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Regional Development Incentives Regulations (C.R.C., c. 1386)

Regulations are current to 2020-10-21

Regional Development Incentives Regulations

C.R.C., c. 1386

REGIONAL DEVELOPMENT INCENTIVES ACT

Regulations Respecting Regional Development Incentives

Short Title

 These Regulations may be cited as the Regional Development Incentives Regulations.

Interpretation

  •  (1) In these Regulations,

    Act

    Act means the Regional Development Incentives Act; (Loi)

    eligible assets

    eligible assets means the assets approved by the Minister as forming the whole or a part of a facility or commercial facility but does not include

    • (a) land,

    • (b) automobiles and other means of transportation other than the material-handling devices that are used exclusively on the premises of the facility or commercial facility,

    • (c) assets that, in the opinion of the Minister, are normally considered to be a charge against income in the year in which they are acquired, and

    • (d) patents, franchises, copyrights and goodwill; (actif admissible)

    equity

    equity means the aggregate of the share capital, earned surplus, contributed surplus, capital surplus and shareholder’s loans that are subordinated to all other types of debt financing that the applicant provides for the financing of an operation. (avoir des actionnaires)

  • (2) For the purposes of the Act,

    commercial operation

    commercial operation means any commercial undertaking, other than

    • (a) an initial processing operation or any operation described in paragraphs (a) to (d) of the definition initial processing operation,

    • (b) a manufacturing or processing operation or any operation described in paragraphs (a) to (n) of the definition manufacturing or processing operation, or

    • (c) an operation in a resource-based industry; (entreprise commerciale)

    initial processing operation

    initial processing operation means an operation the product of which is a fuel or a material mainly used for further processing or manufacturing, but does not include

    • (a) the processing by roasting, leaching or smelting of mineral concentrates to produce metals,

    • (b) the processing of wood by the sulphite process into bleached pulp in a pulp mill that prior to January 1, 1972 produced dissolving and high alpha cellulose pulp on a regular basis,

    • (c) the converting of wood into paperboard or paper other than newsprint, or

    • (d) the processing, other than oil refining, of a product resulting in a significant chemical change in the principal material used; (entreprise de transformation initiale)

    manufacturing or processing operation

    manufacturing or processing operation means an operation whereby any goods, products, commodities or wares are created, fabricated, refined or made more marketable but does not include

    • (a) the transporting or merchandizing of any goods, products, commodities or wares,

    • (b) the growing, catching or harvesting of any natural or cultivated product of nature,

    • (c) the extracting of minerals by any method,

    • (d) the production of energy except as an integral part of and solely for use in an operation whereby any goods, products, commodities or wares are created, fabricated, refined or made more marketable,

    • (e) the grinding, mixing or blending of fertilizers or feedstuffs,

    • (f) the mixing of concrete or asphalt,

    • (g) the drying of hides,

    • (h) the cleaning or drying of peat or Irish moss,

      • (i) salt or potash extraction,

    • (j) any mobile manufacturing or processing operation,

    • (k) construction work,

      • (l) repairing as distinct from rebuilding,

    • (m) the rendering of consumer services, and

    • (n) publishing other than printing; (entreprise de fabrication ou de transformation)

    resource-based industry

    resource-based industry means an industry that uses as a principal material a material

    • (a) the original location of which is not the consequence of human design, and

    • (b) that is in or close to its natural state. (industrie basée sur une ressource naturelle)

Application

 These Regulations apply to any application for a development incentive received by the Minister

Option

  •  (1) An applicant whose application for a development incentive is received by the Minister after the date referred to in paragraph 3(a) and before April 1, 1974, may opt in writing for the application to be dealt with under the Regional Development Incentives Regulations, 1974.

  • (2) An applicant whose application for a development incentive is received by the Minister on or after April 1, 1974 and within two months after the date referred to in paragraph 3(a) may opt in writing for the application to be dealt with under these Regulations.

Product Not Previously Manufactured or Processed in Operation

 No product shall be determined to be a product not previously manufactured or processed in an operation unless, on the date of application for a development incentive for the expansion of a facility to enable the manufacturing or processing of the product,

  • (a) the product is a product that is significantly different from any product that on or within the three years immediately prior to that date is or was being manufactured or processed in the operation of which the facility constitutes the necessary components; and

  • (b) the product could not economically be manufactured or processed in that operation unless that facility is expanded and additional assets acquired.

Approved Capital Costs

  •  (1) The approved capital costs of a facility or commercial facility shall be determined by aggregating the approved capital costs of the eligible assets of the facility or commercial facility.

  • (2) The approved capital cost of an eligible asset shall be determined by aggregating

    • (a) the cost to the applicant of the asset to the extent that the cost does not, in the opinion of the Minister, exceed the fair market value of the asset; and

    • (b) such capital expenditures as, in the opinion of the Minister, have been or are to be reasonably incurred and paid by the applicant as direct costs of designing, acquiring, constructing, transporting and installing the asset and of insuring the asset during the construction period.

