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

Regulations are current to 2024-05-01

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

Canadian Ownership Rate Determination (continued)

 Where two or more entities have reciprocal ownership of units of classes of formal equity that are included in a measured block, the beneficial Canadian ownership of such classes shall be determined by solving the system of simultaneous equations that define the beneficial Canadian ownership of each such class.

  • SOR/85-847, s. 6

Canadian Ownership Rate of Investor Issued with a Certificate

 Subject to section 29, and notwithstanding any other provision of these Regulations

  • (a) the Canadian ownership rate of an investor to whom a certificate, other than a certificate based on a Canadian ownership rate referred to in section 14 of these Regulations or in section 9 of the Canadian Ownership and Control Determination Regulations, has been issued shall, on any day of a period that begins on the day of issue of the certificate and terminates on the day the effective period of the certificate terminates, be the Canadian ownership rate determined by the Minister in respect of which that certificate was applied for less any percentage points added pursuant to subsection 28(1); and

  • (b) an investor to whom a certificate based on a Canadian ownership rate referred to in section 14 has been issued may elect that its Canadian ownership rate shall be deemed to be 75% on any day on which that certificate is in effect.

Units Owned by Investor Deemed Owned by Another Person

 Subject to section 20, a person who has a right under a contract to acquire a number of units of a class of formal equity that constitute a measured block or a number of units of a class of forward equity that, on conversion into formal equity, would constitute a measured block shall be deemed to be the owner of those units unless

  • (a) the Canadian ownership rate of that person is equal to or greater than the Canadian ownership rate of the actual owner,

  • (b) and (c) [Revoked, SOR/85-847, s. 7]

  • (d) the contract is an exchange-traded option contract,

  • (e) the contract provides that the units will be acquired at not less than fair market value as at the date of acquisition,

  • (f) the right under the contract is contingent on an event that could not reasonably be expected to occur,

  • (g) the right under the contract cannot be exercised until the death of the actual owner of the units, or

  • (h) the right under the contract is held solely for the purpose of safeguarding the interests of that person in respect of a loan made or debt purchased by that person.

  • SOR/85-847, s. 7
  •  (1) Where a person has an unconditional right under a contract of purchase and sale to units of a class of formal equity or of a class of forward equity, and the agreement of purchase and sale was entered into not more than two years prior to the day selected under paragraph 30(1)(c) in respect of the class, he shall be deemed for the purposes of these Regulations to be the owner of those units.

  • (2) Where two or more persons own a unit of a class of formal equity or of a class of forward equity the person having the lowest Canadian ownership rate shall be deemed to be the sole owner of the unit.

  • (3) Where two or more persons have a right to a unit of a class of formal equity or of a class of forward equity described in section 19 or subsection (1), the person having the lowest Canadian ownership rate shall be deemed to have the only such right thereto.

Constrained Shares

  •  (1) Subject to subsection (2), where any shares of a class of formal equity of a corporation that is an applicant or investor may be sold by the corporation without the consent of the owner of those shares and the corporation gives notice of the proposed sale before the day the application is filed in substantial compliance with the Act and these Regulations, the shares shall be deemed to be owned by a person having a Canadian ownership rate required of a purchaser by the constating documents of the corporation on the day selected by the corporation under paragraph 30(1)(c).

  • (2) Subsection (1) does not apply unless the applicant submits with its application an undertaking of the corporation referred to in that subsection

    • (a) to complete the sale within twelve months from the date of receipt of the application acknowledged by the Minister pursuant to subsection 39(1) of the Act; and

    • (b) to advise the Minister of the date of the completion of the sale.

  • (3) Where the ownership of any units of a class of formal equity of a corporation is restricted by the constating documents of the corporation to persons having a minimum specified Canadian ownership rate, all such units shall be deemed to be owned by a person having the Canadian ownership rate required of the owner by the constating documents of the corporation if the corporation provides the Minister with an undertaking acceptable to the Minister to enforce the restriction throughout the effective period of the relevant certificate.

Unissued Units Deemed Issued and Outstanding

  •  (1) For the purposes of this section,

    • (a) a reference to an “applicant” includes an investor that is equity-related to the applicant and any investor that has a direct equity percentage or indirect equity percentage in respect of the applicant of 10% or more and any other investor that elects to be subject to this section; and

    • (b) the number of units of a class of formal equity issuable in connection with a class of forward equity shall be the number issuable on the day selected under paragraph 30(1)(c) with respect to the class of formal equity or if no units of the class of formal equity are issued, the latest of the days selected for all classes of formal equity, or where no units are issuable on that day, on the day next following that day on which the units are issuable;

    • (c) [Revoked, SOR/85-847, s. 8]

  • (2) For the purposes of paragraph (7)(b) and subject to subsections (3), (4) and (6), the “market price” of a unit of a class of formal equity on any day is the simple average of the closing prices of units of that class for each day on which there was a closing price that falls not more than ten days, exclusive of Saturdays, Sundays and holidays, before that day.

