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The Labour-Sponsored Venture Capital Corporations Act
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This version is current as of October 16, 2017.
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C.C.S.M. c. L12

The Labour-Sponsored Venture Capital Corporations Act

(Assented to June 28, 1997)

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

PART 1

INTERPRETATION

Definitions

1(1)        In this Act,

"administrator" means the administrator appointed under section 10.1; (« administrateur »)

"Class A share" means a share of the capital stock of a corporation that entitles the holder

(a) to receive notice of and, subject to the corporation's governing Act, to attend and vote at all meetings of the shareholders of the corporation,

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

(c) to receive, on the dissolution of the corporation, pro rata with all the other holders of Class A shares, all the assets of the corporation that remain after payment of all amounts payable to the holders of other classes of shares of the corporation; (« action de catégorie A »)

"Class B share" means a share of the capital stock of a corporation that is issuable only to, and may be held only by, an employee organization and that entitles the holder

(a) to receive notice of and, subject to the corporation's governing Act, to attend and vote at all meetings of the shareholders of the corporation, and

(b) to receive, on the dissolution of the corporation, an amount equal to the amount of the consideration received by the corporation on the issue of the Class B shares divided by the number of Class B shares issued,

but does not entitle the holder to receive dividends; (« action de catégorie B »)

"commission" means the Manitoba Securities Commission; (« Commission »)

"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 an active business carried on in Canada by the entity, or by another entity related to it, in which

(A) of the full-time employees employed at that time in the business or in a similar business carried on by another entity related to the entity, at least 50% are employed in Manitoba, and

(B) of the total of the salaries and wages paid to employees employed at that time in the business or in a similar business carried on by another entity related to the entity, at least 50% is reasonably attributable to services rendered in Manitoba by the employees,

(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 »)

"eligible investment" of a labour-sponsored venture capital corporation means

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

(b) a debt obligation that was issued to the corporation by an entity that was an eligible business entity at the time it was issued where

(i) repealed, S.M. 2006, c. 23, s. 7,

(ii) the debt obligation, if secured, is secured solely by a general security agreement or by a guarantee referred to in clause (c), and

(iii) the debt obligation, by its terms or the terms of any agreement related to it, does not rank ahead of any other debt obligations of the entity except that, where the entity is a corporation, the debt obligation may rank ahead of

(A) a debt obligation 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) a debt obligation owing to a shareholder of the entity or to a person related to any such shareholder,

(c) a guarantee provided by the corporation in respect of a debt obligation that, if the debt obligation had been issued to the corporation at the time the guarantee was provided, would have been an eligible investment because of clause (b),

(d) an option or right granted by an eligible business entity, in conjunction with the issue by the entity of a share or debt obligation that is an eligible investment of the corporation, to acquire a share of the capital stock of the entity that would be an eligible investment of the corporation if that share were issued at the time that the option or right was granted,

(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 the administrator declares, in accordance with guidelines established by the administrator with the approval of the minister, to be 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; (« placement admissible »)

"employee organization" means an organization of employees formed for purposes which include the regulation of relations between employers and employees, and includes a duly organized group or federation of such organizations; (« association de salariés »)

"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 »)

"labour-sponsored venture capital corporation" means a corporation that

(a) is registered, or

(b) has been registered and has any issued and outstanding Class A share; (« corporation à capital de risque de travailleurs »)

"minister" means the member of the Executive Council charged by the Lieutenant Governor in Council with the administration of this Act; (« ministre »)

"prescribed" means prescribed by regulation under this Act;

"prescribed labour-sponsored venture capital corporation" means a prescribed labour-sponsored venture capital corporation under section 6701 of the Income Tax Regulations (Canada). (« corporation à capital de risque de travailleurs visée »)

"registered" means registered under this Act and "registration" means registration under this Act; (« inscrire »)

"regulation", except as otherwise provided, means a regulation made under this Act; (« règlement »)

"share capital", in relation to a class of shares of the capital stock of a corporation at any time, means the amount by which

(a) the total fair market value of the consideration received by the corporation before that time for the issuance of shares of that class or of a class of shares for which shares of that class were substituted,

exceeds

(b) the total of the amounts by which the stated capital of the shares of that class or substituted class has been reduced before that time in a manner permitted by this Act or the regulations; (« capital-actions »)

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 The Income Tax Act.

1(3) to (5) Repealed, S.M. 2006, c. 23, s. 7.

S.M. 2001, c. 24, s. 24; S.M. 2005, c. 43, s. 13; S.M. 2006, c. 23, s. 7; S.M. 2008, c. 3, s. 45; S.M. 2009, c. 26, s. 36.

