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Second Session, Thirty-Seventh Legislature

This version is based on the printed bill that was distributed in the Legislature after First Reading.
It is not the official version.   If accuracy is critical, you can obtain a copy of the printed bill from Statutory Publications.

Bill 28

THE LABOUR-SPONSORED INVESTMENT FUNDS (VARIOUS ACTS AMENDED) ACT


Explanatory Note

(Assented to                                         )

HER MAJESTY, by and with the advice and consent of the Legislative Assembly of Manitoba, enacts as follows:

PART 1

THE INCOME TAX ACT

C.C.S.M. c. I10 amended

1           The Income Tax Act is amended by this Part.

2(1)        Subsection 11.1(1) is amended

(a) by adding the following definitions in alphabetical order:

"adjusted shareholders' equity", in respect of the Class A shares of the capital stock of a corporation at a particular time, is the amount determined according to the following formula:

A x B/C

In this formula,

A   is the shareholders' equity in respect of the Class A shares at the particular time,

B   is the number of Class A shares outstanding at the particular time, the original acquisition of which occurred

(a) before June 1997 and less than seven years before the particular time,

(b) before June 1997 and less than four years before the particular time, if the corporation is satisfied based on written evidence that the individual to whom or to whose qualifying trust the shares were issued is at least 65 years old at the particular time or is retired and at least 60 years old at the particular time, or

(c) after May 1997 and less than eight years before the particular time, and

C   is the number of Class A shares outstanding at the particular time; (« avoir des actionnaires rajusté »)

"entity" means a corporation, a partnership and a trust; (« entité »)

"investment assets" of a labour-sponsored venture capital corporation means its assets other than operating assets used by it directly in carrying on its business; (« actif de placement »)

"new investments total" of a labour-sponsored venture capital corporation at a particular time means the total of all amounts each of which is

(a) the corporation's cost at the particular time of an investment that was acquired by it after February 2001 and that, at the particular time, is an eligible investment of the corporation, or

(b) the greatest amount that would, if subsection (1.1) were read without reference to clause (d), have been the corporation's cost of an investment that was but is no longer an eligible investment of the corporation; (« total des nouveaux placements »)

"small eligible investment" of a labour-sponsored venture capital corporation means an eligible investment (referred to in this definition as the "small investment") of the corporation where the total of the following amounts is not more than $2,000,000.:

(a) the corporation's cost of the small investment,

(b) the corporation's cost of each other investment that

(i) was an eligible investment of the corporation when it acquired the small investment, and

(ii) was issued by the entity that issued the small investment or by another entity related to that entity; (« placement peu important admissible »)

"small investments total" of a labour-sponsored venture capital corporation at a particular time means the total of all amounts each of which is

(a) the corporation's cost at the particular time of an investment that was acquired by it after February 2001 and that, at the particular time, is a small eligible investment of the corporation, or

(b) the greatest amount that would, if subsection (1.1) were read without reference to clause (d), have been the corporation's cost of an investment that was but is no longer a small eligible investment of the corporation; (« total des placements peu importants »)

"total equity raised" by a labour-sponsored venture capital corporation in one or more selling periods means the total of all amounts designated by it under subsection (4) for those selling periods. (« fonds propres levés »)

(b) in the definition "approved share limit", by replacing clause (b) with the following:

(b) $30,000,000., or any greater amount prescribed in the regulations;

(c) in clause (a) of the definition "Class A share", by adding ", other than a share that was issued while a declaration made under section 15.6 of The Crocus Investment Fund Act was in effect" after "Crocus";

(d) in the definition "Crocus", by striking out "The Manitoba Employee Ownership Fund Corporation Act" and substituting "The Crocus Investment Fund Act";

(e) by replacing the definition "eligible investment" with the following:

"eligible investment" of a labour-sponsored venture capital corporation means an eligible investment of the corporation as determined

(a) in the case of an investment of Crocus, under The Crocus Investment Fund Act, and

(b) in any other case, under The Labour-Sponsored Venture Capital Corporations Act; (« placement admissible »)

(f) by replacing the definition "monthly deficiency" with the following:

"monthly deficiency", in relation to a labour-sponsored venture capital corporation in respect of a month, means the greatest of

(a) the amount, if any, by which 60% of the lesser of

(i) the adjusted shareholders' equity in respect of the Class A shares of the corporation's capital stock at the end of the taxation year in which that month ends, and

(ii) the adjusted shareholders' equity in respect of the Class A shares of the corporation's capital stock at the beginning of the immediately preceding taxation year,

exceeds the greater of

(iii) the lowest amount that is the total cost to the corporation of its eligible investments at any time in the month, and

(iv) 50% of the total of

(A) the total cost to the corporation of its eligible investments at the beginning of the taxation year in which that month ends, and

(B) the total cost to the corporation of its eligible investments at the end of that taxation year,

(b) the amount, if any, by which

(i) 70% of the total equity raised by the corporation in all selling periods ending after 2000 and at least two years before the beginning of the taxation year in which that month ends,

exceeds

(ii) the corporation's new investments total at the beginning of that month, and

(c) the amount, if any, by which

(i) 14% of the total equity raised by the corporation in all selling periods ending after 2000 and at least two years before the beginning of the taxation year in which that month ends,

exceeds

(ii) the corporation's small investments total at the beginning of that month; (« insuffisance mensuelle »)

(g) in clause (b) of the definition "qualifying trust", by adding "or common-law partner" after "spouse".

2(2)        Subsection 11.1(1.1) is amended by striking out "and" at the end of clause (a) and by adding the following after clause (b):

(c) a person or entity is related to another person or entity if they are related persons under section 251 of the federal Act and, in determining whether they are related persons,

(i) a partnership is deemed to be a corporation with 100 shares of one class of its capital stock issued and outstanding, and each member of the partnership is deemed to own the proportion of the 100 shares that the fair market value of the member's interest in the partnership is of the fair market value of all the interests in the partnership,

(ii) a trust is deemed to be a corporation with 100 shares of one class of its capital stock issued and outstanding, and each beneficiary of the trust is deemed to own the proportion of the 100 shares that the fair market value of the beneficiary's interest in the trust is of the fair market value of all the interests in the trust, and

(iii) a person who has a right under a contract, in equity or otherwise, immediately or in the future and absolutely or contingently, to acquire a share or a partnership interest shall, unless the right is not exercisable until the death, bankruptcy or permanent disability of an individual, be deemed to be in the same position in relation to the corporation or partnership as if the share or partnership interest were owned by the person;

(d) if on the day that a labour-sponsored venture capital corporation acquires a particular eligible investment in an entity the corporation is legally bound by a written agreement to acquire, within two years after that day, an additional share, partnership interest or debt obligation that

(i) the entity is required to issue to the corporation, and

(ii) if it were issued on that day, would be an eligible investment of the corporation,

then at all times within that two-year period that the corporation continues to be bound by the agreement to acquire the additional share, partnership interest or debt obligation, the corporation's cost of the particular eligible investment is deemed to include the amount that the corporation is bound to pay for the additional share, interest or obligation.