  • (3) Where there is more than one published market for a unit and only one such published market is within Canada, the closing price of that unit shall be determined solely by reference to the published market in Canada.

  • (4) Where there is more than one published market for a unit and

    • (a) more than one such published market is in Canada, or

    • (b) no such published market is in Canada,

    the closing price of that unit shall be determined solely by reference to the published market within or outside Canada, as the case may be, on which the greatest volume of trading in the unit occurred during the ten days, exclusive of Saturdays, Sundays and holidays, before the day referred to in subsection (2).

  • (5) For the purposes of subsections (2), (3), (4) and (7), closing price on any day means, with respect to a class of formal equity in respect of which there is a published market,

    • (a) the price per unit at which the last trade in that class of formal equity was effected in the published market on that day, exclusive of

      • (i) odd lot transactions, and

      • (ii) block transactions and other transactions effected in a manner that is recognized by the rules of the published market and that differs from the conventional pricing process applicable to that market; or

    • (b) on a day in which no transactions other than transactions referred to in subparagraphs (a)(i) and (ii) occurred and as to which closing bid and ask prices were published, the average of such bid and ask prices.

  • (6) For the purposes of subsection (7), conversion price means the aggregate of

    • (a) the proportion x/y, where

      • (i) x is the lesser of

        • (A) the price paid by the first purchaser from the entity, or a person acting as an underwriter for the entity, for the unit of a class of forward equity, and

        • (B) nil, if the unit of a class of forward equity would have a value of nil on the day selected under paragraph 30(1)(c) if the right to acquire the units of a class of formal equity conferred by the unit of a class of forward equity had expired immediately prior to that day, and

      • (ii) y is the number of units issuable pursuant to the exercise of the right conferred by the unit of a class of forward equity on the day selected under paragraph 30(1)(c) or, if no units are so issuable on that day, on the day next following that day on which they are so issuable; and

    • (b) any consideration payable to the entity in connection with the issue of a unit of a class of formal equity upon exercise of such right.

  • (7) Where units are issuable that, if issued would form part of a publicly traded class of formal equity of an applicant, are issuable pursuant to the exercise of a right conferred by a unit of a class of forward equity that is not a bearer unit and

    • (a) the unit of a class of forward equity was issued not more than five years prior to the day selected under paragraph 30(1)(c) with respect to the class of formal equity or if no units of the class of formal equity are issued, the latest of the days selected for all classes of formal equity in respect of the class of formal equity and the conversion price does not exceed

      • (i) the closing price, where the unit was issued pursuant to a final prospectus or other similar public offering document, on the date of that prospectus or offering document, or

      • (ii) in any other case, the closing price immediately prior to the time at which the last of the attributes of a unit of the class of forward equity was finally determined,

      by more than 30%, or

    • (b) the market price of a unit of the class of formal equity, on any day selected by the applicant that is not more than 30 days prior to the day selected by the applicant under paragraph 30(1)(c) with respect to the class of formal equity, exceeds the conversion price,

    the units of the publicly traded class of formal equity shall be deemed

    • (c) to be issued and outstanding and to have a recorded owner that is the owner of record of the unit of a class of forward equity,

    • (d) to be owned by the owner of the unit of a class of forward equity,

    • (e) to form a separate class of formal equity, and

    • (f) to form a publicly traded class of formal equity if the class of forward equity is a publicly traded class of forward equity.

  • (8) Subject to subsections (9) through (12), where units of a class of formal equity of an applicant are issuable pursuant to the exercise of a right conferred by a unit of a class of forward equity, other than a unit referred to in subsection (7), the units of the class of formal equity shall be deemed

    • (a) to be issued and outstanding and to have a recorded owner that is the owner of record of the unit of the class of forward equity;

    • (b) to be owned by the owner of the unit of the class of forward equity;

    • (c) to form a separate class of formal equity; and

    • (d) to form a publicly traded class of formal equity if the class of forward equity is a publicly traded class of forward equity.

  • (9) Subsection (8) does not apply where units, if issued, would form part of a publicly traded class of formal equity and the applicant demonstrates to the Minister that it has no knowledge or reason to believe that if all the units issuable pursuant to the exercise of the rights conferred by all the units of the class of forward equity were issued and outstanding and formed a separate class of formal equity, the beneficial Canadian ownership of that class would be less than the Canadian ownership rate of the applicant determined as if the class of forward equity did not exist.

  • (10) Subject to subsection (11), subsection (8) does not apply where the applicant has knowledge that if all the units issuable pursuant to the exercise of the rights conferred by all the units of the class of forward equity were issued and outstanding and formed a separate class of formal equity, the beneficial Canadian ownership of that class would be greater than the Canadian ownership rate of the applicant determined as if the class of forward equity did not exist.