PART 2

REGISTRATION

Register of labour-sponsored venture capital corporations

2(1)        The minister shall maintain a register in which shall be listed all the corporations registered under this Act.

Inspection of register

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

Application for registration

3(1)        The following corporations may apply to the minister for registration under this Act:

(a) a corporation that was caused to be incorporated under The Corporations Act by an employee organization and has not previously carried on business other than the business related to obtaining registration under this Act;

(b) a prescribed labour-sponsored venture capital corporation.

Form of application

3(2)        An application under this section shall be made by filing with the minister an application setting out

(a) the name of the corporation and the address of its registered office;

(b) information necessary to confirm the corporation's status under subsection (1);

(c) the number of directors of the corporation and the name in full and residential address of each of them;

(d) the name in full and residential address of each officer of the corporation and the office held by him or her; and

(e) any other prescribed information.

Additional materials to accompany application

3(3)        An application for registration by a corporation shall be accompanied by

(a) a certified copy of the articles of the corporation;

(b) a true copy of all shareholders' agreements and proposed agreements entered into or to be entered into by the corporation;

(c) payment of the prescribed application fee; and

(d) any other prescribed materials.

Officer's or director's certificate

3(4)        An application for registration shall be signed by two officers or one director and one officer of the applicant and shall include a certificate signed by one of them certifying that the information contained in the application is complete and accurate.

S.M. 2008, c. 3, s. 46.

Conditions for registration

4(1)        The minister may register a corporation for the purposes of this Act if

(a) the corporation has made an application for registration in accordance with section 3;

(b) the corporation has never previously carried on any business or activities other than

(i) its business as a prescribed labour-sponsored venture capital corporation, or

(ii) activities related to obtaining registration under this Act or becoming a prescribed labour-sponsored venture capital corporation;

(c) the total shareholders' equity of all classes of the corporation's capital stock is not less than $25,000.;

(d) the articles of the corporation provide

(i) that the business of the corporation is restricted to assisting the development of eligible business entities and to creating, maintaining and protecting jobs by providing financial and managerial advice to such entities and by investing funds of the corporation in accordance with this Act and the regulations,

(ii) for authorized capital that includes Class A shares and Class B shares,

(iii) repealed, S.M. 2006, c. 23, s. 8,

(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

(e) the registration is approved by the Lieutenant Governor in Council.

Business restriction

4(2)        If the corporation is a prescribed labour-sponsored venture capital corporation, its articles are deemed to satisfy the requirement in subclause (1)(d)(i) if they satisfy the requirement in subparagraph 204.81(1)(c)(i) of the Income Tax Act (Canada).

S.M. 2001, c. 24, s. 25; S.M. 2005, c. 43, s. 14; S.M. 2006, c. 23, s. 8; S.M. 2008, c. 3, s. 47.

Restrictions on amendment of articles

4.1         The articles of a registered labour-sponsored venture capital corporation must not be amended except

(a) 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 shares; or

(b) as approved by the minister.

S.M. 2001, c. 24, s. 26; S.M. 2005, c. 43, s. 15; S.M. 2006, c. 23, s. 9.

Corporation may apply for deregistration

4.2(1)      A labour-sponsored venture capital corporation may apply to the minister for a cancellation of its registration under this Act. The application must set out the corporation's reasons for the request.

Minister may require administrator to review compliance

4.2(2)      Upon receipt of the application, the minister may require the administrator to review the corporation's compliance with this Act and sections 11.1 and 11.5 of The Income Tax Act and report his or her findings to the minister.

Minister may cancel registration

4.2(3)      The minister may cancel the corporation's registration if he or she is satisfied, based on the administrator's report, that the corporation is in substantial compliance with this Act and sections 11.1 and 11.5 of The Income Tax Act.

S.M. 2006, c. 23, s. 10.

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 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 reserves the total cost to the corporation of which is at least 80% of its share capital at that time in respect of the Class A shares;

(d) and (e) repealed, S.M. 2006, c. 23, s. 11;

(f) the corporation fails to pay a penalty under this Act or a tax payable under section 11.1 or 11.5 of The Income Tax Act within 60 days after it is assessed;

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

(h) the corporation's assets or a substantial portion of them have been placed under the control of a receiver, a receiver-manager or a trustee in bankruptcy.