2(3)        The following is added after subsection 11.1(1.1):

Conditional obligation

11.1(1.2)   For the purpose of clause (1.1)(d), a corporation's whose obligation to acquire an additional investment in an entity is subject only to one or more conditions that

(a) are set out in the agreement; and

(b) at the time of entering into the agreement, can reasonably be expected to be satisfied within the time limit or limits set out in the agreement for the satisfaction of those conditions;

shall be considered to be legally bound to acquire the additional investment.

Additional year to meet 70% and 14% requirements

11.1(1.3)    In determining a corporation's monthly deficiency at any time in a taxation year, the references in subclauses (b)(i) and (c)(i) of the definition "monthly deficiency" to "two years" shall be read as references to "three years" if

(a) the corporation elects, in its return of information under section 11.4 for the year, to have this subsection apply to the corporation for the year;

(b) this subsection has not applied to the corporation in any of its five preceding taxation years;

(c) the net realizable value at the beginning of the year of the corporation's liquid assets, including marketable securities but not including eligible investments and assets required to meet current obligations other than obligations to redeem or repurchase shares, is less than 20% of the fair market value of the corporation's investment assets at that time; and

(d) if this subsection previously applied to the corporation, the corporation would, if the definition "monthly deficiency" in subsection (1) were read without reference to clause (a), have had no monthly deficiency for a 12-month period after this subsection last applied to the corporation.

2(4)        Subsection 11.1(2.1) is amended by striking out "subsections (3) and (4.1)" and substituting "subsection (3)".

2(5)        Subsections 11.1(4.1) and (4.2) are repealed.

2(6)        Subsection 11.1(6) is replaced with the following:

Excess designation

11.1(6)     A corporation that designates under subsection (4) amounts for a selling period that in total exceed its approved share limit for the period shall pay a tax equal to 15% of the excess.

3           Clauses 11.5(2)(b) and (c) are replaced with the following:

(b) where no tax credit has been claimed in respect of the original acquisition of the share and the receipt referred to in subsection 11.1(3) in respect of the original acquisition has been returned to the corporation;

(c) where

(i) it occurs at the written request of the vendor and the vendor is the individual entitled to a deduction under subsection 11.1(2.1) in respect of the original acquisition of the share or

(A) the individual's spouse or common-law partner or former spouse or common-law partner, or

(B) a registered retirement savings plan or registered retirement income fund under which the individual, spouse or common-law partner is an annuitant, and

(ii) the corporation is notified in writing that the individual became disabled and permanently unfit for work, or terminally ill, after the original acquisition;

(d) where it occurs at the request of the vendor, and the vendor is a person on whom the share devolved as a consequence of the death of an individual who held the share or was the annuitant under a registered retirement savings plan or registered retirement income fund that held the share; or

(e) where, if the share is redeemed, acquired or cancelled on a day in February or on March 1, subsection (1) would not have applied if the redemption, acquisition or cancellation had occurred 30 days later.

PART 2

THE MANITOBA EMPLOYEE OWNERSHIP FUND CORPORATION ACT

C.C.S.M. c. E95 amended

4           The Manitoba Employee Ownership Fund Corporation Act is amended by this Part.

5           The title is replaced with "THE CROCUS INVESTMENT FUND ACT".

6(1)        Subsection 1(1) is amended

(a) by adding the following definitions in alphabetical order:

"Class "A" Common Share" means a share of the capital stock of the Fund that is issuable only to an individual (other than a trust) or a trust governed by a registered retirement savings plan, and that entitles the holder

(a) to receive notice of and, subject to The Corporations Act, to attend and vote at all meetings of the shareholders of the Fund,

(b) to receive dividends at the discretion of the Board, and

(c) to receive, on the dissolution of the Fund, rateably with all the other holders of Class "A" Common Shares, all the assets of the Fund that remain after payment of all amounts payable to the holders of other classes of shares of the Fund; (« action ordinaire de catégorie « A » »)

"Class "G" Special Share" means a share of the capital stock of the Fund that

(a) may be issued only to, and held only by, the Minister of Finance on behalf of Her Majesty in right of Manitoba,

(b) entitles the holder to elect one director to the Board, and

(c) does not entitle the holder to any dividends; (« action spéciale de catégorie « G » »)

"Class "L" Special Share" means a share of the capital stock of the Fund that is issuable only to, and may be held only by, the Manitoba Federation of Labour, and that entitles the holder

(a) to receive notice of and, subject to The Corporations Act, to attend and vote at all meetings of the shareholders of the Fund, and

(b) to receive, on the dissolution of the Fund, an amount equal to the amount of the consideration received by the Fund on the issue of the Class "L" Special Shares divided by the number of Class "L" Special Shares issued,

but does not entitle the holder to any dividends; (« action spéciale de catégorie « L » »)

"investment shortfall" of the Fund in respect of a month means, at a particular time,

(a) if the month ended in a taxation year of the Fund that ended before the particular time, the Fund's monthly deficiency, as defined in subsection 11.1(1) of The Income Tax Act, for the month, and

(b) if the month ended in the Fund's current taxation year, the amount, if any, that would be its monthly deficiency for the month if the taxation year had ended at the end of last month that ended before the particular time; (« écart de placement »)

"original acquisition date" in relation to a share means the date of the share's original acquisition as determined under section 11.1 of The Income Tax Act; (« date d'acquisition initiale »)

"registered retirement income fund", "registered retirement savings plan" and "taxable Canadian corporation" have the same meaning as in the Income Tax Act (Canada); (« fonds enregistré de revenu de retraite », « régime enregistré d'épargne-retraite » et « société canadienne imposable »)

(b) by replacing the definition "eligible investment" with the following:

"eligible investment" of the Fund means

(a) a share in the capital stock of a corporation that was a qualified Manitoba business entity when the Fund acquired the share,

(b) a partnership interest in a partnership that was a qualified Manitoba business entity when the Fund acquired the interest,

(c) a debt obligation of an entity that was a qualified Manitoba business entity when the Fund acquired the obligation, if the debt obligation meets the following requirements:

(i) by its terms, or by the terms of any agreement related to it, it does not restrict the entity from incurring other debts,

(ii) by its terms, or by the terms of any agreement related to it, it is subordinated to all other debt obligations of the entity except that, where the entity is a corporation, the debt obligation need not be subordinate to a debt obligation

(A) issued by the entity that is prescribed as a small business security for the purposes of paragraph (a) of the definition "small business property" in subsection 206(1) of the Income Tax Act (Canada), or

(B) owing to a shareholder of the entity or to a person related to any of its shareholders,

