chapter S-29.1

An Act respecting Québec business investment companies

DIVISION I 
GENERAL PROVISIONS
2002, c. 40, s. 333.

Application.

1. This Act applies to every Québec business investment company which is a private legal person incorporated after 23 April 1985 under Part IA of the Companies Act (chapter C-38) and registered as such with the body designated by the Government. It also applies to any investment company constituted under the Business Corporations Act (chapter S-31.1) and registered as such with that body.

Private corporation.

For the purposes of this Act, a company shall be a private corporation, within the meaning of section 1 of the Taxation Act (chapter I-3), or a legal person that would be a private corporation, within the meaning of that Act, were it not designated by the Minister of National Revenue in accordance with subparagraph ii of paragraph b of the definition of “public corporation” in subsection 1 of section 89 of the Income Tax Act (R.S.C. 1985, c. 1 (5th Suppl.)). However, a company may be controlled directly or indirectly by one or more venture capital legal persons which are public corporations within the meaning of section 1 of the Taxation Act.

1985, c. 9, s. 1; 1989, c. 72, s. 1; 1998, c. 17, s. 64; 1999, c. 40, s. 305; 2002, c. 40, s. 334; 2009, c. 52, s. 709; 2010, c. 37, s. 121.

Articles.

2. The articles of a company shall state that its activities consist primarily in acquiring and holding shares of the share capital of other legal persons as the actual owner thereof and that its share capital is made up of a single class of common shares with full voting rights issued in a single series.

1985, c. 9, s. 2; 1987, c. 106, s. 1; 1988, c. 80, s. 1; 1989, c. 72, s. 2; 1997, c. 14, s. 325; 1999, c. 40, s. 305.

Shareholder.

3. Every shareholder of a company shall be a person and be the actual owner of the shares held.

1985, c. 9, s. 3; 1988, c. 80, s. 2; 1999, c. 40, s. 305; 1999, c. 83, s. 295; 2000, c. 39, s. 276.

Transfer of shares to trustee.

3.1. Notwithstanding section 3, a common share with full voting rights of the share capital of a company may be transferred to or acquired by a trustee as part of a registered retirement savings plan or a registered retirement income fund, of a type commonly called self-directed, to the extent that the trust holds the share for the benefit of an annuitant within the meaning of paragraph b of section 905.1 or paragraph d of section 961.1.5, as the case may be, of the Taxation Act (chapter I-3).

Annuitant.

For the purposes of this Act and the regulations thereunder, the annuitant, under such a plan or fund, is also deemed to be the person holding the share as the actual owner.

1991, c. 17, s. 1.

Documents and information.

3.2. A company and a qualified legal person shall, upon the written request of the body designated under section 1 and within the time fixed in the request, furnish to the body any document and any information, in particular financial information, the latter may require for the purposes of this Act and the regulations.

2002, c. 40, s. 335; 2010, c. 37, s. 122.

DIVISION II 
REGISTRATION

Registration of company.

4. The body designated under section 1 shall register a company where, in its opinion, the company fulfills the requirements prescribed by this Act and the regulations thereunder.

Production of documents.

For that purpose, the body may require the production of any document it considers likely to enlighten it as to the advisability of registering a company.

1985, c. 9, s. 4; 1988, c. 80, s. 3; 1989, c. 72, s. 3; 1991, c. 17, s. 2; 1998, c. 17, s. 64; 2010, c. 37, s. 123.

Employee owned company.

4.0.1. A company that was registered as an employee owned company before 1 April 1998 by Investissement Québec and whose registration was not revoked on that date is deemed, in respect of investments made by the company after 31 March 1998, to have been registered on 1 April 1998 under section 4.

1999, c. 83, s. 296; 2001, c. 51, s. 253.

4.1. (Repealed).

1986, c. 113, s. 1; 1989, c. 72, s. 4; 1998, c. 17, s. 64; 1999, c. 83, s. 297.

4.2. (Repealed).

1988, c. 80, s. 4; 1989, c. 72, s. 5.

4.3. (Repealed).

1988, c. 80, s. 4; 1989, c. 72, s. 5.

Common share with full voting rights.