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 within one year after a corporation's registration is suspended under subsection (1) the minister is satisfied, after a review by the administrator, that 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 purposes of subsections (3) and (7), a corporation is no longer in default under subsection (1) when all of the following conditions are met:

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

(b) the corporation has paid all amounts payable under this Act or under section 11.1 or 11.5 of The Income Tax Act, and all penalties and interest payable in respect of those amounts;

(c) 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;

(d) none of the corporation's assets are under the control of a receiver, a receiver-manager or a trustee in bankruptcy.

Registration automatically cancelled

5(5)        A corporation's registration is automatically cancelled when

(a) the registration has been suspended for a period of 365 days; or

(b) a court requires the corporation to be wound up or dissolved or its assets to be liquidated, or approves a plan for the winding-up or dissolution of the corporation or the liquidation of its assets, and the court order

(i) cannot be appealed or the time for appealing it has expired, or

(ii) has been appealed but has not been reversed or set aside on appeal.

Transitional

5(6)        If an order referred to in clause (5)(b) was made in respect of a corporation before this subsection came into force, the corporation's registration is cancelled on the coming into force of this subsection.

Minister may reinstate registration

5(7)        Upon the application of a corporation whose registration was cancelled under clause (5)(a), the minister may reinstate the corporation's registration if he or she is satisfied, after a review by the administrator, that the corporation

(a) is no longer in default under subsection (1); and

(b) has a viable business plan to operate as a labour-sponsored venture capital corporation.

S.M. 2001, c. 24, s. 27; S.M. 2005, c. 43, s. 16; S.M. 2006, c. 23, s. 11.

Registration decisions final

5.0.1       The following decisions are final and not subject to appeal:

(a) a decision under section 4 not to register a corporation;

(b) a decision under section 4.2 not to cancel a registration;

(c) a decision under section 5 to suspend a registration or not to reinstate a registration.

S.M. 2006, c. 23, s. 12.

5.1         Repealed.

S.M. 2001, c. 24, s. 27; S.M. 2006, c. 23, s. 13.

PART 2.1

GOVERNANCE AND REPORTING

Composition of board

5.1.1(1)    While any Class A share of a labour-sponsored venture capital corporation is outstanding,

(a) a majority of the members of the corporation's board of directors must be persons elected to the board by the holders of the Class A shares; and

(b) at least two members of its board of directors must be persons elected to the board by the holder or holders of the Class B shares.

Restrictions apply after first shareholders' meeting

5.1.1(2)    Subsection (1) applies despite any other law, any agreement, or the articles or by-laws of the corporation, but does not apply to a corporation until after the first meeting of the corporation's shareholders to be held after the later of

(a) June 30, 2007; and

(b) the day the corporation first issued a Class A share after becoming registered.

Election of board members

5.1.1(3)    Up to three members of the board of directors of a labour-sponsored venture capital corporation are deemed for the purpose of clause (1)(a) to be have been elected by the holders of the Class A shares if they have been elected or appointed from a list of nominees approved by a resolution of the holders of the Class A shares.

S.M. 2006, c. 23, s. 14; S.M. 2008, c. 3, s. 48.

Board charter

5.2(1)      The board of directors of a labour-sponsored venture capital corporation must develop a charter that describes the role of the board and how it differs from the role of management of the corporation.

Independence of chair and vice-chair

5.2(2)      No employee of a labour-sponsored venture capital corporation or of a manager of a labour-sponsored venture capital corporation's business shall act as chair or vice-chair of the board of directors of the corporation or of any committee of the board.

S.M. 2005, c. 43, s. 17.

Corporate governance policies and practices

5.3(1)      The board of directors of a labour-sponsored venture capital corporation must develop corporate governance policies and practices having regard to what are generally considered to be best corporate governance practices for public companies, and must adhere to those policies and practices and periodically review and update them.

Disclosure of governance policies and practices

5.3(2)      A labour-sponsored venture capital corporation must include a summary of its corporate governance policies and practices in each prospectus and each annual report to shareholders issued by the corporation.  It must also make a copy of the policies and practices available for inspection by any person upon written request.

S.M. 2006, c. 23, s. 15.

Conflict of interest for board members

5.4(1)      The board of directors of a labour-sponsored venture capital corporation must establish conflict of interest policies and procedures for members of the board, and for committees of the board, that are in keeping with best corporate governance practices for public companies, and must adhere to those policies and procedures.

Conflict of interest for employees

5.4(2)      The board of directors of a labour-sponsored venture capital corporation must establish conflict of interest policies and procedures for officers and employees of the corporation that are in keeping with best corporate governance practices for public companies, and must monitor adherence to those policies and procedures.