(iii) it is secured solely by a floating charge on the assets of the entity,

(d) a debt obligation of an entity that was a qualified Manitoba business entity when the debt obligation was issued to the Fund, and that requires that the funds advanced to the entity by the Fund be advanced by the entity to another entity all or substantially all of whose assets are investments of a type referred to in clause (a), (b) or (c),

(e) a guarantee provided by the Fund in respect of a debt obligation that, if the Fund had acquired the debt obligation at the time the guarantee was given, would have been a debt obligation described in clause (c), (d) or (f) at that time,

(f) a debt obligation issued by a qualified Manitoba business entity, if all or substantially all of the entity's assets at the time the debt obligation was acquired by the Fund were investments described in this clause or any of clauses (a) to (d),

(g) an option or right granted by a qualified Manitoba business entity, in conjunction with the acquisition by the Fund of an investment that is described in any of clauses (a) to (f), to acquire a share of the capital stock of a corporation or an interest in a partnership that would have been described in clause (a) or (b) if the share or interest had been acquired at the time of the option or right was granted,

(h) an investment or part of an investment that, under a written agreement between the Fund and the minister, qualifies as an eligible investment,

(i) an investment of a flow-through investment vehicle, as defined in the regulations, to the extent that the investment qualifies under the regulations as an eligible investment of the Fund, and

(j) any other investment that, under the regulations, is an eligible investment,

but does not include an investment declared under section 11.1 to be an ineligible investment or an investment that, when it was acquired by the Fund, was an ineligible investment under the regulations; (« placement admissible »)

(c) by repealing the definitions "qualifying trust" and "taxable Canadian corporation".

6(2)        Subsection 1(2) is replaced with the following:

Interpretation of "related"

1(2)        For the purposes of this Act, a person or entity is related to another person or entity if they are related for the purposes of sections 11.1 to 11.5 of The Income Tax Act.

6(3)        The following is added after subsection 1(9):

Agreement to make additional investments

1(10)       When for the purposes of sections 11.1 to 11.5 of The Income Tax Act the Fund's cost of a particular investment includes an amount under clause 11.1(1.1)(d) of that Act because the Fund is required to make an additional investment, the additional investment, when it is acquired, shall qualify as an eligible investment of the Fund if it would have been an eligible investment had it been acquired by the Fund when it acquired the particular investment.

Minister may enter into agreement

1(11)       Subject to subsection (12), the minister may enter into an agreement with the Fund under which, on any terms or conditions the minister considers appropriate, an investment of the Fund or of a flow-through investment vehicle qualifies as an eligible investment of the Fund.

Limitation

1(12)       An investment cannot qualify as an eligible investment of the Fund under an agreement made under subsection (11) unless, at the time that the Fund acquired

(a) the investment; or

(b) by acquiring or holding an interest in a flow-through investment vehicle, an indirect interest in the investment held or acquired by the flow-through investment vehicle;

the entity that issued the investment would have been a qualified Manitoba business entity if clause (a) of the definition "qualified Manitoba business entity" in subsection (1) were read as follows:

"(a) all or substantially all of the fair market value of the property of which is attributable to

(i) property used in a specified active business, as defined in subsection 204.8(1) of the Income Tax Act (Canada), carried on by the entity or by an entity related to it,

(ii) investments in other qualified Manitoba business entities, or

(iii) any combination of properties described in subclauses (i) and (ii),

and that has assets with a total value of not more than $50,000,000., or"

7           Subsection 2(3) is replaced with the following:

Partially applicable provisions

2(3)        Subsections 32(2), 33(3) and 34(2), section 38, clauses 113(2)(a) and (f), and subsections 184(26) and 234(6) of The Corporations Act do not apply with respect to Class "G" Special Shares.

8           Subsections 3(3) and (4) are repealed.

9(1)        Subsection 4(1) is replaced with the following:

Articles of the Fund

4(1)        The articles of the Fund that are filed under The Corporations Act must

(a) set out the authorized capital of the Fund, which shall consist of

(i) Class "A" Common Shares,

(ii) Class "G" Special Shares that may be issued for a maximum consideration of $2,000,000.,

(iii) Class "L" Special Shares,

(iv) any additional classes of shares that were issued before this subclause came into force, and

(v) any additional classes of shares created by filing articles of amendment under The Corporations Act;

(b) set out the rights, privileges, restrictions and conditions attaching to each class of shares which, in the case of the Class "A" Common Shares, must be consistent with sections 4.1 and 4.2; and

(c) provide that the business and affairs of the Fund shall be managed by a board of directors a majority of whom are elected by the holder of the Class "L" Special Shares.

Amendment requires minister's approval

4(1.1)      The articles of the Fund shall not be amended without the minister's approval except to create a new class or classes of shares or to amend the rights, privileges, restrictions or conditions attaching to a class of shares other than the Class "A" Common Shares.

9(2)        Subsections 4(2) and (4) are repealed.

10          The following is added after section 4:

Definitions

4.1(1)      In this section and section 4.2,

"common-law partner" has the same meaning as in the Income Tax Act (Canada); (« conjoint de fait »)

"qualifying trust", in relation to an individual, means a trust governed by a registered retirement savings plan or a registered retirement income fund where the annuitant under the plan or fund is the individual or his or her spouse or common-law partner. (« fiducie admissible »)

Repurchase of share acquired after May 1997

4.1(2)      A holder of a Class "A" Common Share is not entitled to require the Fund to repurchase the share before the eighth anniversary of its original acquisition date if that date is after May 1997.

Repurchase of share acquired before June 1997

4.1(3)      Except as otherwise provided in the articles of the Fund, a holder of a Class "A" Common Share is not entitled to require the Fund to repurchase the share before the seventh anniversary of its original acquisition date if that date is before June 1997.

Exceptions to 8-year hold period

4.1(4)      Subsection (2) does not apply to a request for the repurchase of a Class "A" Common Share if the Board is satisfied that

(a) the holder acquired the share as a consequence of the death of the individual to whom or to whose qualifying trust the share was issued;

(b) the holder, or an individual from whom the holder acquired the share or whose qualifying trust is the holder of the share, has experienced an involuntary loss or interruption of employment that was not compensated through employment insurance benefits or workers' compensation benefits; or

(c) the holder requested the repurchase within 60 days after the share was issued to the holder.

Restrictions on transfers

4.2          A Class "A" Common Share may not be transferred except as follows:

(a) by an individual to

(i) his or her brother, sister, parent, child, spouse or common-law partner, or former spouse or common-law partner, or

(ii) the trustee of a qualifying trust for the individual;

(b) by the trustee of a qualifying trust for an individual to

(i) the individual or his or her brother, sister, parent, child, spouse or common-law partner, or former spouse or common-law partner, or

(ii) the trustee of another qualifying trust for the individual;

(c) as a consequence of the death of an individual, to the individual's estate or to his or her heirs;

(d) to the Fund on a repurchase of the share;

(e) when the transfer is necessitated by an involuntary loss or interruption of employment of the holder or of an individual whose qualifying trust is the holder of the share, and the loss or interruption of employment is not compensated through employment insurance or workers' compensation benefits; or

(f) when the transfer is at least

(i) seven years after the share's original acquisition date, if that date is before June 1997, or

(ii) eight years after the share's original acquisition date, if that date is after May 1997.