5. For the purposes of this Act, a common share with full voting rights is a common share within the meaning of section 1 of the Taxation Act (chapter I-3) to which are attached a number of voting rights in the issuing legal person, in all circumstances and regardless of the number of shares held, which is not less than the number attached to any other share of the share capital of the legal person.

Shares deemed to be shares with full voting rights.

Notwithstanding the first paragraph and unless the body designated under section 1 decides otherwise, where shares of a particular class or of a particular series of a particular class of the share capital of a company are, on 30 April 1987 or at the time of registration in the case of a company registered after that date, the only common shares with full voting rights of the share capital of the company and where, by reason of a change in the share capital of the company,

 (1) a new series of the particular class is created or a new class is created and the shares of that series or of that class would be, but for this paragraph, common shares with full voting rights, or

 (2) any share of the particular class or of the particular series would no longer be, but for this paragraph, a common share with full voting rights,

Rules applicable.

the following rules apply:

 (1) any share of the particular class or of the particular series is deemed to be a common share with full voting rights;

 (2) every other share of the share capital of the company is deemed not to be a common share with full voting rights.

Determination of classes or series of shares.

Notwithstanding the first paragraph, the body may determine the class or series of shares of the share capital of a company whose shares are common shares with full voting rights where, on 30 April 1987 or at the time of registration in the case of a company registered after that date, the shares of several classes or of several series of a class of the share capital of the company would be, but for this paragraph, common shares with full voting rights.

1985, c. 9, s. 5; 1986, c. 15, s. 227; 1986, c. 113, s. 2; 1987, c. 106, s. 2; 1998, c. 17, s. 64; 1999, c. 40, s. 305; 2010, c. 37, s. 124.

Applications.

6. The body designated under section 1 may prescribe the form and content of

 (1) an application for the registration of a company;

 (2) an application for the validation of an investment in a qualified legal person.

1985, c. 9, s. 6; 1987, c. 106, s. 3; 1998, c. 17, s. 64; 1999, c. 40, s. 305; 2010, c. 37, s. 125.

Revocation of registration.

7. The body designated under section 1 may revoke the registration of a company if it is proved that the company

 (1) has furnished false information or documents;

 (2) is failing or neglecting to fulfill its obligations under this Act and the regulations thereunder;

 (3) has filed an application for that purpose.

Notice.

The notice of revocation of the registration of a company shall indicate the date of the revocation and shall be sent to the head office of the company by registered or certified mail.

1985, c. 9, s. 7; 1988, c. 80, s. 5; 1998, c. 17, s. 64; 2010, c. 37, s. 126.

Revocation of registration.

8. Registration of a company is revoked of right upon the occurrence of any of the following events:

 (1) upon the company's dissolution;

 (2) upon adoption or approval, by the shareholders of the company, of a resolution to wind it up;

 (3) upon the company's being placed under a winding-up order for a reason other than bankruptcy or insolvency;

 (4) upon the company's being placed under a receiving order pursuant to the Bankruptcy and Insolvency Act (Revised Statutes of Canada, 1985, chapter B-3) or having made an assignment of its property within the meaning of the said Act;

 (5) upon reduction to less than $50,000 of the paid-up capital of the common shares with full voting rights, held by natural persons, of a company having made and holding a qualified investment;

 (6) upon the adoption or approval by the company's shareholders of a resolution ordering the amalgamation of the company.

1985, c. 9, s. 8; 1986, c. 113, s. 3; 1988, c. 80, s. 6; 1989, c. 72, s. 6; 1991, c. 17, s. 3; 1992, c. 45, s. 1; 2000, c. 39, s. 277.

Transmission to Minister of Revenue.

9. The body designated under section 1 shall send to the Minister of Revenue the information he deems necessary when the body registers a company or a registration is revoked.

1985, c. 9, s. 9; 1986, c. 113, s. 4; 1998, c. 17, s. 64; 2010, c. 37, s. 127.

Register.

10. The body designated under section 1 shall keep a register containing the following information:

 (1) the names of the companies;

 (2) their dates of constitution;

 (3) their dates of registration;

 (4) the addresses of their head offices.

1985, c. 9, s. 10; 1998, c. 17, s. 64; 1999, c. 40, s. 305; 2010, c. 37, s. 128.