Policies to be available for inspection

5.4(3)      A labour-sponsored venture capital corporation must make its conflict of interest policies and procedures available for inspection by any person upon written request.

S.M. 2005, c. 43, s. 17.

Committees

5.5(1)      The board of directors of a labour-sponsored venture capital corporation must establish the following committees:

(a) an investment committee, to assist the board in

(i) developing and evaluating the corporation's policies and procedures for the acquisition, management and disposition of investments, and monitoring its adherence to those policies and procedures,

(ii) selecting and evaluating providers of investment management services, and

(iii) evaluating proposed acquisitions and dispositions of eligible investments;

(b) a valuation committee, to assist the board in

(i) developing and evaluating the corporation's valuation policies and procedures, and monitoring its adherence to them,

(ii) monitoring the corporation's compliance with all applicable regulatory and statutory requirements regarding the valuation of the Class A shares and the corporation's investments, and

(iii) selecting a valuator and evaluating the valuator's independence, qualifications and performance;

(c) an audit committee, to assist the board in

(i) overseeing the accounting and financial reporting processes of the corporation,

(ii) ensuring that management has implemented an effective system of internal financial controls, and monitoring management's reporting on those controls,

(iii) establishing an effective system of control over travel and other expenses of the corporation incurred by senior employees and board members,

(iv) monitoring the corporation's compliance with its legal and regulatory requirements,

(v) selecting an auditor and evaluating the auditor's independence, qualifications and performance,

(vi) facilitating any audit or investigation and reviewing the findings, and

(vii) developing policies and procedures for receiving and dealing with complaints and submissions, including those made anonymously or confidentially by employees of the corporation, in respect of the corporation's internal financial controls or its accounting or financial reporting;

(d) a governance and nominations committee, to assist the board in

(i) enhancing and evaluating the corporation's corporate governance policies and practices, and monitoring its adherence to them,

(ii) determining the appropriate size of the board and its committees,

(iii) developing criteria for independence of board and committee members,

(iv) developing financial, investment and other competency criteria for board and committee members, and providing educational opportunities to develop those competencies,

(v) recruiting qualified nominees for board and committee positions, and

(vi) developing policies and procedures for receiving and dealing with complaints and submissions, including those made anonymously or confidentially by employees of the corporation, in respect of matters not covered by the policies and procedures referred to in subclause (c)(vii).

The board may assign additional duties or functions to these committees.

Board may establish other committees

5.5(2)      The board of directors of a labour-sponsored venture capital corporation may establish any other committee it considers necessary or advisable.

Composition of committees

5.5(3)      The board of directors of a labour-sponsored venture capital corporation may appoint to any committee of the board one or more persons who are not members of the board but have the necessary expertise to assist the committee in performing its functions, and may fix the remuneration for such committee members.  But the chair of a committee and a majority of its members must be board members.

Composition of certain committees

5.5(4)      In the case of a committee referred to in subsection (1),

(a) at least one member must be a person elected to the board by the holders of the Class A shares;

(b) no more than 1/2 of the members may be persons appointed to the board by the holder or holders of the Class B shares; and

(c) a person cannot be the chair of the board and the chair of the committee at the same time.

S.M. 2005, c. 43, s. 17; S.M. 2008, c. 3, s. 49.

Annual business plan

5.5.1       The board of directors of a labour-sponsored venture capital corporation must approve a business plan for each fiscal year of the corporation.

S.M. 2006, c. 23, s. 16.

Financial reserves

5.5.2       The board of directors of a labour-sponsored venture capital corporation must establish policies respecting reserves for meeting the corporation's cash-flow requirements and guarantee obligations, and must monitor the corporation's adherence to those policies.

S.M. 2006, c. 23, s. 16.

Annual report to shareholders

5.6(1)      In its annual report to shareholders, a labour-sponsored venture capital corporation must include the following:

(a) a description of the corporation's business plan for the year being reported, and the extent to which the corporation met its business objectives for that year;

(a.1) a description of the corporation's business plan for the current year;

(b) the particulars of its compensation for senior employees and board members;

(c) the particulars of its travel and other expenses incurred by senior employees and board members;

(d) a description of the corporation's policies and practices regarding the use of its financial and other resources for non-income producing purposes, the extent to which the resources were so used and the purposes for which they were used;

(e) a description of the risks associated with making investments in the corporation;

(f) a description of the corporation's process for valuing its Class A shares;

(g) a description of the board's policies regarding the corporation's reserves, and a report on the status of those reserves.

