Canadian Ownership and Control Determination Regulations, 1984 (SOR/84-431)
Full Document:
Regulations are current to 2024-10-30
PART IInterpretation and Application (continued)
Classes of Formal Equity and Classes of Forward Equity
5 (1) For the purposes of these Regulations,
(a) a class of formal equity of a partnership or trust, subject to subsections (2) and (3), comprises all substantially similar units; and
(b) a class of formal equity of a corporation comprises all shares that are part of the same class of the corporation or, if the class consists of more than one series, of the same series.
(2) For the purposes of these Regulations, an applicant or investor may elect that additional units of a class of formal equity issued on or after any day selected by that applicant or investor in respect of that class under paragraph 30(1)(c) shall constitute a separate class of formal equity.
(3) For the purposes of these Regulations,
(a) all rights expressed as a fixed percentage of income or revenue that in the aggregate represent 100% of that income or revenue at a particular time,
(b) all rights expressed as a fixed percentage of capital that in the aggregate represent 100% of that capital at a particular time, or
(c) all rights expressed as a fixed percentage of income and capital or revenue and capital that in the aggregate represent 100% of that income and capital or revenue and capital at a particular time
in respect of all or a specified portion of the property of a partnership constitute a class of formal equity that shall be deemed to compromise 100 units owned by the owners of interests in the class of formal equity in the proportions that their interests represent of that class of formal equity.
(4) For the purposes of these Regulations, a class of forward equity comprises all units the attributes of which are identical and that were issued on the same day and at the same price if any.
Exclusions from Formal Equity
6 (1) There shall, for the purpose of determining the Canadian ownership rate of any person or class of persons, be excluded from the formal equity of a corporation,
(a) during a 60 day period from the day on which the underwriting agreement was signed, any share of a publicly traded class of formal equity that a dealer, acting as an underwriter pursuant to an underwriting agreement, owns;
(b) any unit that was a bearer unit on February 9, 1982; and
(c) any unit that has a fixed or determinable yield not exceeding a reasonable yield in relation to the market yield of a comparable unit on the date of issue of the unit.
(2) For the purposes of paragraph (1)(c), the calculation of the yield shall take into consideration any incentive that the person or class of persons referred to in that subsection would, based on a Canadian ownership rate determined as if the unit and all other units of the same class of formal equity were included in formal equity, be qualified to receive pursuant to the Petroleum Incentives Program Act in respect of the consideration paid on the issue of the units.
(3) Where, in respect of units of a class of formal equity of an entity, the entity would have a total equity percentage of 100% calculated as if those units constituted all the formal equity of the entity, those units shall be excluded from formal equity for the purpose of determining the Canadian ownership rate of that entity.
Equity-Relatedness Defined
7 (1) For the purposes of these Regulations, equity-related persons or persons equity-related to each other means
(a) individuals connected by blood relationship, marriage or adoption;
(b) an entity and
(i) a person who has a direct equity percentage in the entity of more than 50%,
(ii) a person who is a member of an equity-related group the members of which have an aggregate direct equity percentage in the entity of more than 50%, or
(iii) any person equity-related to a person described in subparagraph (i) or (ii); or
(c) any two entities
(i) if one person has a direct equity percentage in each entity of more than 50% or the members of one equity-related group of persons have an aggregate direct equity percentage in the entity of more than 50%,
(ii) if one person has a direct equity percentage in one of the entities of more than 50% and that person is equity-related to a person who has a direct equity percentage in the other entity of more than 50%,
(iii) if one person has a direct equity percentage in one of the entities of more than 50% and that person is equity-related to any member of an equity-related group the members of which have an aggregate direct equity percentage in the other entity of more than 50%,
(iv) if one person has a direct equity percentage in one entity of more than 50% and that person is equity-related to each member of an unrelated group the members of which have an aggregate direct equity percentage in the other entity of more than 50%,
(v) if any member of an equity-related group the members of which have an aggregate direct equity percentage in one of the entities of more than 50% is equity-related to each member of an unrelated group the members of which have an aggregate direct equity percentage in the other entity of more than 50%,
(vi) if each member of an unrelated group the members of which have an aggregate direct equity percentage in one of the entities of more than 50% is equity-related to at least one member of an unrelated group the members of which have an aggregate direct equity percentage in the other entity of more than 50%, or
(vii) if any member of an equity-related group the members of which have an aggregate direct equity percentage in one of the entities of more than 50% is equity-related to each member of an equity-related group the members of which have an aggregate direct equity percentage in the other entity of more than 50%.