10.1. (Repealed).

1988, c. 80, s. 7; 1998, c. 17, s. 64; 1999, c. 40, s. 305; 2002, c. 40, s. 336.

DIVISION III 
QUALIFIED INVESTMENT

Qualified investment.

11. A company shall make a qualified investment contemplated in section 12 to enable its shareholders to avail themselves of the tax benefits provided in the Taxation Act (chapter I-3) in respect of a company.

Amount.

The amount of a qualified investment shall be established by regulation of the Government.

1985, c. 9, s. 11; 1989, c. 72, s. 7; 1999, c. 83, s. 298.

Qualified investment.

12. An investment validated by the body designated under section 1 which is made before 13 June 2003 by a company whose paid-up capital in respect of its issued and outstanding common shares with full voting rights, held by natural persons, is not less than $50,000, and which is a common share with full voting rights of the share capital of a qualified legal person that is acquired by a company as first purchaser, is a qualified investment.

Restriction.

Notwithstanding the first paragraph, an investment in a qualified legal person is not a qualified investment if the shareholder directly or indirectly controlling the qualified legal person that, but for this paragraph, would benefit by a qualified investment or a person with whom the shareholder is not dealing at arm's length, is the shareholder of a company that, within the two years preceding the investment, made a qualified investment in a qualified legal person any of whose shareholders directly or indirectly controlling it or any person with whom the shareholder is not dealing at arm's length is also a shareholder of the company that, but for this paragraph, would have made a qualified investment.

Conditions.

To be qualified, the legal person shall, at the time of acquisition, meet the following conditions:

 (1) be a Canadian-controlled private corporation within the meaning of section 1 of the Taxation Act (chapter I-3);

 (2) have assets of less than $50,000,000;

 (3) have its head office in Québec;

 (4) have paid, in the last 12 months preceding the date of acquisition, or in the months preceding that date in the case of a legal person that has been in operation for less than 12 months, and in the 12 months following the acquisition, more than 50% of the salaries paid to its employees and, as the case may be, to employees of the legal persons with which it is associated, to employees who, for the purposes of the regulations made under section 771 of the Taxation Act, are employees of an establishment situated in Québec;

 (5) operate mainly in one of the sectors of activity determined by regulation of the Government;

 (6) deal at arm's length with the company, within the meaning of the regulations, on that date and in the following 24 months, except with the prior authorization of the body designated under section 1 where it is not dealing at arm's length with the company following a transaction that is subsequent to the date on which a qualified investment is made and that may prevent the bankruptcy of the legal person.

1985, c. 9, s. 12; 1986, c. 15, s. 228; 1986, c. 113, s. 5; 1988, c. 80, s. 8; 1989, c. 72, s. 8; 1991, c. 17, s. 4; 1997, c. 14, s. 326; 1998, c. 17, s. 64; 1999, c. 40, s. 305; 1999, c. 83, s. 299; 2000, c. 39, s. 278; 2001, c. 51, s. 254; 2002, c. 40, s. 337; 2006, c. 13, s. 236; 2010, c. 37, s. 129.

Fledgling legal person.

12.1. For the purposes of section 12, where, in the opinion of the body designated under section 1, the investment is made in a fledgling legal person, the condition provided

 (1) in subparagraph 4 of the third paragraph of the said section must be met by the legal person only during the 12 months following the acquisition of a qualified investment;

 (2) in subparagraph 5 of the third paragraph of the said section must be met within four months after the date of acquisition of the qualified investment.

1987, c. 106, s. 4; 1988, c. 80, s. 9; 1989, c. 72, s. 9; 1998, c. 17, s. 64; 1999, c. 40, s. 305; 1999, c. 83, s. 300; 2000, c. 39, s. 279; 2001, c. 51, s. 255; 2010, c. 37, s. 130.

12.2. (Repealed).

1989, c. 72, s. 10; 1992, c. 45, s. 2; 1999, c. 83, s. 301.

12.3. (Repealed).

1989, c. 72, s. 10; 1999, c. 40, s. 305; 1999, c. 83, s. 301.

Maximum investments.