11          Sections 5 to 8 are repealed.

12          Section 9 is amended by striking out everything after "Fund".

13          Section 10 is repealed.

14(1)       Subsection 11(1) is amended in the part before clause (a) by striking out "subsections (2) and (3)" and substituting "subsection (2)".

14(2)       Subsection 11(2) is amended

(a) in the part before clause (a) of the English version, by striking out "In making investments, the" and substituting "The"; and

(b) by replacing clause (b) with the following:

(b) not acquire an eligible investment that would result in the total fair market value of its investments in a qualified Manitoba business entity being more than 10% of the fair market value of the Fund's investment assets;

14(3)       Subsection 11(3) is repealed.

15(1)       Subsection 11.1(1) is replaced with the following:

Notice of intent to declare investment ineligible

11.1(1)     Where,

(a) at any time after the acquisition of an eligible investment by the Fund, the investment would, if it were acquired at that time, not be an eligible investment of the Fund because of one or more transactions or events in a series of transactions or events that included the Fund's acquisition of the investment; and

(b) in the minister's opinion, the Fund's acquisition of the investment as an eligible investment is contrary to the object and spirit of this Act or sections 11.1 to 11.5 of The Income Tax Act;

the minister may, by written notice to the Fund within two years after the day on which the series of transactions or events came to the attention of the minister, propose that the investment be declared to be an ineligible investment.

15(2)       Clause 11.1(3)(b) is amended by striking out "not to be an eligible" and substituting "to be an ineligible".

15(3)       Subsection 11.1(4) is replaced with the following:

Effect of declaration

11.1(4)     For the purpose of sections 11.1 to 11.5 of The Income Tax Act, an investment that is declared under this section to be an ineligible investment is deemed never to have been an eligible investment.

16(1)       Subsection 12(1) is replaced with the following:

Reserves

12(1)       The Fund shall maintain a reserve fund equal to the total of

(a) all amounts each of which is an amount included in the cost of an eligible investment of the Fund for the purposes of sections 11.1 to 11.5 of The Income Tax Act because of clause 11.1(1.1)(d) of that Act; and

(b) the greater of

(i) 15% of the fair market value of its investment assets, and

(ii) 50% of the total of its outstanding guarantees.

16(2)       Clause 12(2)(c) is amended by adding "or" at the end of subclause (ii), by striking out "or" at the end of subclause (iii) and by repealing subclause (iv).

17          Section 13 is repealed.

18          Subsection 15(2) is amended

(a) in the part before clause (a),

(i) by striking out "at any valuation date" in the English version and substituting "as at any valuation date,", and

(ii) by striking out "at that valuation date" and substituting "on that valuation date";

(b) in clauses (c) and (d), by striking out "on each" and substituting "for each"; and

(c) in clause (d), by adding "as at that date" at the end.

19          The following is added after the centred heading "PART 4" after section 15:

REPORTING AND COMPLIANCE

Annual statements and returns

15.1(1)     The Fund must file with the minister for each fiscal year, on or before the day on or before which it is required to file its return of income under Part I of the Income Tax Act (Canada),

(a) a copy of its audited financial statements, together with the auditor's report on those statements; and

(b) a copy of the return of information it is required to file for the year under section 11.4 of The Income Tax Act, along with a written statement from the Fund's auditor attesting to the accuracy of the information it contains.

Request for additional information

15.1(2)     The minister may at any time, by written notice to Fund, require the Fund to file with the minister a return of information on any subject connected with the business, affairs, assets or liabilities of the Fund that, in the minister's opinion, is relevant to the administration or enforcement of this Act or of sections 11.1 to 11.5 of The Income Tax Act, including information that would assist the minister in determining whether or not to make a declaration under section 11.1.

Return of additional information

15.1(3)     When the Fund receives a notice under subsection (2), it must provide the required return of information required by the notice within the time specified in the notice.

Extension of time

15.1(4)     The minister may extend the time for filing any statement, report or return of information under this section.

Records to be maintained

15.2(1)     The Fund must maintain records in the form and containing the information that the minister considers necessary to determine whether the Fund is in compliance with this Act, the regulations, the articles of the Fund and sections 11.1 to 11.5 of The Income Tax Act.

Location and time for retention of records

15.2(2)     The Fund must

(a) keep its records at its head office in Manitoba or at any other location in Manitoba approved by the minister; and

(b) retain them for the period of time its records are required to be retained for the purposes of the administration and enforcement of The Income Tax Act.

"Authorized person" defined

15.3(1)     In this section, "authorized person" means a person authorized by the minister for the purposes of this section.

Demand for production of records

15.3(2)     If the minister considers it necessary for the administration or enforcement of this Act or sections 11.1 to 11.5 of The Income Tax Act, he or she may, by a demand served personally or by registered letter, require the Fund to produce for inspection, audit or examination by an authorized person any of the records referred to in section 15.2.

Audits and inspections

15.3(3)     An authorized person may, at any reasonable time and for any purpose related to the administration or enforcement of this Act or sections 11.1 to 11.5 of The Income Tax Act, inspect, audit or examine

(a) records produced pursuant to a demand made under subsection (2); and

(b) records referred to in section 15.2, including documents that relate, or in the opinion of the authorized person may relate, to those records;

and the authorized person may make or cause to be made one or more copies of those records or documents.

Authorized entry

15.3(4)     An authorized person may, in order to carry out an inspection, audit or examination permitted by this section,

(a) enter into any premises or place where the Fund carries on business or where records relating to its business are kept; and

(b) require a person having responsibility for management of the Fund's business or custody of its records, or any other person in the premises or place, to give the authorized person all reasonable assistance and to answer all proper questions relating to the administration and enforcement of this Act and sections 11.1 to 11.5 of The Income Tax Act and, for that purpose, require the person to attend at the premises or place with the authorized person.

Offences

15.4(1)     A person who

(a) makes a false or misleading statement in any document filed with the minister under or for the purposes of this Act or the regulations; or

(b) interferes with an inspection, audit or investigation by an authorized person under section 15.3;

is guilty of an offence and is liable on summary conviction

(c) in the case of an individual, to a fine of not less than $1,000. and not more than $20,000. or imprisonment for a term of not more than two years, or both; and

(d) in the case of a corporation, to a fine of not less than $5,000. and not more than $100,000.