  • (3) Where a development incentive has been authorized in respect of a facility, the Minister shall not approve any capital costs of that facility that are in excess of 115 per cent of the capital costs that were forecast by the applicant at the time the Minister authorized the development incentive unless the applicant, before incurring such excess capital costs, obtained the agreement of the Minister to include such excess capital costs in determining the amount of the approved capital costs.

  • (4) The approved capital costs of a facility in respect of which the Minister has authorized a development incentive shall not include the capital costs of any assets that, in the opinion of the Minister, create a significant change in the facility, unless

    • (a) the Minister is notified of the additional assets and approves the change in the facility before any commitments in respect of those assets are made by the applicant; and

    • (b) the assets are acquired and put to use within 24 months of the bringing into commercial production of the facility.

Jobs Created Directly in an Operation

  •  (1) The number of jobs created directly in an operation shall be determined to be the number of man days, or fractions thereof, paid by the applicant with respect to the employment of employees in or based upon the facility during the second and third years after the date on which the facility is brought into commercial production divided by the number of days that the facility is in operation during those years, and adjusted to take into account such circumstances as the Minister may determine to be appropriate.

  • (2) For the purposes of subsection (1), in determining the number of employees of an applicant in or based upon a facility, there shall not be included

    • (a) employees engaged in work that is not part of the operation in respect of which the development incentive was authorized; and

    • (b) in the case of the expansion of a facility, employees to the extent of the number normally in or based upon the facility as it was constituted at the date of application for the development incentive.

  • (3) For the purposes of subsections (1) and (2), the employees of an applicant may include the employees of a person who is managing and operating the facility under a management agreement with the applicant.

  • (4) For the purpose of determining the amount of any development incentive, the number of jobs created directly in an operation shall not, unless the Minister otherwise determines, exceed by more than 15 per cent the number of jobs specified and approved in the authorization by the Minister.

Working Capital and Capitalized Expenses

  •  (1) The amount of working capital to be included in the capital to be employed in an operation of any class shall be such amount of the excess of current assets over current liabilities other than loans as, in the opinion of the Minister, will be required for an operation of that class when the operation is in production at its intended full capacity.

  • (2) The amount of capitalized expenses that may be included in the total capital costs of a facility or commercial facility shall be such expenditures, other than the costs of fixed assets, as in the opinion of the Minister are

    • (a) necessarily incurred in bringing the facility or commercial facility into commercial production or operation; and

    • (b) capable, in accordance with normal accounting practice, of being treated as capital expenditures and not as charges against income.

Conditions and Limitations

  •  (1) Any offer of a development incentive under the Act shall remain open for acceptance by the applicant for a period of 90 days from the day on which the offer is made by the Minister.

  • (2) Any offer of a development incentive under the Act shall specify a date by which the construction or installation of the fixed assets of the facility shall begin.

  • (3) Where the construction or installation of the fixed assets of a facility has not been commenced before the date specified pursuant to subsection (2) in respect of the facility, the offer referred to in that subsection shall be deemed to be withdrawn on that date.

 A development incentive shall not be authorized in respect of a facility unless the approved capital costs of the facility as forecast for the purpose of the authorization will, in the opinion of the Minister, exceed

  • (a) $30,000, in the case of a facility in respect of which the development incentive is based only on the approved capital costs; and

  • (b) $60,000, in the case of a facility in respect of which a development incentive is based in part on the number of jobs created in the operation.

  •  (1) In authorizing a development incentive in respect of a facility, the Minister shall specify the minimum amount of the equity of the applicant in the operation, which amount shall be not less than 20 per cent of

    • (a) the approved capital costs of the facility as forecast for the purpose of the authorization, in the case of the establishment of a facility; or

    • (b) the approved capital costs of the facility as forecast for the purpose of the authorization plus the book value of the assets of the facility at the time of application, in the case of expansion or modernization of the facility.

  • (2) The applicant shall provide the amount of equity specified by the Minister pursuant to subsection (1) by the day production starts.

 It is a condition of a development incentive in respect of a facility that the applicant shall undertake to train and employ to the maximum extent practicable persons resident at the time of application for the development incentive in the designated region in which the facility is located.

 It is a condition of a development incentive in respect of a facility that the applicant shall provide reasonable opportunities to Canadian manufacturers to supply the machinery and equipment included in the eligible assets of the facility, where such machinery and equipment are competitive in performance, price and delivery.

  •  (1) It is a condition of a development incentive in respect of a facility that, if the amount or present value of assistance referred to in paragraph 6(c) of the Act is changed from the amount or present value that was taken into consideration by the Minister when authorizing the development incentive, the amount of the development incentive may be varied to the extent of the change in that assistance.

