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Canadian Ownership and Control Determination Regulations, 1984 (SOR/84-431)

Regulations are current to 2024-05-01

PART IInterpretation and Application (continued)

Equity-Relatedness Defined

  •  (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

  •  (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

  •  (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

 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

 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

  •  (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.

 Notwithstanding paragraphs 12(1)(c), (d) and (e), a trust, a pension trust or pension corporation referred to in those paragraphs shall not be considered to have a Canadian ownership rate of 100% unless

  • (a) the plan is registered under the Income Tax Act;

  • (b) at least 80% of any trustees who are individuals are qualified to apply for a certificate under the Act;

  • (c) at least 90% of the active members are shown on the records maintained in respect of the plan as having addresses in Canada; and

  • (d) the administrators, trustees or insurers of the trust or corporation have no knowledge or reason to believe that less than 90% of the active members are persons who would qualify for a Canadian ownership rate of 100%.

Canadian Ownership Rate of Small Applicant

 The Canadian ownership rate of a small applicant is 75%.

Canadian Ownership Rate of Secondary Investors

  •  (1) Where a secondary investor would, in the application of the Investment Canada Act, be determined pursuant to subsection 26(1) of that Act to be a Canadian-controlled entity for the purposes of that Act, the secondary investor may elect to be treated as having a Canadian ownership rate of 100% in respect of an application if the aggregate of

    • (a) the direct and indirect equity percentages in respect of the applicant of the secondary investor, and

    • (b) the direct and indirect equity percentages, in respect of the applicant, of all secondary investors that are equity-related to the secondary investor and that make an election under this subsection

    does not exceed 10%.

  • (2) This section does not apply to any secondary investor

    • (a) that is also a primary investor in respect of the relevant applicant;

    • (b) that is equity-related to that applicant or to any primary investor; or

    • (c) to whom a certificate based on a Canadian ownership rate referred to in section 14 has been issued and is in effect.

  • SOR/85-847, s. 4

PART IIICanadian Ownership Rates other than Specified Rates and Rates of Insurance Companies and Trusts

Canadian Ownership Rate Determination

  •  (1) Subject to Parts II and V and section 50, the Canadian ownership rate of an entity shall be determined in accordance with this Part.

  • (2) Subject to subsection (5) and sections 28 and 29, the Canadian ownership rate of an entity having one class of formal equity shall be obtained by calculating the beneficial Canadian ownership of that class of formal equity determined in accordance with section 25, rounded to the nearest whole number.

  • (3) Subject to subsection (5) and sections 28 and 29, the Canadian ownership rate of an entity that has more than one class of formal equity shall be obtained by calculating

    • (a) the average of the beneficial Canadian ownerships of all classes of formal equity of the entity, each weighted by a factor determined in a manner acceptable to the Minister, rounded to the nearest whole number, or

    • (b) where factors by which each class of formal equity of the entity may be weighted cannot be determined in a manner acceptable to the Minister, the lower

      • (i) of the lowest of each of the averages of the beneficial Canadian ownerships of any classes of formal equity of the entity for which weighting factors can be determined in a manner acceptable to the Minister, each weighted by the applicable factor, and

      • (ii) the lowest of the beneficial Canadian ownerships of any classes of formal equity of the entity for which a weighting factor cannot be determined in a manner acceptable to the Minister,

      rounded to the nearest whole number.

  • (4) Where a factor by which the beneficial Canadian ownership of a class of formal equity of an entity may be weighted with that of each other class of formal equity cannot be determined in a manner acceptable to the Minister and the Minister considers it appropriate, all units of that class shall be excluded from formal equity for the purposes of subsection (3) and the definition formal equity in subsection 35(1) of the Act.

  • (5) Subject to sections 28 and 29 the Canadian ownership rate of a pension trust, pension corporation or trust governed by a deferred profit sharing plan shall be obtained by calculating

    • (a) with respect to a trust or pension corporation referred to in paragraph 12(1)(c), (d) or (e) that would have a Canadian ownership rate of 100% but for paragraph 13(b), (c) or (d), the proportion x/y, expressed as a percentage rounded to the nearest whole number, where

      • (i) x is the number of its active members who are persons with addresses in Canada, and

      • (ii) y is the total number of its active members; and

    • (b) with respect to a pension trust or pension corporation in respect of a fund referred to in paragraph 12(1)(e) that would qualify for a Canadian ownership rate of 100% but for the fact that it has less than twenty-five active members, the proportion x/y, expressed as a percentage rounded to the nearest whole number, where

      • (i) x is the total liabilities of the fund in respect of individuals qualified to apply for a certificate, and

      • (ii) y is the total liabilities of the fund in respect of all members.

  • SOR/85-847, s. 5
 

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