Offence by Fund

15.4(2)     If the minister notifies the Fund of its failure to comply with a requirement under this Act or sections 11.1 to 11.5 of The Income Tax Act to file or provide, or to produce for inspection, a record, report, return, statement or other information, and the Fund does not comply with that requirement within 30 days after receiving the notice, the Fund is guilty of an offence and is liable on summary conviction to a fine of not less than $5,000. and not more than $100,000.

Liability of director, officer or agent

15.4(3)     If a corporation commits an offence under this Act, a director, officer or agent of the corporation who authorized, permitted or acquiesced in the commission of the offence is also guilty of an offence and is liable on summary conviction to a fine of not more than $20,000., whether or not the corporation has been prosecuted or convicted.

Defence re false or misleading statement

15.4(4)     A person is not guilty of an offence under clause (1)(a) or under subsection (3) in respect of a statement that is false or misleading if the person

(a) did not know, and in the exercise of reasonable diligence could not have known, that the statement was false or misleading; and

(b) upon becoming aware that the statement was false or misleading, took steps to notify the minister that the statement was false or misleading.

Defence re interference with audit or inspection

15.4(5)     A person is not guilty of an offence under clause (1)(b) in respect of a refusal to provide, disclose or permit access to information or records if the person demonstrates to the satisfaction of the court that

(a) he or she communicated to the minister or a person authorized to act for the minister that the information or records were protected by a solicitor-client privilege; and

(b) he or she believed on reasonable grounds that the information or records were protected by a solicitor-client privilege that had not been waived by the person entitled to waive it.

Limitation on prosecution

15.4(6)     No prosecution for an offence under this Act may be instituted more than two years after the day on which evidence sufficient to justify a prosecution for the offence came to the knowledge of the minister, and a certificate of the minister as to the day on which the evidence came to his or her knowledge is, in the absence of evidence to the contrary, proof of that date.

Monthly reporting re investment shortfalls

15.5(1)     If at any time the Fund has had an investment shortfall of more than $1,000,000. for any 18 months in a 36-month period, it must provide to the minister, by the end of each month and in a form approved by the minister, a report setting out

(a) all information required to determine whether the Fund had an investment shortfall for the immediately preceding month; and

(b) the value, as at the end of the immediately preceding month, of the Fund's investment assets and of its reserves under section 12.

Duration of monthly reporting

15.5(2)     The monthly reporting requirement under subsection (1) applies to the first month after the last of the 18 months referred to in that subsection and to every month after that until the monthly reports demonstrate that the Fund has had no investment shortfall for a period of 12 consecutive months and is meeting the liquid reserve requirement in section 12.

Minister may declare shares ineligible for tax credit

15.6(1)     In the following circumstances, the minister may, by written order, declare the Class "A" Common Shares that are issued after a date specified in the order to be ineligible for the labour-sponsored funds tax credit under section 11.1 of The Income Tax Act:

(a) the minister has notified the Fund of its failure to comply with a requirement under this Act or sections 11.1 to 11.5 of The Income Tax Act to file or provide, or to produce for inspection, a record, report, return, statement or other information, and the Fund does not comply with that requirement within 30 days after receiving the notice;

(b) the minister has notified the Fund of its failure to value its shares in accordance with section 15, and the Fund does not make the valuation as required within 30 days after receiving the notice;

(c) the Fund has had an investment shortfall of at least $1,000,000. for any two months within a period during which it is required to provide monthly reports to the minister under section 15.5;

(d) the Fund fails for a period of more than 60 days to maintain the reserve required by section 12;

(e) the Fund fails to pay a tax or penalty payable under section 11.1, 11.2 or 11.3 of The Income Tax Act within 60 days after it is assessed; or

(f) the articles of the Fund are amended contrary to subsection 4(1.1).

Notice of order

15.6(2)     The minister must give the Fund written notice of an order made under subsection (1) at least seven days before the date specified in the order.

Cancellation or suspension of order

15.6(3)     If, after an order is issued under subsection (1), the Fund is no longer in default under that subsection, the minister

(a) must cancel the order if no order has been made under that subsection within the immediately preceding 96 months; and

(b) in any other case, may cancel the order, or may suspend it subject to any conditions the minister considers appropriate.

When no longer in default

15.6(4)     For the purpose of subsection (3), the Fund is no longer in default under subsection (1) when all of the following conditions are met:

(a) if it was given notice under clause (1)(a) or (b) of a failure to comply with a requirement, it has complied with that requirement;

(b) if applicable, the Fund has filed with the minister the latest monthly report required to be filed under section 15.5 and, according to that report, did not have an investment shortfall for the month for which that report was filed;

(c) the Fund is meeting the requirements of section 12 respecting reserves;

(d) the Fund has paid all taxes and penalties payable under sections 11.1, 11.2 and 11.3 of The Income Tax Act;

(e) if the articles of the Fund were amended contrary to subsection 4(1.1), the minister has approved the amendments or the articles are further amended with the approval of the minister.

20          Clause 23(c) is replaced with the following:

(c) for the purpose of the definition "eligible investment" in subsection 1(1),

(i) prescribing classes of investments as ineligible investments and enabling the minister, on application by the Fund, to exempt specific investments from those classes, and

(ii) prescribing investments or classes of investments as eligible investments;

(c.1) defining "flow-through investment vehicle", prescribing the circumstances under which, and the extent to which, an investment of a flow-through investment vehicle qualifies as an eligible investment of the Fund, and establishing the Fund's cost of such an investment for the purposes of sections 11.1 to 11.4 of The Income Tax Act;

21          Section 25 is replaced with the following:

C.C.S.M. reference

25          This Act shall no longer be referred to as chapter E95 of the Continuing Consolidation of the Statutes of Manitoba but may be referred to as chapter C308 of the Continuing Consolidation of the Statutes of Manitoba.

22          The Schedule is repealed.

PART 3

THE LABOUR-SPONSORED VENTURE CAPITAL CORPORATIONS ACT

C.C.S.M. c L12 amended

23          The Labour-Sponsored Venture Capital Corporations Act is amended by this Part.

24(1)       Subsection 1(1) is amended

(a) in the English version of the definition "Class A share", by adding "and" at the end of clause (b);

(b) in the English version of the definition "Class B share", by adding "and" at the end of clause (a);

(c) by replacing the definition "eligible business entity" with the following:

"eligible business entity", at any time, means an entity where

(a) all or substantially all of the fair market value of the property of the entity is at that time attributable to

(i) property used in a specified active business carried on by the entity or by another entity related to it,

(ii) investments in other eligible business entities that, if they had been issued at that time to a labour-sponsored venture capital corporation, would be eligible investments of the corporation, or

(iii) any combination of property described in subclause (i) and investments described in subclause (ii), and

(b) the total carrying value immediately before that time of all the property of the entity and entities related to it (determined in accordance with generally accepted accounting principles on a consolidated and combined basis, where applicable) does not exceed $50,000,000.; (« entreprise admissible »)