Public access to annual report

5.6(2)      A labour-sponsored venture capital corporation must make a copy of its annual report to shareholders available for inspection by any person upon written request.

Information in continuous disclosure documents

5.6(3)      Subsection (1) does not apply to information that is included in the most recent prospectus that has been filed with the commission and is available to members of the public free of charge, if the annual report indicates where in the prospectus the information is to be found and where to obtain a copy of the prospectus free of charge.

S.M. 2005, c. 43, s. 17; S.M. 2006, c. 23, s. 17; S.M. 2008, c. 3, s. 50.

PART 3

INVESTMENTS

Investment policies and criteria

6(1)        Each labour-sponsored venture capital corporation shall establish investment policies and criteria, consistent with this Act and the regulations, with respect to

(a) the creation, retention or protection of employment in Manitoba;

(b) employment practices, workplace safety, environmental and economic sustainability and other matters; and

(c) the composition of the investment portfolio of the corporation in terms of industry sectors, income, growth and risk.

Disclosure of investment policies

6(2)        A labour-sponsored venture capital corporation must include a summary of its investment policies in each prospectus and each annual report to shareholders issued by the corporation.  It must also make a copy of the policies available for inspection by any person upon written request.

S.M. 2005, c. 43, s. 18; S.M. 2006, c. 23, s. 18.

7           Repealed.

S.M. 2005, c. 43, s. 19.

Restrictions

8(1)        A labour-sponsored venture capital corporation shall not

(a) subject to the regulations, 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 total of

(i) the cost to the corporation of the assets in its investment portfolio, other than investments held to meet its reserve requirements, and

(ii) any money the corporation has available for making additional investments, other than investments held to meet its reserve requirements;

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

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

(d) acquire or hold, directly or indirectly, an investment in an entity, other than a wholly-owned subsidiary of the corporation, that is engaged in selling or promoting the sale of shares of the corporation, or in another entity that is related to such an entity.

Restrictions re workplace

8(2)        Subject to the regulations, no person shall, in a workplace, engage in advertising or promotional activities for the sale of Class A shares.

S.M. 2001, c. 24, s. 28; S.M. 2005, c. 43, s. 20; S.M. 2006, c. 23, s. 19.

9           Repealed.

S.M. 2001, c. 24, s. 29; S.M. 2005, c. 43, s. 21; S.M. 2006, c. 23, s. 20.

INVESTMENT PACING

Investment pacing deficiency

9.1(1)      A labour-sponsored venture capital corporation's investment pacing deficiency for a fiscal year is the greatest of the following amounts:

(a) the amount of the deficiency determined by the following formula:

deficiency = (70% × A) − C

In this formula,

A

is the total of all amounts designated by it under section 11.1 of The Income Tax Act in respect of Class A shares issued by the corporation after February 2001 and at least two years before the end of that fiscal year,

C

is the total of all amounts each of which was the cost to the corporation, immediately after the acquisition, of an eligible investment acquired by it after February 2001 and before the end of that fiscal year;

(b) the amount that would be the deficiency under clause (a) if

(i) the reference in the formula to "70%" were read as "14%", and

(ii) in determining the amount for C, the only eligible investments taken into account were those where the total of the following amounts does not exceed $2,000,000.:

(A) the corporation's cost of the particular investment,

(B) the corporation's cost of all other eligible investments that are then held by the corporation and were issued to it by the same entity or by another entity related to that entity;

(c) the amount, if any, determined under the regulations as the corporation's investment pacing deficiency for that year.

No deficiency

9.1(2)      If the amount determined under subsection (1) for a corporation's fiscal year is nil or a negative amount, the corporation does not have an investment pacing deficiency for that year.

Penalty for deficiency

9.2(1)      A labour-sponsored venture capital corporation that has an investment pacing deficiency for a fiscal year must pay to the Minister of Finance, within six months after the end of the fiscal year, a penalty equal to 30% of the deficiency.

Penalty is partly recoverable

9.2(2)      A corporation that pays a penalty under this section for a fiscal year and does not have an investment pacing deficiency for the next fiscal year may recover a portion of the penalty at the end of that next fiscal year equal to 15% of the penalty for each full month before the end of that year that the penalty was paid in full, up to a maximum of 90%.  The recoverable portion is payable by the minister within 30 days after the corporation satisfies the administrator that it does not have an investment pacing deficiency for that following year.