13. No qualified legal person may be the beneficiary of an aggregate of qualified investments in excess of $10,000,000 for the total qualified investments made in the qualified legal person and in all the legal persons with which it is associated. However, for the purpose of computing that amount, any excess amount is deemed not to be a qualified investment and qualified investments held for at least 24 months in the qualified legal person and in the legal persons with which it is associated shall not be taken into account.

1985, c. 9, s. 13; 1989, c. 72, s. 11; 1995, c. 63, s. 296; 1999, c. 40, s. 305; 2001, c. 51, s. 256.

Validation refused.

13.1. The body designated under section 1 may refuse to validate any investment which, though consistent with the literal meaning of this Act and the regulations, does not, in the opinion of the body, meet the objectives pursued by this Act and the regulations.

Validation refused.

Without restricting the scope of the first paragraph, the body may, in particular, refuse to validate an investment:

 (1) if in the opinion of the body,

(a)  the price paid by a company for the shares of the capital stock of a qualified legal person is considerably higher than the value of a common share issued before or after the investment by the qualified legal person, taking into account for this purpose the net assets of the shareholders of the qualified legal person,

(b)  the sharing of risk, between the company and the main shareholders of a qualified legal person of which the company intends to acquire shares, is not equitable, in particular when the rate of dilution of the shares of the qualified legal person acquired by the company is not reasonable in the circumstances, or

(c)  the viability prospects of the qualified legal person are too limited; or

 (2) where an option to sell or any other form of guarantee of return is granted by anyone, on the date of the investment, to a shareholder of the company.

1988, c. 80, s. 10; 1989, c. 72, s. 12; 1997, c. 85, s. 417; 1998, c. 17, s. 64; 1999, c. 40, s. 305; 2002, c. 40, s. 338; 2010, c. 37, s. 131.

13.2. If it is of the opinion that an investment meets the objectives pursued by this Act, the body designated under section 1 may

 (1) validate it as a qualified investment even if it was made before the registration of the company if, considering the circumstances, the time within which the company was subsequently registered appears to be reasonable;

 (2) extend, in the case of a fledgling legal person, for the period it considers necessary according to the circumstances, the time limit fixed in paragraph 2 of section 12.1 to meet the requirement set out in subparagraph 5 of the third paragraph of section 12;

 (3) if an application therefor is filed with it before the date of the investment, admit a percentage lower than the percentage fixed in subparagraph 4 of the third paragraph of section 12, for the last 12 months preceding the date the investment is made or for any period prior to such date in the case of a legal person which has been in operation for less than 12 months.

1988, c. 80, s. 10; 1989, c. 72, s. 13; 1998, c. 17, s. 64; 1999, c. 40, s. 305; 1999, c. 83, s. 302; 2010, c. 37, s. 132.

Authorization.

13.3. In all cases where its prior authorization is required for a transaction, operation or event, the body designated under section 1 may authorize such a transaction, operation or event if it is proved that, notwithstanding the absence of its prior authorization, the fact of authorizing the transaction, operation or event does not contravene the objectives pursued by this Act and the regulations.

1989, c. 72, s. 14; 1998, c. 17, s. 64; 2010, c. 37, s. 133.

Transmission of information.

14. A company shall, within 30 days of any change, send in writing, to the body designated under section 1, the information relating to its shareholders, its share capital and its qualified investments.

1985, c. 9, s. 14; 1998, c. 17, s. 64; 2010, c. 37, s. 134.

Statement to shareholders.

15. The body designated under section 1 shall issue a statement to each shareholder of a company, attesting to the amount of his adjusted interest in a qualified investment or to the qualified portion of his adjusted interest in a qualified investment in a legal person operating in a business in the scientific research and experimental development sector, as determined by regulation.

Adjusted interest.

For the purposes of this Act, an adjusted interest in a qualified investment is the adjusted interest in a qualified investment as determined under section 965.31.1 of the Taxation Act (chapter I-3), and the qualified portion of the adjusted interest in a qualified investment is determined under section 965.33.1 of the Taxation Act.

1985, c. 9, s. 15; 1986, c. 113, s. 6; 1991, c. 17, s. 5; 1998, c. 17, s. 64; 1999, c. 40, s. 305; 2010, c. 37, s. 135.

Participation in qualified investment.