(d) in the definition "eligible investment", by striking out "and" at the end of clause (c) and by striking out everything after clause (d) and substituting the following:

(e) a partnership interest that was issued to the corporation by a partnership that was an eligible business entity at the time the interest was issued,

(f) an investment or part of an investment that, under a written agreement between the corporation and the minister, qualifies as an eligible investment,

(g) an investment of a flow-through investment vehicle, as defined in the regulations, to the extent that the investment qualifies under the regulations as an eligible investment of the corporation, and

(h) any other investment that, under the regulations, is an eligible investment,

but does not include an investment declared under section 10 to be an ineligible investment or an investment that, when it was acquired by the corporation, was an ineligible investment under the regulations;

(e) by replacing the definition "entity" with the following:

"entity" means

(a) a taxable Canadian corporation,

(b) a partnership of taxable Canadian corporations, and

(c) a trust that is resident in Canada for the purposes of the Income Tax Act (Canada); (« entité »)

(f) by adding the following definitions in alphabetical order:

"investment assets" of a labour-sponsored venture capital corporation means all of its assets other than the operating assets used by it directly in carrying on its business; (« actif de placement »)

"investment shortfall" of a corporation in respect of a month means, at a particular time,

(a) if the month ended in a taxation year of the corporation that ended before the particular time, the corporation's monthly deficiency, as defined in subsection 11.1(1) of The Income Tax Act, for the month, and

(b) if the month ended in the corporation's current taxation year, the amount, if any, that would be its monthly deficiency for the month if the taxation year had ended at the end of the last month that ended before the particular time; (« écart de placement »)

24(2)       Subsection 1(2) is amended by striking out everything after "if they are related" and substituting "for the purposes of sections 11.1 to 11.5 of The Income Tax Act."

24(3)       The following is added after subsection 1(2):

Agreement to make additional investments

1(3)        When for the purposes of sections 11.1 to 11.5 of The Income Tax Act a labour-sponsored venture capital corporation's cost of a particular investment includes an amount under clause 11.1(1.1)(d) of that Act because the corporation is required to make an additional investment, the additional investment, when it is acquired, shall qualify as an eligible investment of the corporation if it would have been an eligible investment if it had been acquired by the corporation when it acquired the particular investment.

Minister may enter into agreement

1(4)        Subject to subsection (5), the minister may enter into an agreement with a labour-sponsored venture capital corporation under which, on any terms or conditions the minister considers appropriate, an investment of the corporation or of a flow-through investment vehicle qualifies as an eligible investment of the corporation.

Limitation

1(5)        An investment cannot qualify as an eligible investment of a labour-sponsored venture capital corporation under an agreement made under subsection (4) unless, at the time that the corporation acquired

(a) the investment; or

(b) by acquiring or holding an interest in a flow-through investment vehicle, an indirect interest in the investment held or acquired by the flow-through investment vehicle;

the entity that issued the investment would have been an eligible business entity if the references in the definition "specified active business" in subsection (1) to "Manitoba" were read as "Canada" and the reference in clause (b) of the definition "eligible business entity" to "related to" were read as "affiliated under section 251.1 of the Income Tax Act (Canada) with".

25          Clause 4(d) is amended

(a) in the English version, by striking out "that" in the part before subclause (i) and adding "that" at the beginning of subclauses (i) and (iii);

(b) by striking out the part of subclause (ii) before paragraph (A) and substituting "for authorized capital that consists only of"; and

(c) by replacing subclauses (iv) and (v) with the following:

(iv) rights and restrictions respecting the redemption or purchase or acquisition for cancellation of Class A shares that are consistent with the regulations, and

(v) rights and restrictions respecting the transfer of Class A shares that are consistent with the regulations; and

26          The following is added after section 4:

Amendment of articles

4.1         The articles of a labour-sponsored venture capital corporation shall not be amended without the approval of the minister except to create a new class or classes of shares or to amend the rights, privileges, restrictions or conditions attaching to a class of shares other than Class A shares.

27          Section 5 is replaced with the following:

Suspension of registration

5(1)        The minister may by written order suspend the registration of a corporation, with effect from the date specified in the order, where

(a) the minister has notified the corporation of its failure to comply with a requirement under this Act or sections 11.1 to 11.5 of The Income Tax Act to file or provide, or to produce for inspection, a record, report, statement, return, statement or other information, and the corporation does not comply with that requirement within 30 days after receiving the notice;

(b) the minister has notified the corporation of its failure to value its Class A shares as required by this Act and the regulations, and the corporation does not value its shares as required within 30 days after receiving the notice;

(c) at any time in the first three taxation years of the corporation beginning with the first taxation year in which the corporation issues a Class A share, the corporation does not have eligible investments and liquid reserves the total cost to the corporation of which is at least 80% of the shareholders' equity at that time in respect of the Class A shares;

(d) the corporation has had an investment shortfall of at least $1,000,000. for any two months within a period during which it is required to provide monthly reports to the minister under section 5.1;

(e) the corporation fails for a period of more than 60 days to maintain its liquid reserves as required by subsection 9(1);

(f) the corporation fails to pay a tax or penalty payable under section 11.1, 11.2 or 11.3 of The Income Tax Act within 60 days after it is assessed; or

(g) the articles of the corporation are amended contrary to section 4.1.

Notice of order

5(2)        If the minister makes an order under subsection (1) in respect of a corporation, the minister must give the corporation written notice the order at least seven days before the date specified in the order.

Cancellation or suspension of order

5(3)        If, after an order is issued to a corporation under subsection (1), the corporation is no longer in default under that subsection, the minister

(a) must cancel the order if no order has been made under that subsection within the immediately preceding 96 months; and

(b) in any other case, may cancel the order, or may suspend it subject to any conditions the minister considers appropriate.

When no longer in default

5(4)        For the purpose of subsection (3), a corporation is no longer in default under subsection (1) when all of the following conditions are met:

(a) if it was given notice under clause (1)(a) or (b) of a failure to comply with a requirement, it has complied with that requirement;

(b) if applicable, the corporation has filed with the minister the latest monthly report required to be filed under section 5.1 and, according to that report, did not have an investment shortfall for the month for which that report was filed;

(c) the corporation is meeting the requirements of section 9 respecting reserves;

(d) the corporation has paid all taxes and penalties payable under sections 11.1, 11.2 and 11.3 of The Income Tax Act;

(e) if the articles of the corporation were amended contrary to section 4.1, the minister has approved the amendments or the articles are further amended with the approval of the minister.

Registration revoked

5(5)        Despite subsection (3), if a registration is suspended for more than a year, the registration is revoked.

