Budget Implementation Act, 2016, No. 2 (S.C. 2016, c. 12)
Full Document:
Assented to 2016-12-15
(2) Subsection (1) comes into force or is deemed to have come into force on January 1, 2017.
5 (1) Section 15 of the Act is amended by adding the following after subsection (2.15):
Marginal note:Back-to-back arrangement — application
(2.16) Subsection (2.17) applies at any time if
(a) at that time, a person or partnership (referred to in this subsection and subsections (2.17) to (2.192) as the intended borrower) has an amount outstanding as or on account of a debt or other obligation to pay an amount (in this subsection and subsections (2.17) to (2.192) referred to as the shareholder debt) to a person or partnership (in this subsection and subsections (2.17) to (2.192) referred to as the immediate funder);
(b) subsection (2) would not, in the absence of this subsection and subsection (2.17), apply to the shareholder debt;
(c) at that time, a funder, in respect of a particular funding arrangement,
(i) has an amount outstanding as or on account of a debt or other obligation to pay an amount (other than a debt or other obligation to pay an amount to which subsection (2) applies or would apply if it were not a pertinent loan or indebtedness, as defined in subsection (2.11)) to a person or partnership that meets either of the following conditions:
(A) recourse in respect of the debt or other obligation is limited in whole or in part, either immediately or in the future and either absolutely or contingently, to a funding arrangement, or
(B) it can reasonably be concluded that all or a portion of the particular funding arrangement was entered into or was permitted to remain outstanding because
(ii) has a specified right in respect of a particular property that was granted directly or indirectly by a person or partnership and
(d) at that time, one or more funders is an ultimate funder.
Marginal note:Back-to-back arrangement — consequences
(2.17) If this subsection applies at a particular time, then for the purposes of this section and section 80.4, the intended borrower is deemed to receive a loan from each particular ultimate funder at the particular time, the amount of which is equal to the amount determined by the formula
A × B/C – (D – E)
where
- A
- is the lesser of
(a) the amount outstanding as or on account of the shareholder debt at the particular time, and
(b) the total of all amounts, each of which is, at the particular time,
(i) an amount outstanding as or on account of a debt or other obligation that is owed by a funder (other than an ultimate funder) to an ultimate funder under a funding arrangement in respect of the shareholder debt, or
(ii) the fair market value of a particular property in respect of which an ultimate funder has granted a specified right to a funder (other than an ultimate funder) under a funding arrangement in respect of the shareholder debt;
- B
- is the total of all amounts, each of which is, at the particular time,
(a) an amount outstanding as or on account of a debt or other obligation that is owed by a funder (other than an ultimate funder) to the particular ultimate funder under a funding arrangement in respect of the shareholder debt, or
(b) the fair market value of a particular property in respect of which the particular ultimate funder has granted a specified right to a funder (other than an ultimate funder) under a funding arrangement in respect of the shareholder debt;
- C
- is the total amount determined under paragraph (b) of the description of A;
- D
- is the total of all amounts, each of which is, in respect of the shareholder debt, an amount that the intended borrower has been deemed by this subsection to have received from the particular ultimate funder as a loan at any time before the particular time; and
- E
- is the total amount of any repayments deemed by subsections (2.19) and (2.191) to have occurred before the particular time, in respect of any deemed loans from the particular ultimate funder that are referred to in the description of D.
Marginal note:Back-to-back arrangement — conditions for deemed repayment
(2.18) Subsection (2.19) applies in respect of an intended borrower and a particular ultimate funder at a particular time if
(a) prior to the particular time, subsection (2.17) has applied in respect of a shareholder debt to deem one or more loans to have been received by the intended borrower from the particular ultimate funder; and
(b) at the particular time,
(i) an amount owing in respect of the shareholder debt is repaid in whole or in part,
(ii) an amount owing in respect of a debt or other obligation owing to the particular ultimate funder by a funder (other than an ultimate funder) under a funding arrangement in respect of the shareholder debt is repaid in whole or in part, or
(iii) either
(A) there is a decrease in the fair market value of a property in respect of which a specified right was granted by the particular ultimate funder to a funder (other than an ultimate funder) under a funding arrangement in respect of the shareholder debt, or
(B) a right described in clause (A) is extinguished.