Investments acquired within six months after year-end

9.3         A labour-sponsored venture capital corporation that enters into a written agreement in one fiscal year to acquire an eligible investment, and then acquires the eligible investment within the first six months of the next fiscal year, may do the following for the purpose of section 9.1 with the approval of the administrator:

(a) treat the investment as having been acquired by the corporation in the fiscal year in which it entered into the agreement; and

(b) include its cost of the investment when it acquired the investment as its cost of an eligible investment acquired by it before the end of that fiscal year.

S.M. 2006, c. 23, s. 21.

Notice of intent to declare investment ineligible

10(1)       Where,

(a) at any time after the acquisition of an eligible investment by a labour-sponsored venture capital 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) in the administrator's opinion, the corporation's acquisition of the investment as an eligible investment is contrary to the object and spirit of this Act;

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

Replacement investments

10(1.1)     Where all or any part of an eligible investment

(a) is acquired by a labour-sponsored venture capital corporation as part of a series of transactions or events that includes the repayment, redemption, repurchase or cancellation of all or any part of another eligible investment of the corporation or of another labour-sponsored venture capital corporation; and

(b) in the opinion of the administrator, was acquired as a direct or indirect replacement for the other investment or any part of it;

the administrator may, by written notice to the corporation within two years after the day on which the series of transactions or events came to the administrator's attention, propose that all or any part of the replacement investment be declared to be an ineligible investment.

Objection

10(2)       A labour-sponsored venture capital corporation any of whose investments the administrator proposes to declare to be an ineligible investment may, within 30 days after receiving the notice under subsection (1) or (1.1), object to the proposed declaration by filing a written notice of objection with the administrator setting out the relevant facts and its reasons for the objection.

Action of administrator

10(3)       Where the administrator has made a proposal under subsection (1) or (1.1) in respect of an investment, the administrator may, after considering any objection made under subsection (2),

(a) abandon the proposal; or

(b) declare the investment to be an ineligible investment;

and shall give the corporation that made the investment written notice of the decision.

Minister to review administrator's declaration

10(3.1)     Upon receipt of a written request from the corporation within 90 days after the corporation is notified of a declaration under subsection (3), the minister must review the declaration.  The minister may confirm the declaration or rescind it, and must give the corporation written notice of the decision.

Effect of declaration

10(4)       For the purpose of section 9.1, an investment that is declared under this section to be an ineligible investment is deemed never to have been an eligible investment.

S.M. 2001, c. 24, s. 30; S.M. 2006, c. 23, s. 22.

PART 4

ADMINISTRATION

Minister to appoint independent administrator

10.1(1)     The minister must appoint a person, other than a civil servant, as an administrator to be responsible for monitoring and enforcing compliance with the following provisions of this Act:

(a) Part 3 (investments), except section 6 (investment policies);

(b) section 11 (prohibition against reduction of stated capital, dissolution);

(c) subsection 12(2) (annual statements and returns);

(d) section 13 (records);

(e) any other provision designated by the minister.

Administrator may declare investment to be eligible

10.1(2)     The administrator may

(a) with the approval of the minister, establish guidelines for declaring otherwise ineligible investments to be eligible investments; and

(b) on application by a labour-sponsored venture capital corporation in a form approved by the administrator, declare an investment or part of an investment to be an eligible investment in accordance with those guidelines.

Term of office

10.1(3)     The administrator is to hold office for the term fixed by the minister, or until the minister revokes the appointment or appoints another person as his or her successor.

Remuneration and expenses

10.1(4)     The minister may determine the remuneration and expenses to be paid to the administrator.

Administrative support

10.1(5)     The minister may provide clerical and administrative support to the administrator to enable him or her to carry out his or her functions under this Act.

Administrator to report to minister

10.1(6)     The administrator must prepare and provide to the minister, within three months after the end of each fiscal year of the government and whenever else the minister requires, a report containing such information as the minister requires about the administration and enforcement of the provisions of this Act for which the administrator is responsible.

S.M. 2006, c. 23, s. 23.

Responsibility of Manitoba Securities Commission

10.2(1)     The commission is responsible for monitoring a labour-sponsored venture capital corporation's compliance with its disclosure obligations under

(a) Part 2.1 (governance);

(b) subsection 6(2) (investment policies);

(c) subsection 12(1) (valuation of shares).

Commission to report to minister

10.2(2)     The commission must prepare and provide to the minister, within three months after the end of the government's fiscal year, a report containing such information as the minister requires regarding the matters for which the commission is responsible under subsection (1).

S.M. 2006, c. 23, s. 23.

