating to the audit or examination, either orally, or, where he or she so requires, in writing, on oath or affirmation, and for that purpose require those persons to attend at the premises or place with him or her; and

             (d)  where, during the course of an audit or examination, it appears to the inspector that there has been a violation of this Act or the regulations, the minister or inspector may with a warrant issued under section 31, seize and take away, in the case of an inspector with the written permission of the minister, the records, books, accounts, vouchers, letters, telegrams and other documents and retain them until they are produced in court proceedings.

             (2)  The minister may, by registered letter or by a demand served personally, require from

             (a)  a person; or

             (b)  where the person is a partnership or corporation, from a partner or the president, manager, secretary or a director, agent or representative of that person,

production, or production on oath or affirmation, of books, letters, accounts, invoices, statements, financial or otherwise, or other documents within a reasonable time that is stipulated in the registered letter of demand.

             (3)  The minister may, by registered letter or by a demand served personally, require the production, under oath or affirmation, by a person, partnership, syndicate, trust or corporation or by his or her or its agent or officer of letters, accounts, invoices, statements, financial or otherwise, books or other documents in the possession or in the control of that person, partnership, syndicate, trust or corporation or of his, hers or its agent or officer for the purpose of determining the amount of a grant or venture capital tax credit or the amount payable to the Crown under this Act by a person and production of those documents is required to be made within a reasonable time that is stipulated in the registered letter or demand.

             (4)  The minister may, for a purpose related to the administration or enforcement of this Act, authorize a person, whether or not he or she is an officer of the department, to make an inquiry that the minister considers necessary with reference to anything related to the administration or enforcement of this Act.

             (5)  Where a book, record or other document has been seized, examined or produced under this section, the person by whom it is seized or examined or to whom it is produced or an officer of the department may make 1 or more copies of the document and a document purporting to be certified by the minister or a person authorized by the minister to have a copy made under this section is admissible in evidence, without proof of the office or signature of the person appearing to have certified the document and has the same probative force as the original document.

             (6)  A person shall not hinder, molest or interfere with a person doing anything that he or she is authorized under this section to do or prevent or attempt to prevent a person from doing anything and, notwithstanding another law to the contrary, a person shall, unless he or she is unable to do so, do everything he or she is required under this section to do.

             (7)  Declarations or affidavits in connection with statements of information submitted under this section may be taken before a person having authority to administer oaths or affirmations.

             (8)  For the purpose of an inquiry authorized under subsection (4), the person authorized to make the inquiry has the powers conferred on a commissioner under thePublic Inquiries Act .

1988 c15 s30

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Power of search and seize

      31. (1) A Provincial Court judge who is satisfied by information upon oath or affirmation that there are reasonable grounds for believing that there is on a premises or in a place where a corporation or business is carried on anything that there are reasonable grounds to believe will give evidence with respect to an offence under this Act, may issue a warrant authorizing an investigator named in the warrant to enter and search those premises or that place and to make those inquiries and copies of records, books, accounts, vouchers, letters, telegrams and other documents that are necessary, subject to those conditions that may be specified in the warrant.

             (2)  The owner or person in charge of the premises or place referred to in this section and persons found there shall give an investigator reasonable help to enable the investigator to carry out his or her duties and functions under this section and shall provide the information that the investigator may reasonably require.

1988 c15 s31; 2004 c36 s47

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Amounts owing a debt due

      32. (1) Where

             (a)  an amount is payable to the Crown by a venture capital corporation under section 24; or

             (b)  a person obtains a grant or venture capital tax credit under this Act on the basis of information that is false or of an application that contains a false statement,

the amount of that payment, grant or venture capital tax credit is a debt due to the Crown and may be recovered,

             (c)  by filing a certificate of the minister certifying the amount of the payment, grant or venture capital tax credit together with interest at the prescribed rate to the date of the certificate, with the Trial Division.

             (2)  A certificate filed under paragraph (1)(c) has the same effect as if it were a judgment obtained in the Trial Division for the recovery of a debt in the amount specified in the certificate, together with reasonable costs and charges with respect to its filing.

1988 c15 s32; 2013 c16 s25

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Offence

      33. (1) A person who makes or helps in making a statement in a document required by or for the purposes of this Act or the regulations that

             (a)  at the time and in the light of the circumstances under which it was made, is false or misleading in respect of a material fact; or

             (b)  omits to state a material fact the omission of which makes the statement false or misleading,

is guilty of an offence and is liable on summary conviction to a fine,

             (c)  in the case of a person other than a corporation, of not more than $2,000; or

             (d)  in the case of a corporation, of not more than $20,000.

             (2)  A person is not guilty of an offence under subsection (1) where the person or corporation 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.

1988 c15 s33

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Limitation

      34. Proceedings to enforce this Act or the regulations may not be instituted after 6 years after the time the subject matter of the proceedings arose.

1988 c15 s34

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Regulations

      35. (1) The Lieutenant-Governor in Council may make regulations

             (a)  requiring the payment of fees for a matter required to be done in the administration of this Act and prescribing the amounts of those fees;

             (b)  prescribing forms for the purposes of this Act;

             (c)  requiring a person or corporation to supply information or submit returns respecting a class of information required in assessing compliance with this Act;

             (d)  prescribing the calculation of the amount of a grant or venture capital tax credit where equity shares are purchased by a shareholder as part of a distribution to the public;

             (e)  defining a word or expression used in this Act but not defined in this Act;

             (f)  defining the expression "small business" for the purposes of this Act or the regulations, enlarging or restricting that definition for the purpose of this Act or the regulations or designating a business, or business in a class of businesses, as a small business for the purposes of this Act or the regulations;

             (g)  prescribing the method of calculation of the consideration to be paid for each equity share under section 24 where a venture capital corporation proposes to dissolve, or where its registration is revoked, or its equity shares are purchased or otherwise acquired by the venture capital corporation;

             (h)  prescribing a condition that a corporation must meet before registration;

              (i)  prescribing the method of determining the amount of equity capital of a venture capital corporation;

              (j)  prescribing authorized investments for the purposes of section 10;

             (k)  prescribing the method of calculation to be used in determining the percentage of wages and salaries paid in the province;

              (l)  prescribing a rate of interest that is to be prescribed and the method by which it is to be calculated; and

           (m)  prescribing another matter or thing required by this Act to be prescribed by the regulations.

             (2)  Regulations made under this Act may be made retroactive to a day not earlier than November 10, 1988.

1988 c15 s35