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1998/99 Legislative Session: 3rd Session, 36th Parliament

FIRST READING

The following electronic version is for informational purposes only.

The printed version remains the official version.

HONOURABLE IAN WADDELL

MINISTER OF SMALL BUSINESS,

TOURISM AND CULTURE

BILL 11 – 1998

SMALL BUSINESS VENTURE CAPITAL

AMENDMENT ACT, 1998

HER MAJESTY, by and with the advice and consent of the Legislative Assembly of the

Province of British Columbia, enacts as follows:

Section 1 of the Small Business Venture Capital Act, R.S.B.C. 1996, c. 429, is amended

in the definition of "small business" by striking out "corporation" and substituting

"corporation, whether a cooperative association or not," .

Section 3 (4) is repealed and the following substituted:

(4) Registration of a venture capital corporation under this

section constitutes

approval, as of the date of registration, for the issue of $50 000 of equity capital.

Section 10 is amended

(

a) by repealing subsection (1) (

b) and substituting the following:

(

b) unless otherwise provided by regulation, at least 75% of the wages and

salaries, determined in the prescribed manner, of the small business are or

will be paid to employees who regularly report to work at operations located

in British Columbia; , and

(

b) by repealing subsection (2) and substituting the following:

(2) Despite subsection (1) (a), if

(

a) a small business and another company are affiliates only because one of

them is controlled by one person and the other by one or more persons

described in paragraph (

e) or (

f) of the definition of "associate" in

section 1 (1), and

(

b) the administrator is satisfied that the small business and the other company

do not have any agreement, commitment or understanding to conduct, in

concert, any business,

then, in calculating the number of employees under subsection (1) (a), the administrator

must not count the employees of the affiliate of the small business.

Section 13 (1) is amended by striking out "more than 50%" and substituting "50% or

more" .

Section 15 is repealed and the following substituted:

Aggregate venture capital corporation investment

(1) A venture capital corporation must not make an investment in a small business if,

as a result of that investment, the aggregate of all amounts received by that small

business, and any affiliates of that small business, from the venture capital

corporation and any other venture capital corporation or corporations, directly or

indirectly, would be greater than $3 million.

(2) For the purposes of subsection (1), if in the opinion of the administrator one of

the reasons for the separate existence of 2 or more small businesses is to increase

the amount received from one or more venture capital corporations, the small

businesses are deemed to be one small business.

Section 20 (4) is repealed and the following substituted:

(4) If a venture capital corporation makes an application under subsection (3), the

administrator must, following the approval of the Minister of Finance and

Corporate Relations and in accordance with the provisions of

section 21 of the

Income Tax Act, issue a tax credit certificate in the amount referred to in

subsection (3), unless

(

a) the venture capital corporation has contravened this Act or the regulations,

(

b) the administrator considers that the venture capital corporation or its

directors, officers or shareholders are conducting the business or affairs of

the venture capital corporation in a manner that is contrary to the spirit and

intent of this Act.

Section 22 is amended by adding the following subsection:

(3.1) If in the opinion of the administrator a venture capital corporation has conducted

its business and affairs in a manner consistent with the spirit and intent of this Act

and has incurred investment losses, the administrator may reduce the amount that

would otherwise be payable under subsection (3) in order to take into account any

such losses.

Section 27 is amended by adding the following subsection:

(4) The administrator may revoke the registration of a venture capital corporation if

(

a) under subsection (1), the administrator makes one or more forgiveness

orders in respect of the venture capital corporation, and

(

b) the aggregate amount forgiven equals the aggregate of tax credits issued and

grants authorized in respect of amounts received by the venture capital

corporation.

Section 30 (1) (

c) and (2) is amended by striking out "entity" and substituting "entity, or

an affiliate of the small business, corporation or other entity," .

Section 35 (1) (

a) is amended by striking out "to the administrator" and substituting "to

the administrator, to a person working for or under the administrator" .

Transition

11 Despite the amendments to the Small Business Venture Capital Act enacted by

sections 4 and 5 of this Act, a venture capital corporation that held an investment that

was an eligible investment immediately before the coming into force of those

amendments may

(

a) continue to hold the investment, and

(

b) increase the investment up to the levels permitted before the coming into

force of those amendments,

and the investment is an eligible investment, for the same period of time as would have

applied if those amendments had not been brought into force.

Commencement

12 This Act comes into force by regulation of the Lieutenant Governor in Council.

Explanatory Notes

SECTION 1: [Small Business Venture Capital Act, amends

section 1] clarifies that a cooperative

association may be eligible to be a small business as defined by the Act.

SECTION 2: [Small Business Venture Capital Act, repeals and replaces

section 3 (4)]

requires the administrator to preapprove all fund raising over $50 000.

SECTION 3: [Small Business Venture Capital Act, amends

section 10] removes requirement

that the administrator consider the wages and salaries of employees of

affiliated companies when qualifying a small business.

SECTION 4: Small Business Venture Capital Act, amends

section 13 (1)] restores the

original intent of subsection when first enacted in 1985, that a VCC must be a

minority shareholder.

SECTION 5: Small Business Venture Capital Act, reenacts

section 1]

reduces the amount of tax incentive financing a small business may

receive under the Act;

permits the administrator to consider 2 or more small businesses to

be one small business for the purposes of

section 15;

allows the administrator to look behind the form of a transaction to

determine compliance with the objectives of the Act.

SECTION 6: [Small Business Venture Capital Act, repeals and replaces

section 20 (4)]

clarifies the powers of the administrator to refuse to issue tax credits if the VCC

has contravened the Act or regulations or the administrator considers that the

VCC or its directors, officers or shareholders are acting contrary to the spirit

and intent of the Act.

SECTION 7: [Small Business Venture Capital Act, adds

section 22 (3.1)] allows the administrator

to consider a VCC's investment losses when calculating its liability to

repay tax credits.

SECTION 8: [Small Business Venture Capital Act, adds

section 27 (4)] allows the administrator

to revoke the registration of a VCC which has received a full forgiveness

order.

SECTION 9: [Small Business Venture Capital Act, amends

section 30] extends the investigative

powers of the administrator to the affairs of affiliates of small businesses,

corporations and other entities.

SECTION 10: [Small Business Venture Capital Act, amends

section 35 (1) (a)] expands the

offence provisions to make it an offence to provide false or misleading information

to the administrator's staff.

SECTION 11: [Small Business Venture Capital Act, transitional] grandfathers certain rights

and obligations in place before the coming into force of some of the amendments

to sections 13 and 15 of the Act by sections 4 and 5 of this Bill. Investments

held by a VCC that were held as eligible investments before the coming

into force of those amendments are to be dealt with as they were dealt with

before the amendments came into force.

Copyright © 1999: Queen's Printer, Victoria, British Columbia, Canada