Prohibition against reduction of stated capital, dissolution

11          Notwithstanding The Corporations Act, a labour-sponsored venture capital corporation shall not

(a) reduce its stated capital in respect of a class of shares otherwise than on a redemption, acquisition or cancellation of shares of that class by the corporation or under prescribed circumstances; or

(b) be wound up or dissolved without the prior written approval of the minister, which may be given without conditions or with any conditions the minister considers appropriate.

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. The corporation must disclose the method and frequency of its share valuations in each prospectus of the corporation.

Annual report to administrator

12(2)       Within six months after the end of each fiscal year, a labour-sponsored venture capital corporation must file with the administrator

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

(b) an information return, in a form approved by the administrator, containing prescribed information and a declaration, signed by the corporation's chief executive officer and its chief financial officer, attesting to the accuracy and completeness of the information in the return.

Administrator may require additional information

12(3)       The administrator may at any time, by written notice, require a labour-sponsored venture capital corporation to provide information about any matter that, in the administrator's opinion, is relevant to the administration or enforcement of the provisions of this Act for which the administrator is responsible, including information that would assist the administrator in determining whether or not to make a declaration under section 10 or 10.1.

Reporting to the commission

12(4)       A labour-sponsored venture capital corporation must provide to the commission, in a form approved by the commission, any information that the commission, by written notice to the corporation, requires in order to monitor the corporation's compliance with its disclosure obligations referred to in subsection 10.2(1).

Deadline for providing information

12(5)       A corporation required to provide information under subsection (3) or (4) must provide it within the time stated in the notice or any longer period allowed by the administrator or the commission, as the case may be.

S.M. 2001, c. 24, s. 31; S.M. 2005, c. 43, s. 22; S.M. 2006, c. 23, s. 24.

Records

13          A labour-sponsored venture capital corporation must keep records in accordance with the regulations.

S.M. 2001, c. 24, s. 32; S.M. 2006, c. 23, s. 25.

"Authorized person" defined

14(1)       In this section and in section 16, "authorized person" means any of the following persons:

(a) a person authorized by the minister for the purposes of this section;

(b) for the purpose of administering or enforcing any provision of this Act for which the administrator is responsible, the administrator or a person authorized by the administrator for the purposes of this section.

Demand for production of records

14(2)       If the minister or an authorized person considers it necessary for the administration or enforcement of this 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, 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, for that purpose, require the person to attend at the premises or place with the authorized person.

S.M. 2001, c. 24, s. 32; S.M. 2006, c. 23, s. 26.

15          Repealed.

S.M. 2001, c. 24, s. 32; S.M. 2006, c. 23, s. 27.

Penalty is a debt and bears interest

15.1        The penalty payable by a labour-sponsored venture capital corporation under subsection 9.2(1) is a debt due to the government by the corporation and bears interest in accordance with the regulations under The Financial Administration Act from the date it becomes payable until it is paid in full.

S.M. 2006, c. 23, s. 28.

Power to collect debt

15.2        The minister has the same powers to collect the debt that the director under The Tax Administration and Miscellaneous Taxes Act has under Part I, Division 5, of that Act to collect a tax debt under that Act, other than a tax debt of a collector.

S.M. 2006, c. 23, s. 28.

Administrator may assess or reassess penalty

15.3(1)     If in the administrator's opinion a labour-sponsored venture capital corporation has

(a) failed to report any or all of its investment pacing deficiency as at the end of a fiscal year; or

(b) failed to pay the penalty payable under subsection 9.2(1) in respect of an investment pacing deficiency;

the administrator may, by written notice to the corporation, assess or reassess the penalty payable under subsection 9.2(1) in respect of the deficiency.

Notice of assessment or reassessment

15.3(2)     The administrator must cause the notice of assessment or reassessment to be served on the corporation and must provide a copy of it to the minister.

Assessment deemed correct

15.3(3)     An assessment or reassessment is deemed to be correct unless

(a) it is rescinded or revised by the minister after a review or by the court on an appeal under section 15.5; or

(b) it is replaced by a reassessment.

S.M. 2006, c. 23, s. 28.

Application for review by minister

15.4(1)     Within 90 days after receiving a notice of assessment or reassessment, a labour-sponsored venture capital corporation may dispute it by filing with the minister a notice of objection setting out the facts and the reasons for the objection.

Minister may confirm, vary or rescind assessment

15.4(2)     After reviewing the notice of objection and the administrator's response to it, the minister must

(a) confirm, vary or rescind the assessment or reassessment; or

(b) refer the matter to the administrator for reassessment of the penalty in accordance with any directions the minister considers appropriate.