  • (2) Assistance taken into consideration in accordance with paragraph 6(c) of the Act shall be deemed to include the present value of any difference between prevailing market terms for loans or leases and any more favourable terms on which loans or leases are made to the applicant.

 It is a condition of a development incentive in respect of a facility that if,

  • (a) during the 30 months immediately following the day on which the facility is brought into commercial production, in the case of a facility in respect of which the development incentive is based only on the approved capital costs, or

  • (b) during the 42 months immediately following the day on which the facility is brought into commercial production, in the case of a facility in respect of which the development incentive is based in part on the number of jobs created in the operation,

the facility or part of the facility is destroyed by fire, flood or other act beyond the control of the applicant, the applicant shall pay to Her Majesty such amount of the insurance proceeds as may be determined by the Minister to be the same proportion of the whole of the insurance proceeds as the development incentive paid in respect of the destroyed assets is of the aggregate of the approved capital costs of the destroyed eligible assets and the book value of other destroyed assets in respect of which the insurance is paid.

  •  (1) Unless otherwise specified in the authorization by the Minister, it is a condition of a development incentive in respect of a new facility that the applicant for the development incentive shall, for a period of at least 36 months after the day the facility was brought into commercial production, continue to carry on, at substantially the same rate as at the time of his application in respect of the new facility, every other operation utilizing a facility in any designated region whereby a product is manufactured or processed that is the same as or similar to a product manufactured or processed in the operation of which the new facility constitutes the necessary components.

  • (2) Where an applicant who is subject to the condition referred to in subsection (1) fails to comply with that subsection, he thereupon ceases to be eligible to be paid the amount of the incentive that was based on the number of jobs created directly in the operation, and shall repay to Her Majesty any amount paid on account thereof.

  •  (1) It is a condition of a development incentive in respect of a facility that, if

    • (a) during the 24 months immediately following the date on which the facility is brought into commercial production, in the case of a facility in respect of which the development incentive is based only on the approved capital costs, or

    • (b) during the 36 months immediately following the date on which the facility is brought into commercial production, in the case of a facility in respect of which the development incentive is based in part on the number of jobs created in the operation,

    eligible assets comprised in the approved capital costs on which the amount of development incentive is based cease to be used in the facility, the applicant shall, unless the Minister determines that the cessation of use was unavoidable, repay to Her Majesty such amount of the development incentive as may be determined by the Minister to be the same proportion of the total development incentive as the approved capital costs of the eligible assets that have ceased to be used in the facility are of the total approved capital costs.

  • (2) An applicant shall

    • (a) notify the Minister forthwith upon ceasing to use eligible assets under the circumstances referred to in subsection (1); and

    • (b) repay any amount required to be repaid by him pursuant to subsection (1) not later than four months from the date on which he ceased to use the eligible assets.

 It is a condition of any development incentive that is based in part on the number of jobs created in the operation that, if during the second and third years immediately following the date on which the facility is brought into commercial production, the number of jobs created directly in the operation is less than the estimated number of jobs on which payments, on account of the development incentive are based, the applicant shall repay to Her Majesty the amount paid on account of the development incentive that was related to the number of jobs that were not so created.

Payment of Development Incentives

 The Minister may determine that a new, expanded or modernized facility has been brought into commercial production when he is satisfied that the facility has been utilized in the continuous production of quantities of goods for a period of not less than 30 days and that most, by value, of the eligible assets approved by the Minister in respect of the facility are being utilized in the manufacturing or processing of those goods and will continue to be so utilized.

  •  (1) The amount that the Minister shall, pursuant to section 10 of the Act, pay on account of a development incentive at the time he is satisfied that the facility has been brought into commercial production shall not exceed an amount equal to 80 per cent of the total development incentive calculated without taking into account the approved capital costs of any eligible assets not then in use in the operation.

  • (2) Subject to subsection (3), where

    • (a) during the 30 months following the date on which a facility is brought into commercial production, in the case of a facility in respect of which a development incentive is based only on the approved capital costs, or

    • (b) during the 42 months following the date on which the facility is brought into commercial production, in the case of a facility in respect of which a development incentive is based in part on the number of jobs created in the operation,

    the Minister is satisfied that 80 per cent of the development incentive will be greater by at least 25 per cent than the amount of the payment made in accordance with subsection (1), he may make to the applicant a further payment or payments on account of the development incentive.

  • (3) The total of all payments made on account of a development incentive in respect of a facility prior to the expiration of

    • (a) 24 months from the date on which the facility is brought into commercial production, in the case of a facility in respect of which the development incentive is based only on the approved capital costs, or

    • (b) 36 months from the date on which the facility is brought into commercial production, in the case of a facility in respect of which the development incentive is based in part on the number of jobs created in the operation,

    shall not exceed 80 per cent of the development incentive that the Minister estimates that he will pay after the expiration of such period.