  • (11) Where an applicant demonstrates to the Minister that the applicant has knowledge or reason to believe that a unit of a class of forward equity of the applicant

    • (a) will not be converted to a unit of a class of formal equity at any time prior to the expiration of the right conferred by the unit of the class of forward equity, subsection (8) does not apply to the unit of the class of forward equity; or

    • (b) will be converted to a unit of a class of formal equity at any time prior to the expiration of the right conferred by the unit of the class of forward equity, subsection (10) does not apply to the unit of the class of forward equity.

  • (12) Subject to subsection (13), where units of a publicly traded class of formal equity of an applicant are issuable pursuant to the exercise of a right conferred by a unit of a class of forward equity that is a bearer unit and all units of that class of forward equity were offered for sale at the time of issue by the entity or its underwriters only outside Canada, the units of the class of formal equity shall be deemed

    • (a) to be issued and outstanding and owned by a person having a Canadian ownership rate of nil; and

    • (b) to form a separate class of formal equity.

  • (13) Subsection (12) does not apply to a unit of a class of forward equity of the applicant where the applicant demonstrates to the Minister that the unit does not meet the conditions described in paragraph (7)(a) nor the condition described in paragraph (7)(b) and that the applicant has knowledge or reason to believe that the unit will not be converted to a unit of a class of formal equity at any time prior to the expiration of the right conferred by the unit.

  • (14) Where an applicant has no knowledge or reason to believe that the beneficial Canadian ownership of units of a class of forward equity of the applicant that are issuable would be less than the applicant’s Canadian ownership rate, calculated without regard to those units, and the applicant elects that the class of forward equity be exempt from the application of this section, the class of forward equity is exempt from the application of this section.

  • (15) Where units of a class of forward equity were either issued and outstanding or to be issued and outstanding pursuant to a public announcement on or prior to July 15, 1983, the applicant may elect that

    • (a) subsections (1) to (13) shall apply only in respect of those units of a class of formal equity that would have been deemed issued and outstanding as a result of the application of subsection 17(5) or (7), as the case may be, of the Canadian Ownership and Control Determination Regulations as a result of the application of those Regulations; and

    • (b) the Canadian ownership rate of the owner of the units shall be deemed to be the Canadian ownership rate that would be considered for the purposes of subsection 17(5) and (7) of the Canadian Ownership and Control Determination Regulations to be the Canadian ownership rate of a person deemed to own those units.

  • (16) Where a class of forward equity of an applicant has been issued by the applicant and

    • (a) the exercise of the right conferred by a unit of the class of forward equity is subject to a restriction to the effect that the right is not exercisable if the exercise thereof would reduce the Canadian ownership rate of the applicant below a specified limit that is acceptable to the Minister, or

    • (b) the right conferred by a unit of the class of forward equity cannot be exercised unless, at the time of the exercise of the right, the owner thereof has a specified Canadian ownership rate that is acceptable to the Minister,

    the applicant may elect to be exempt from the application of subsections (2) to (13) in respect of the class of forward equity and, on the making of that election, the applicant is exempt from the application of those subsections in respect of the class of forward equity.

  • (17) Units of a class of formal equity deemed issued and outstanding under this section shall cease to be so deemed on the day that is the earliest of

    • (a) the day next following the day on which the right conferred by the unit of the class of forward equity expires;

    • (b) the day next following any day on which the number of units issuable pursuant to the exercise of the right conferred by the unit of the class of forward equity is reduced.

  • (18) Units of a class of formal equity deemed issued and outstanding pursuant to paragraph 22(7)(a) shall cease to be so deemed on the day that is five years from the day next following the day of issue of the unit of the class of formal equity.

  • (19) For purposes of this section, a unit of a class of forward equity that was issued pursuant to a right conferred by another unit of a class of forward equity shall be deemed to have been issued on the day of issue of that other unit of a class of forward equity.

  • SOR/85-847, s. 8
  •  (1) Subject to subsection (2) where a person has a right to the issue of a unit of a class of formal equity or a unit of a class of forward equity under an agreement described in subparagraph 66.1(6)(a)(v), 66.2(5)(a)(v) or 66.4(5)(a)(iii) of the Income Tax Act and the unit can reasonably be expected to be issued within 24 months from the day the application for a certificate is filed in substantial compliance with the Act and these Regulations

    • (a) if the unit would, on issue, be a unit of a class of formal equity, the unit shall be deemed

      • (i) to be issued and outstanding,

      • (ii) to be owned by the owner of the right to the issue of the unit on the day selected under paragraph 30(1)(c), and

      • (iii) to form part of a separate class of formal equity, or

    • (b) if the unit would, on issue, be a unit of a class of forward equity, the unit shall be deemed

      • (i) to be issued and outstanding as of the date the agreement was entered into, and

      • (ii) to be owned by the owner of the right to the issue of the unit on the day selected under paragraph 30(1)(c)

      for the lesser of

    • (c) a period ending 24 months from the day that the application is filed in substantial compliance with the Act and these Regulations, and

    • (d) a period ending on the day on which the right to the issue of the unit terminates

    for the purposes of any Canadian ownership rate determined during that period.

  • (2) Subsection (1) applies in respect of one period only for a right described in that subsection.

 

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