(2) Where two entities are equity-related to the same entity, the entities are, for the purposes of these Regulations, equity-related to each other.
(3) For the purposes of these Regulations,
(a) equity-related group means a group of persons each member of which is equity-related to every other member of the group;
(b) unrelated group means a group of persons that is not an equity-related group; and
(c) where a person has a direct equity percentage in two or more entities, that person is, as a person having a direct equity percentage in one of the entities, equity-related to himself as a person having a direct equity percentage in each of the other entities.
(4) For the purposes of these Regulations,
(a) persons are connected by blood relationship if one is the child or other descendant of the other or if one is the brother or sister of the other;
(b) persons are connected by marriage if one is married to the other or to a person who is connected by blood relationship to the other; and
(c) persons are connected by adoption if one has been adopted, either legally or in fact, as the child of the other or as the child of a person who is connected by blood relationship, otherwise than as a brother or sister, to the other.
Direct Equity Percentage Defined
8 (1) For the purposes of paragraph (b) of the definition direct equity percentage in subsection 35(1) of the Act, direct equity percentage means
(a) where factors by which all classes of formal equity of the particular person referred to in that paragraph may be weighted are determined in a manner acceptable to the Minister, the sum of the products obtained when the number of units in each class of formal equity of the particular person referred to in that paragraph that is owned by the person referred to in that paragraph are multiplied by the corresponding weighting factor referred to in subsection (2), expressed as a percentage of the sum of the products obtained when the total number of units in each class of formal equity of the particular person is multiplied by the corresponding weighting factor referred to in subsection (2); and
(b) where factors by which all classes of formal equity of the particular person referred to in that paragraph may be weighted cannot be determined in a manner acceptable to the Minister, the greater of
(i) the greatest of the results obtained when the sums of the products obtained by multiplying the number of units owned by the person referred to in that paragraph in the classes of formal equity of the particular person for which relative weighting factors can be determined in a manner acceptable to the Minister by the corresponding weighting factors referred to in subsection (2) are each expressed as a percentage of the sum of the products obtained when the total numbers of units in those classes are multiplied by the corresponding weighting factors referred to in subsection (2), and
(ii) the greatest of the results obtained when the number of units in each class of formal equity of the particular person that is owned by the person for which a weighting factor cannot be determined in a manner acceptable to the Minister is expressed as a percentage of the number of units in that class.
(2) For the purposes of subsection (1)
(a) where factors by which all classes of formal equity of the particular person referred to in that subsection may be weighted are determined in a manner acceptable to the Minister, the weighting factor for a class of formal equity shall be the weighting factor that would be determined for that class under paragraph 16(3)(a) if each class of formal equity were to consist of the same number of units; and
(b) where factors by which all classes of formal equity of the particular person referred to in that subsection may be weighted cannot be determined in a manner acceptable to the Minister, the weighting factor for a class of formal equity shall be the weighting fact that would be determined for that class under subparagraph 16(3)(b)(i) if each relevant class of formal equity were to consist of the same number of units.
Determination of Total Assets of Small Applicant
9 (1) For the purpose of paragraph (a) of the definition small applicant in subsection 2(1), the total assets of an entity are, subject to subsection (4), the greatest of
(a) the assets of the entity that would be shown on its balance sheet,
(b) the assets that would be shown on any consolidated balance sheet of the entity, and
(c) where the entity’s assets would be included in the consolidated balance sheet of any other entity, the assets that would be shown on the consolidated balance sheet of that other entity,
as at the end of the most recently completed fiscal period of the relevant entity, if the balance sheet or consolidated balance sheet, as the case may be, were prepared in accordance with the applicable standards of the Canadian Institute of Chartered Accountants as set out in the Canadian Institute of Chartered Accountant’s Handbook or, where such standards are not so set out, in accordance with generally accepted accounting principles.