Regions

  •  (1) The Minister shall not authorize a primary development incentive, a secondary development incentive or a special development incentive with respect to a facility located in the region designated in the Designated Region Order 1970-1Footnote 1.

  • (2) The Minister shall not authorize a special development incentive with respect to a facility located in any region designated in the Regional Development Incentives Designated Region Order, 1974 that is within the Province of Quebec, Ontario, Manitoba, Saskatchewan, Alberta or British Columbia.

Loan Guarantees

 A loan guarantee may be authorized by the Minister in respect of the establishment in the areas comprised by

  • (a) the regions designated as designated regions for the purposes of the Act by the Regional Development Incentives Designated Region Order, 1974, and

  • (b) the region designated as a designated region for the purposes of the Act by the Designated Region Order 1970-1Footnote 1,

of a commercial facility that provides commercial services of one or more of the following classes:

  • (c) business offices;

  • (d) warehousing and freight-handling facilities;

  • (e) shopping centres;

  • (f) convention facilities;

  • (g) hotel accommodation; or

  • (h) recreational facilities.

 A loan guarantee shall not be authorized in respect of a commercial facility unless the total capital costs of the commercial facility will, in the opinion of the Minister, exceed

  • (a) $2,500,000 if the commercial facility is located in the metropolitan area of Montreal;

  • (b) $500,000 if the commercial facility is located in the metropolitan area of Winnipeg or Quebec City; or

  • (c) $250,000 if the commercial facility is located in any other place within the areas prescribed by section 22.

  •  (1) A loan guarantee shall not exceed 90 per cent of the total amount of the advances made by the lender to the borrower plus the interest thereon.

  • (2) The Minister shall not authorize a loan guarantee unless he is satisfied that the terms and conditions of the loan are in accordance with reasonable commercial practice with respect to

    • (a) the security provided for the loan; and

    • (b) the circumstances in which the borrower shall be in default.

  •  (1) It is a condition of any loan guarantee that the lender shall, semi-annually or at such shorter intervals as may be specified in the loan guarantee agreement, provide the Minister with a report showing

    • (a) the amount and date of any advances made under the loan;

    • (b) the amount and date of any payment received on account of principal or interest on the loan;

    • (c) any amount due on the last day of each month of the period covered by the report; and

    • (d) the amount and type of insurance carried on the facility or commercial facility.

  • (2) It is a condition of any incremental loan guarantee that the lender pay to the Receiver General, at the time he provides the Minister with a report pursuant to subsection (1), a guarantee fee of two per cent per annum, calculated on the guaranteed portion of the loan outstanding as of the last day of each month of the period covered by the report.

  • (3) It is a condition of any shared-risk loan guarantee that the lender pay to the Receiver General, at the time he provides the Minister with a report pursuant to subsection (1),

    • (a) where the percentage guaranteed does not exceed 50 per cent of the loan, a guarantee fee of one per cent per annum calculated on the guaranteed portion of the loan outstanding as of the last day of each month of the period covered by the report; and

    • (b) where the percentage guaranteed exceeds 50 per cent of the loan, a guarantee fee of

      • (i) one per cent per annum, calculated on the first 50 per cent of the guaranteed portion of the loan outstanding as of the last day of each month of the period covered by the report,

      • (ii) two per cent of the percentage guaranteed that exceeds 50 per cent but does not exceed 70 per cent of the guaranteed portion of the loan outstanding as of the last day of each month of the period covered by the report, and

      • (iii) three per cent of the percentage guaranteed that exceeds 70 per cent of the guaranteed portion of the loan outstanding as of the last day of each month of the period covered by the report.

  • (4) For the purposes of this section,

    incremental loan guarantee

    incremental loan guarantee means a guarantee under which, after default by the borrower, the lender is entitled to apply any proceeds obtained from the realization of the security firstly in satisfaction of that portion of the unpaid balance of the loan that is not guaranteed by Her Majesty; (garantie croissante d’un prêt)

    shared-risk loan guarantee

    shared-risk loan guarantee means a guarantee under which, after default by the borrower and before Her Majesty’s liability is determined, the lender is required to apply any proceeds obtained from realization of the security in satisfaction of the loan. (garantie d’un prêt à risques partagés)

 A loan guarantee agreement shall contain conditions respecting

  • (a) the notification to be given to the Minister where the borrower is in default;

  • (b) the terms and conditions under which the loan guarantee may be invoked;

  • (c) the manner in which any assets of the borrower may be taken or seized by the lender;

  • (d) the disposition or management of assets taken or seized by the lender;

  • (e) the payments to the Receiver General to be made by the lender out of the disposition or management of assets taken or seized by the lender; and

  • (f) such other terms and conditions as the Minister considers appropriate.

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