Monthly reporting re investment shortfalls

5.1(1)      If at any time a labour-sponsored venture capital corporation has had an investment shortfall of more than $1,000,000. for any 18 months in a 36-month period, it must provide to the minister, by the end of each month and in a form approved by the minister, a report setting out

(a) all information required to determine whether the corporation had an investment shortfall in the immediately preceding month; and

(b) the value, as at the end of the immediately preceding month, of the corporation's investment assets and of its reserves under section 9.

Duration of monthly reporting

5.1(2)      The monthly reporting requirement under subsection (1) applies to the first month after the last of the 18 months referred to in that subsection and to every month after that until the monthly reports demonstrate that the corporation has had no investment shortfall for a period of 12 consecutive months and is meeting the liquid reserve requirement in section 9.

28          Section 8 is replaced with the following:

Investment restrictions

8           A labour-sponsored venture capital corporation shall not

(a) acquire an eligible investment that would result in the total cost to the corporation, immediately after the acquisition, of its investments in an eligible business entity and entities affiliated with the entity being more than 10% of the fair market value of the corporation's investment assets;

(b) prohibit investment in either unionized or non-unionized eligible business entities; or

(c) act, or allow itself to be used, as an instrument for organizing employees into unions.

29(1)       Subsection 9(1) is replaced with the following:

Liquid reserves

9(1)        A labour-sponsored venture capital corporation shall at all times maintain a liquid reserve having a total cost to the corporation of not less than the total of

(a) all amounts each of which is an amount included in the cost of an eligible investment for the purposes of sections 11.1 to 11.5 of The Income Tax Act because of clause 11.1(1.1)(d) of that Act; and

(b) the greater of

(i) 15% of its shareholders' equity, and

(ii) 50% of the total of its outstanding guarantees.

29(2)       Subsection 9(2) is amended

(a) by replacing the part before clause (a) with the following:

Assets of liquid reserves

9(2)        For the purpose of subsection (1), a labour-sponsored venture capital corporation's liquid reserves consist of

(b) in clause (c), by adding "or" at the end of subclause (ii), by striking out "or" at the end of subclause (iii) and by repealing subclause (iv); and

(c) by adding "de" at the beginning of the French version of clause (e).

30(1)       Subsection 10(1) is amended

(a) by replacing clause (a) with the following:

(a) at any time after the acquisition of an eligible investment by the corporation, the investment would, if it were acquired at that time, not be an eligible investment of the corporation because of one or more transactions or events in a series of transactions or events that included the corporation's acquisition of the investment; and

(b) by adding "or sections 11.1 to 11.5 of The Income Tax Act" at the end of clause (b).

30(2)       The following is added after subsection 10(3):

Effect of declaration

10(4)       For the purpose of sections 11.1 to 11.5 of The Income Tax Act, an investment that is declared under this section to be an ineligible investment is deemed never to have been an eligible investment.

31(1)       Subsections 12(1) to (3) are replaced with the following:

Valuation of shares

12(1)       For the purpose of determining the issue or redemption price of its Class A shares from time to time, a labour-sponsored venture capital corporation shall value the shares in the prescribed manner, annually or at such more frequent intervals as are prescribed.

Annual statements and returns

12(2)       A labour-sponsored venture capital corporation must file with the minister for each fiscal year, on or before the day on or before which it is required to file its return of income under Part I of the Income Tax Act (Canada),

(a) a copy of its audited financial statements, together with the auditor's report on those statements; and

(b) a copy of the return of information it is required to file for the year under section 11.4 of The Income Tax Act, together with a written statement from the corporation's auditor attesting to the accuracy of the information it contains.

Request for additional information

12(3)       The minister may at any time, by written notice to a labour-sponsored venture capital corporation, require the corporation to file with the minister a return of information on any subject connected with the business, affairs, assets or liabilities of the corporation that, in the minister's opinion, is relevant to the administration or enforcement of this Act or of sections 11.1 to 11.5 of The Income Tax Act, including information that would assist the minister in determining whether or not to make a declaration under section 10.

31(2)       Subsection 12(4) is amended by striking out "An entity" and substituting "A corporation".

32          Sections 13 to 17 are replaced with the following:

Records to be maintained

13(1)       A labour-sponsored venture capital corporation must maintain records in such form and containing such information as the minister considers necessary to determine whether the corporation is in compliance with this Act, the regulations, the articles of the corporation and sections 11.1 to 11.5 of The Income Tax Act.

Location and time for retention of records

13(2)       A labour-sponsored venture capital corporation must

(a) keep its records at its head office in Manitoba or at any other location in Manitoba approved by the minister; and

(b) retain them for the period of time its records are required to be retained for the purposes of the administration and enforcement of The Income Tax Act.

"Authorized person" defined

14(1)       In this section, "authorized person" means a person authorized by the minister for the purposes of this section.

Demand for production of records

14(2)       If the minister considers it necessary for the administration or enforcement of this Act or sections 11.1 to 11.5 of The Income Tax Act, he or she may, by a demand served personally or by registered letter, require a labour-sponsored venture capital corporation to produce for inspection, audit or examination by an authorized person any of the records referred to in section 13.

Audits and inspections

14(3)       An authorized person may, at any reasonable time and for any purpose related to the administration or enforcement of this Act or sections 11.1 to 11.5 of The Income Tax Act, inspect, audit or examine

(a) records produced pursuant to a demand made under subsection (2); or

(b) records referred to in section 13, including documents that relate, or in the opinion of the authorized person may relate, to those records;

and the authorized person may make or cause to be made one or more copies of those records or documents.

Authorized entry

14(4)       An authorized person may, in order to carry out an inspection, audit or examination permitted by this section,

(a) enter into any premises or place where a labour-sponsored venture capital corporation carries on business or any records relating to its business are kept; and

(b) require a person having responsibility for management of the corporation's business or custody of its records, or any other person in the premises or place, to give the authorized person all reasonable assistance and to answer all proper questions relating to the administration and enforcement of this Act and sections 11.1 to 11.5 of The Income Tax Act and, for that purpose, require the person to attend at the premises or place with the authorized person.

Minister's decision final

15          A decision of the minister under

(a) section 4 to not register a corporation;

(b) section 5 to suspend the registration of a corporation; or

(c) section 10 to declare an investment to be an ineligible investment;

is final and is not subject to appeal.

Offences

16(1)       A person who

(a) makes a false or misleading statement in any document filed with the minister under or for the purposes of this Act or the regulations; or

(b) interferes with an inspection, audit or investigation by an authorized person under section 14;

is guilty of an offence and is liable on summary conviction

(c) in the case of an individual, to a fine of not less than $1,000. and not more than $20,000. or imprisonment for a term of not more than two years, or both; and

(d) in the case of a corporation, to a fine of not less than $5,000. and not more than $100,000.

Offence by corporation

16(2)       If the minister notifies a corporation of its failure to comply with a requirement under this Act or sections 11.1 to 11.5 of The Income Tax Act to file or provide, or to produce for inspection, a record, report, return, statement or other information, and the corporation does not comply with that requirement within 30 days after receiving the notice, the corporation is guilty of an offence and is liable on summary conviction to a fine of not less than $5,000. and not more than $100,000.