Marginal note:Back-to-back arrangement — deemed repayment
(2.19) If this subsection applies in respect of an intended borrower and a particular ultimate funder at a particular time,
(a) the intended borrower is deemed, for the purposes of this section, paragraph 20(1)(j), section 80.4 and subsection 227(6.1), to repay, in whole or in part, one or more of the deemed loans referred to in paragraph (2.18)(a) at the particular time; and
(b) the total amount of the deemed repayments referred to in paragraph (a) is to be determined by the following formula:
A – B – C
where
- A
- is the total of all amounts, each of which is the amount of a loan deemed by subsection (2.17) to have been received, at any time before the particular time, by the intended borrower from the particular ultimate funder in respect of the shareholder debt,
- B
- is the total of all amounts deemed by this subsection to have been repaid, at any time before the particular time, by the intended borrower in respect of any loans referred to in the description of A, and
- C
- is the amount determined by the formula
D × E/F
where
- D
- is the lesser of
(i) the amount outstanding as or on account of the shareholder debt, immediately after the particular time, and
(ii) the total of all amounts, each of which is, immediately after the particular time,
(A) an amount outstanding as or on account of a debt or other obligation that is owed by a funder (other than an ultimate funder) to an ultimate funder under a funding arrangement in respect of the shareholder debt, or
(B) the fair market value of a particular property in respect of which an ultimate funder has granted a specified right to a funder (other than an ultimate funder) under a funding arrangement in respect of the shareholder debt,
- E
- is the total of all amounts, each of which is, immediately after the particular time
(i) an amount outstanding as or on account of a debt or other obligation that is owed by a funder (other than an ultimate funder) to the particular ultimate funder under a funding arrangement in respect of the shareholder debt, or
(ii) the fair market value of a particular property in respect of which the particular ultimate funder has granted a specified right to a funder (other than an ultimate funder) under a funding arrangement in respect of the shareholder debt, and
- F
- is the amount determined under subparagraph (ii) in the description of D.
Marginal note:Negative amounts
(2.191) If, in the absence of section 257, the formula in subsection (2.17) would result in a negative amount at a particular time,
(a) the intended borrower is deemed, for the purposes of this section, paragraph 20(1)(j), section 80.4 and subsection 227(6.1), to repay, in whole or in part, one or more of the loans deemed by subsection (2.17) to have been received by the intended borrower from the particular ultimate funder before the particular time; and
(b) the total amount of the deemed repayments referred to in paragraph (a) is equal to the absolute value of that negative amount.
Marginal note:Back-to-back arrangement — definitions
(2.192) The following definitions apply in this subsection and subsections (2.16) to (2.191).
- funder
funder, in respect of a funding arrangement, means
(a) if the funding arrangement is described in paragraph (a) of the definition funding arrangement, the immediate funder;
(b) if the funding arrangement is described in paragraph (b) of the definition funding arrangement, the creditor in respect of the debt or other obligation or the grantor of the specified right, as the case may be; and
(c) a person or partnership that does not deal at arm’s length with a person or partnership referred to in paragraph (a) or (b). (bailleur de fonds)
- funding arrangement
funding arrangement means
(a) the shareholder debt; and
(b) each debt or other obligation or specified right, owing by or granted to a funder, in respect of a particular funding arrangement, if the debt or other obligation or specified right meets the conditions in subparagraph (2.16)(c)(i) or (ii) in respect of a funding arrangement. (mécanisme de financement)
- specified right
specified right has the same meaning as in subsection 18(5). (droit déterminé)
- ultimate funder
ultimate funder means a funder, if subsection (2) would apply to the shareholder debt if the creditor under the shareholder debt were the funder instead of the immediate funder. (bailleur de fonds ultime)
(2) Subsection (1) applies in respect of
(a) if the immediate funder in respect of a shareholder debt is a debtor, or holder of a specified right, under a funding arrangement under which an ultimate funder is the creditor or the grantor of the specified right,
(i) loans received and indebtedness incurred in respect of the shareholder debt after March 21, 2016, and
(ii) any portion of a particular loan received or indebtedness incurred in respect of the shareholder debt before March 22, 2016 that remains outstanding on that day, as if that portion were a separate loan or indebtedness that was received or incurred, as the case may be, on March 22, 2016 in the same manner and on the same terms as the particular loan or indebtedness; and
(b) in any other case,
(i) loans received and indebtedness incurred after 2016, and
(ii) any portion of a particular loan received or indebtedness incurred before January 1, 2017 that remains outstanding on that day, as if that portion were a separate loan or indebtedness that was received or incurred, as the case may be, on January 1, 2017 in the same manner and on the same terms as the particular loan or indebtedness.
- Date modified: