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Canada Small Business Financing (Establishment and Operation of Capital Leasing Pilot Project) Regulations

Version of section 1 from 2006-03-22 to 2006-11-01:

  •  (1) The definitions in this subsection apply in these Regulations.

    Act

    Act means the Canada Small Business Financing Act. (Loi)

    aggregate outstanding balance

    aggregate outstanding balance means the aggregate, calculated on the day on which a capital lease is entered into or is amended as a result of improvements to the equipment, of

    • (a) the total financing amount of the capital lease,

    • (b) the outstanding balance of any other capital lease registered with the Minister in accordance with these Regulations, and

    • (c) the outstanding loan amount referred to in subsection 4(3) of the Act. (somme des soldes impayés)

    capital lease

    capital lease means a lease or leasing under which a lessor provides equipment to a lessee for payment and that meets one of the following conditions:

    • (a) the lease or leasing includes a bargain purchase option or provides for a transfer of ownership of the leased equipment to the lessee at the end of its term;

    • (b) the term of the lease or leasing is greater than 75% of the economic life of the equipment; and

    • (c) the net present value of the scheduled payments made under the lease or leasing, calculated in accordance with the annual imputed rate of interest used in the calculation of the scheduled payments, is 90% or more of the cost of the equipment on the day the lease or leasing is entered into. (contrat de location-acquisition)

    cost of the equipment

    cost of the equipment means, in respect of equipment that is the subject of a capital lease,

    • (a) in respect of new equipment, the purchase price of the equipment provided to the lessee,

    • (b) in respect of used equipment, the lesser of

      • (i) the purchase price of the used equipment, and

      • (ii) the fair market value of the used equipment on the day on which the capital lease is entered into,

    and may include, in respect of either new or used equipment,

    • (c) the additional costs necessary for the operation of the equipment, other than maintenance and training costs,

    • (d) the cost of software related to the operation of the equipment, and

    • (e) non-refundable taxes and customs duties, if applicable. (coût du matériel)

    lease funder

    lease funder means a person who purchases or accepts an assignment of a capital lease. (investisseur)

    lessee

    lessee means a person who carries on or is about to carry on a small business in Canada and who is a party to a capital lease. It does not include Her Majesty or an agent of Her Majesty in right of Canada or a province, a municipality or a municipal or other public body that performs a function of government. (locataire)

    lessor

    lessor means

    • (a) a member of the Canadian Payments Association established by subsection 3(1) of the Canadian Payments Act

      • (i) as set out in paragraph 4(1)(b) or (c) or paragraph 4(2)(a) or (c) of that Act, or

      • (ii) as set out in any of paragraphs 4(2)(d) to (h) of that Act, if the member provides, with their application to be a lessor under these Regulations, their Canadian Payments Association transit number and a certificate issued by the member’s external auditor stating that the member has been a commercial lessor in Canada for the past five years;

    • (b) a local cooperative credit society, within the meaning of subsection 2(1) of the Canadian Payments Act, that is a member of a central cooperative credit society, within the meaning of that subsection, if the central cooperative credit society is a member of the Canadian Payments Association;

    • (c) a leasing company incorporated in Canada or a lease funder carrying on business in Canada, with a place of business in Canada, that

      • (i) maintains a rating of “BBB” or better issued by a Canadian bond rating agency, or

      • (ii) participates in a securitization program approved by a Canadian bond rating agency; or

    • (d) any other organization designated by the Minister as a lessor for the purposes of these Regulations. (locateur)

    outstanding balance of a capital lease

    outstanding balance of a capital lease means the aggregate of

    • (a) the amount of any overdue payments,

    • (b) the net present value of all future payments due under the capital lease, discounted at the annual imputed rate of interest used in the calculation of the scheduled payments, and

    • (c) the present value, discounted at the annual imputed rate of interest used in the calculation of the scheduled payments of the lesser of

      • (i) the residual value of the equipment set out in the registration form referred to in subsection 12(1), and

      • (ii) the bargain purchase option price of the equipment set out in the capital lease. (solde impayé du contrat de location-acquisition)

    rate of interest on Government of Canada bonds

    rate of interest on Government of Canada bonds means

    • (a) for a capital lease with a term of less than three years, the one to three year Government of Canada marketable bonds average yield as published by the Bank of Canada on the last Wednesday of the month before the day on which the capital lease is entered into;

    • (b) for a capital lease with a term of three to five years, the three to five year Government of Canada marketable bonds average yield as published by the Bank of Canada on the last Wednesday of the month before the day on which the capital lease is entered into; and

    • (c) for a capital lease with a term exceeding five years but not exceeding ten years, the five to ten year Government of Canada marketable bonds average yield as published by the Bank of Canada on the last Wednesday of the month before the day on which the capital lease is entered into. (taux de rendement des obligations du gouvernement du Canada)

    small business

    small business means a business carried on or about to be carried on in Canada for gain or profit with an estimated gross annual revenue

    • (a) in the case of a business being carried on, not exceeding $5 million for the fiscal year of the business during which a capital lease is approved by a lessor, or a loan is approved by a lender, in respect of the business; or

    • (b) in the case of a business about to be carried on, that is not expected, at the time a capital lease is approved by a lessor or a loan is approved by a lender in respect of the business, to exceed $5 million for its first fiscal year that is at least 52 weeks in duration.

    It does not include the business of farming or a business having as its principal object the furtherance of a charitable or religious purpose. (petite entreprise)

    total financing amount of a capital lease

    total financing amount of a capital lease means the aggregate of

    • (a) the financed cost of the equipment, and

    • (b) the registration fee referred to in subsection 14(1), if the fee has been financed and is set out in the registration form referred to in subsection 12(1). (montant total du financement du contrat de location-acquisition)

  • (2) For the purposes of these Regulations, the provisions of the Income Tax Act apply to the determination of whether a person is dealing at arm’s length with another person.

  • (3) For the purposes of these Regulations, a lessee is related to another lessee or borrower if

    • (a) either lessee or borrower directly or indirectly controls the other in any manner;

    • (b) both lessees or both the lessee and the borrower are directly or indirectly controlled in any manner by the same person or group of persons;

    • (c) the lessee carries on their small business in partnership with the other lessee or borrower who carries on another small business; or

    • (d) the lessee shares management services, administrative services, equipment, facilities or overhead expenses of the business with the other lessee or borrower, but is not in partnership with that lessee or borrower.

  • (4) For the purpose of subsection (3), control means the holding of shares of a corporation to which are attached more than 50% of the votes necessary to elect a majority of their directors.

  • (5) Despite subsection (3), a lessee is not related to another lessee or borrower for the purposes of these Regulations if their businesses are located at different premises and neither derives more than 25% of their actual or projected gross revenues from the other.

  • (6) For the purposes of these Regulations, a capital lease is considered to have been entered into on the day on which it is signed by the lessee and the lessor.

  • SOR/2002-446, s. 1

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