(2) For the purposes of subsection (1), where the most recently completed fiscal period of an entity ended not earlier than 180 days prior to the day on which an application is filed by the entity in substantial compliance with the Act and these Regulations and no balance sheet is available for that fiscal period, the immediately preceding completed fiscal period of the entity is its most recently completed fiscal period.
(3) An entity that does not have a completed fiscal period may, for the purposes of subsection (1), elect that a period commencing on the day it commenced doing business and ending on any day not earlier than 180 days prior to the date on which an application is filed by the entity in substantial compliance with the Act and these Regulations shall be its most recently completed fiscal period.
(4) Where, in the opinion of the Minister, the total assets shown on the balance sheet or consolidated balance sheet of an entity do not fairly represent the total assets of that entity, the Minister may, for the purposes of these Regulations, adjust those assets in the manner he considers appropriate.
(5) [Revoked, SOR/85-847, s. 3]
- SOR/85-847, s. 3
Trust Property
10 A unit of formal equity of an entity that is held in trust by a trustee shall, for the purposes of determining the Canadian ownership rate of any person or class of persons, be deemed to be owned by the trust and any beneficial interest of a person in that unit shall be deemed to be formal equity of the trust owned by the person.
Prescription of Persons Qualified to Apply for a Certificate
11 A corporation incorporated outside Canada is qualified to apply for a certificate if
(a) all of its formal equity is owned by a corporation incorporated in Canada;
(b) it was incorporated prior to October 29, 1980; and
(c) its activities have been conducted primarily in Canada at all times after October 28, 1980.
PART IISpecified Canadian Ownership Rates
Canadian Ownership Rate of Applicants or Investors
12 (1) For the purposes of these Regulations Her Majesty in right of Canada or a province and the following, whether as applicants or investors, are considered to have a Canadian ownership rate of 100%:
(a) an individual who is qualified to apply for a certificate under the Act;
(b) a trust governed by a registered retirement savings plan or a registered retirement income fund within the meaning of the Income Tax Act if the beneficiary of the trust is an individual qualified to apply for a certificate;
(c) a trust governed by a deferred profit sharing plan within the meaning of the Income Tax Act;
(d) a pension trust or pension corporation in respect of a fund governed by a defined contribution pension plan;
(e) a pension trust or pension corporation in respect of a fund governed by a defined benefit pension plan or a combined defined benefit defined contribution pension plan and having at least twenty-five active members;
(f) a trust that is a public entity if
(i) any trustee of the trust that is a corporation is licensed or otherwise authorized under the laws of Canada or a province to carry on the business of offering to the public its services as trustee,
(ii) not less than 80% of all trustees of the trust who are individuals are qualified to apply for a certificate, and
(iii) the trustees or administrators of the trust have no knowledge or reason to believe that less than 90% of the aggregate value of all units in the trust is held for the benefit of persons who would qualify for a Canadian ownership rate of 100%;
(g) a cooperative corporation organized under the laws of Canada or a province, if
(i) at least 90% of the members and 90% of the shareholders, if any, of the corporation are shown on the records of the corporation as having addresses in Canada,
(ii) at least 90% of the shares, if any, of the corporation are shown on the records of the corporation as being registered in the names of persons having addresses in Canada, and
(iii) the corporation has no knowledge or reason to believe that less than 90% of the members and 90% of the shareholders, if any, of the corporation are persons who would qualify for a Canadian ownership rate of 100%, or that less than 90% of the shares are owned by persons who would qualify for a Canadian ownership rate of 100%; and
(h) an entity that is a registered charity under the Income Tax Act.
(2) An individual who is not qualified to apply for a certificate under the Act shall be considered to have a Canadian ownership rate of nil.
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