Liability of director, officer or agent

16(3)       If a corporation commits an offence under this Act, a director, officer or agent of the corporation who authorized, permitted or acquiesced in the commission of the offence is also guilty of an offence and is liable on summary conviction to a fine of not more than $20,000., whether or not the corporation has been prosecuted or convicted.

Defence re false or misleading statement

16(4)       A person is not guilty of an offence under clause (1)(a) or under subsection (3) in respect of a statement that is false or misleading if the person

(a) did not know, and in the exercise of reasonable diligence could not have known, that the statement was false or misleading; and

(b) upon becoming aware that the statement was false or misleading, took steps to notify the minister that the statement was false or misleading.

Defence re interference with audit or inspection

16(5)       A person is not guilty of an offence under clause (1)(b) in respect of a refusal to provide, disclose or permit access to information or records where the person demonstrates to the satisfaction of the court that

(a) he or she communicated to the minister or a person authorized to act for the minister that the information or records were protected by a solicitor-client privilege; and

(b) he or she believed on reasonable grounds that the information or records were protected by a solicitor-client privilege that had not been waived by the person entitled to waive it.

Limitation on prosecution

17          No prosecution of an offence under this Act may be instituted more than two years after the day on which evidence sufficient to justify a prosecution for the offence came to the knowledge of the minister, and a certificate of the minister as to the day on which the evidence came to his or her knowledge is, in the absence of evidence to the contrary, proof of that date.

33          Subsection 18(1) is amended

(a) by adding the following after clause (a):

(a.1) for the purpose of the definition "eligible investment" in subsection 1(1),

(i) prescribing classes of investments as ineligible investments and enabling the minister, on application by a labour-sponsored venture capital corporation, to exempt specific investments from those classes, and

(ii) prescribing investments or classes of investments as eligible investments;

(a.2) defining "flow-through investment vehicle", prescribing the circumstances under which, and the extent to which, an investment of a flow-through investment vehicle qualifies as an eligible investment of a labour-sponsored venture capital corporation, and establishing the corporation's cost of such an investment for the purposes of sections 11.1 to 11.4 of The Income Tax Act;

(b) by repealing clauses (f), (g) and (i) to (n).

34          The following is added after section 18:

Employee requests for payroll deductions

18.1(1)     A Manitoba employee may, by written notice to his or her employer, request the employer to deduct a specified amount from the employee's salary for a specified number of pay periods for the purchase of Class A shares of a specified labour-sponsored venture capital corporation.

Employer required to deduct

18.1(2)     Subject to subsection (3), an employer who has received requests under subsection (1) from

(a) 20% of the employer's Manitoba employees, if the employer has fewer than 250 Manitoba employees; or

(b) 50 or more of the employer's Manitoba employees, if the employer has 250 or more Manitoba employees;

shall make the requested deductions.

Notice to terminate deduction

18.1(3)     If an employee requests the employer in writing to cease making deductions from his or her salary under this section, the employer must stop making the deductions, beginning with the pay period following receipt of the request.

Remittance of deductions

18.1(4)     An employer must, by the 15th day of the month following the month in which the employer deducts amounts under this section,

(a) remit the deducted amounts to the labour-sponsored venture capital corporation for which they were deducted; and

(b) provide to the labour-sponsored venture capital corporation a statement specifying, for each employee on whose behalf an amount is remitted,

(i) the employee's name, address, date of birth and social insurance number, and

(ii) the amount remitted.

Deemed subscription

18.1(5)     The amount remitted to a labour-sponsored venture capital under this section on behalf of an employee is deemed to be a subscription by the employee for as many Class A shares of the corporation, including fractional shares, as may be purchased with that amount.

Amounts deemed to be salary

18.1(6)     Until an amount deducted by an employer under this section is remitted to the labour-sponsored venture capital corporation designated by the employee, the amount is, for the purposes of the rights of the employee, deemed to be salary or wages owed by the employer to the employee and, if the employer fails to remit to the corporation any amount so deducted, the employee is entitled to enforce the payment to the employee and for that purpose is entitled to all of the rights of employees in respect of the payment of wages or salaries under any Act of the Legislature.

PART 4

TRANSITIONAL AND COMING INTO FORCE

Transitional

35(1)       The directors of Crocus Investment Fund must file restated articles of incorporation under section 174 of The Corporations Act.  These articles must restate the authorized capital of Crocus Investment Fund and, subject to subsection (2), the existing rights, privileges, restrictions and conditions attaching to each class of shares of its capital stock.

Amendment of share rights

35(2)       The restated articles may amend the rights, privileges, restrictions and conditions attaching to the Class "A" Common Shares to the extent necessary to make them consistent with sections 4.1 and 4.2 of The Manitoba Employee Ownership Fund Corporation Act as enacted by section 10.

Coming into force

36(1)       Except as otherwise provided in this section, this Act comes into force on the day it receives royal assent.

36(2)       Subsection 16(2), sections 17 and 28 and subsection 29(2) come into force on a day fixed by proclamation.

36(3)        Section 22 comes into force on the day that a certificate is issued under section 174 of The Corporations Act giving effect to the restated articles of incorporation referred to in section 35.

Explanatory Note

Part 1 of this Bill amends the provisions of The Income Tax Act relating to labour-sponsored venture capital corporations.  Among other things, this Part

  • changes the approved share limit;
  • changes the investment pacing requirements;
  • eliminates the cooling-off period;
  • clarifies the circumstances in which an early redemption of shares of a labour-sponsored venture capital corporation can result in a claw-back of the tax credits.

Part 2 of this Bill amends The Manitoba Employee Ownership Fund Corporation Act.  Among other things, this Part

  • renames the Act as The Crocus Investment Fund Act;
  • enables Crocus Investment Fund to move its share rights and restrictions out of the Act and into articles filed under The Corporations Act;
  • repeals various provisions that are no longer required;
  • adds reporting and compliance requirements;
  • eliminates the prohibition against investing in prescribed investments and, in its place, authorizes regulations that can restrict the types of investments that would otherwise qualify as eligible investments;
  • expands the classes of investments that will qualify as eligible investments for the purpose of the investment pacing requirements under The Income Tax Act.

Part 3 of this Bill amends The Labour-Sponsored Venture Capital Corporations Act to make it more consistent with the provisions of The Manitoba Employee Ownership Fund Corporation Act. Among other things, this Part

  • revises the reporting and compliance requirements;
  • eliminates the prohibition against investing in prescribed investments and, in its place, authorizes regulations that can restrict the types of investments that would otherwise qualify as eligible investments;
  • expands the classes of investments that will qualify as eligible investments for the purpose of the investment pacing requirements under The Income Tax Act.