Notice of minister's decision

15.4(3)     The minister must notify the corporation of his or her decision and must provide written reasons for the decision.

No reassessment after objection to minister

15.4(4)     After the corporation files a notice of objection with the minister in relation to the assessment or reassessment of a penalty, the penalty cannot be further reassessed except as permitted or required by

(a) the minister; or

(b) the court on an appeal under section 15.5.

S.M. 2006, c. 23, s. 28.

Corporation may appeal assessment or reassessment

15.5(1)     Within 90 days after receiving a copy of the minister's decision under section 15.4, the labour-sponsored venture capital corporation may appeal the assessment or reassessment to the Court of Queen's Bench by applying to the court for an order under this section.

Parties

15.5(2)     The parties to the appeal are the appellant and the government, but the administrator is entitled to appear and be heard on the appeal.

Notice to minister and administrator

15.5(3)     As soon as practicable after filing its application with the court, the corporation must serve a copy of the application on the Minister of Finance and the administrator.

Court decision

15.5(4)     After hearing the appeal, the court may

(a) affirm, rescind or vary the assessment or reassessment; and

(b) make any order as to costs that the court considers appropriate.

S.M. 2006, c. 23, s. 28.

Offences

16(1)       A person who

(a) makes a false or misleading statement in any document filed with or provided to the minister, the administrator, the commission or an authorized person 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 or authorized person notifies a corporation of its failure to comply with a requirement under this 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.

S.M. 2001, c. 24, s. 32; S.M. 2006, c. 23, s. 29.

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.

S.M. 2001, c. 24, s. 32.

L.G. in C. may make regulations

18(1)       The Lieutenant Governor in Council may make regulations

(a) defining, enlarging, or restricting the meaning of any word used in this Act or the regulations;

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

(i) prescribing classes of investments as ineligible investments, 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 purpose of section 9.1;

(b) repealed, S.M. 2005, c. 43, s. 23;

(c) respecting applications under this Act for registration or for the cancellation of a registration, including prescribing an application fee;

(d) respecting the circumstances in which a labour-sponsored venture capital corporation may

(i) reduce its stated capital, or

(ii) redeem, acquire or purchase for cancellation any share or shares of its capital stock;

(e) respecting the circumstances in which the shares of the capital stock of a labour-sponsored venture capital corporation may be transferred;

(f) and (g) repealed, S.M. 2001, c. 24, s. 33;

(h) respecting the times at which and the manner in which the shares of the capital stock of a labour-sponsored venture capital corporation are to be valued;

(i) to (n) repealed, S.M. 2001, c. 24, s. 33;

(o) repealed, S.M. 2006, c. 23, s. 30;

(o.1) providing transitional rules for matters arising from amendments to this Act;

(o.2) modifying, extending or limiting the application of this Act or sections 11.1 to 11.5.1 of The Income Tax Act to a corporation and its shareholders in the event of a reorganization, amalgamation or merger — including a transaction or series of transactions that result in all or substantially all of the assets and Class A shareholders of one corporation becoming the assets and Class A shareholders of another corporation — or a plan of arrangement under The Corporations Act;

(o.3) limiting the application of subsection 8(2);

(o.4) modifying, extending or limiting the application of this Act or section 11.5.1 of The Income Tax Act to a corporation and its shareholders in the event that the corporation's registration is cancelled;

(o.5) varying the investment restrictions in clause 8(1)(a) as they apply to a corporation in the first 24 months after it first issues a Class A share;

(o.6) prescribing information to be provided in an information return under section 12;

(o.7) respecting records to be kept under this Act;

(o.8) modifying, extending or limiting the application of this Act to a corporation in order to resolve a conflict between this Act and any provision of the Income Tax Act (Canada) to which the corporation is subject as a prescribed labour-sponsored venture capital corporation;

(p) respecting any other matter that the Lieutenant Governor in Council considers necessary for carrying out the purposes of this Act.

18(2) and (3) Repealed, S.M. 2006, c. 23, s. 30.

S.M. 2001, c. 24, s. 33; S.M. 2005, c. 43, s. 23; S.M. 2006, c. 23, s. 30; S.M. 2008, c. 3, s. 51.

18.1        Repealed.

S.M. 2001, c. 24, s. 34; S.M. 2006, c. 23, s. 31.

C.C.S.M. reference

19          This Act may be referred to as chapter L12 of the Continuing Consolidation of the Statutes of Manitoba.

Coming into force

20          This Act comes into force on a day fixed by proclamation.

NOTE: S.M. 1997, c. 39 was proclaimed in force December 10, 1997.