15.0.1. Where new common shares with full voting rights of a company are subscribed and paid and the company uses its funds to make a qualified investment, the company may allocate to the shareholders of its choice an amount as participation in a qualified investment not exceeding the amount of such investment, and also an amount as additional participation in a qualified investment, without, however, exceeding the financial commitment of each shareholder within the meaning of paragraph b.1 of section 965.29 of the Taxation Act (chapter I-3).

Approval.

To be valid, the allocation must be approved by the body designated under section 1.

1987, c. 106, s. 5; 1988, c. 80, s. 11; 1992, c. 45, s. 3; 1998, c. 17, s. 64; 2010, c. 37, s. 136.

Participation in qualified investment.

15.0.2. For the purposes of this Act, a participation in a qualified investment has the meaning assigned by paragraph c of section 965.29 of the Taxation Act (chapter I-3) and additional participation in a qualified investment has the meaning assigned by regulation.

1987, c. 106, s. 5; 1992, c. 45, s. 4.

Share with full voting rights.

15.0.3. For the purposes of this Act, a person is deemed to hold a share with full voting rights of the share capital of a qualified legal person where the share is held by a legal person that the person controls alone or with persons related to him or by a subsidiary of such a legal person or a subsidiary of such a subsidiary.

1987, c. 106, s. 5; 1999, c. 40, s. 305.

DIVISION III.1 
Repealed, 1999, c. 83, s. 303.
1986, c. 113, s. 7; 1999, c. 83, s. 303.

15.1. (Repealed).

1986, c. 113, s. 7; 1988, c. 80, s. 12; 1989, c. 72, s. 15; 1999, c. 40, s. 305; 1999, c. 83, s. 303.

15.2. (Repealed).

1986, c. 113, s. 7; 1999, c. 40, s. 305; 1999, c. 83, s. 303.

15.2.1. (Repealed).

1989, c. 72, s. 16; 1999, c. 40, s. 305; 1999, c. 83, s. 303.

15.3. (Repealed).

1986, c. 113, s. 7; 1989, c. 72, s. 17; 1999, c. 40, s. 305; 1999, c. 83, s. 303.

15.4. (Repealed).

1986, c. 113, s. 7; 1999, c. 83, s. 303.

15.5. (Repealed).

1986, c. 113, s. 7; 1999, c. 83, s. 303.

15.6. (Repealed).

1986, c. 113, s. 7; 1999, c. 83, s. 303.

15.7. (Repealed).

1986, c. 113, s. 7; 1999, c. 83, s. 303.

15.8. (Repealed).

1986, c. 113, s. 7; 1999, c. 40, s. 305; 1999, c. 83, s. 303.

15.9. (Repealed).

1986, c. 113, s. 7; 1999, c. 83, s. 303.

15.10. (Repealed).

1986, c. 113, s. 7; 1999, c. 40, s. 305; 1999, c. 83, s. 303.

15.11. (Repealed).

1986, c. 113, s. 7; 1999, c. 83, s. 303.

DIVISION IV 
REGULATIONS

Regulations.

16. The Government may make regulations to

 (1) determine the required qualifications for any company applying to be registered, the conditions it or any other legal person shall fulfil and the information they shall furnish;

 (2) determine the form of the reports that a company or any legal person shall furnish, the information required to be contained in the reports and the period at which they shall be filed;

 (2.1) determine the information that a company shall furnish with respect to any change concerning its shareholders, its share capital and its qualified investments;

 (3) determine what constitutes the assets of a legal person and of any legal person associated with it, the net equity of a legal person's shareholders and the manner of computing them;

 (4) determine the sectors of activity in which legal persons contemplated in section 12 are required to operate, except the activities it determines;

 (5) define the expressions “arm's length”, “associated legal person”, “fledgling legal person”, “related person” and “venture capital legal person”;

 (6) determine the conditions of holding a qualified investment and the length of time for which it may be held, and provide penalties and modalities for receiving such an investment;

 (7) determine tariffs of duties and fees payable to the body it designates under section 1 for any act performed by that body under this Act;

 (8) (subparagraph repealed);

 (9) (subparagraph repealed);

 (10) define the expression “amount of the qualified investment”;

 (11) determine the conditions which must be respected by a qualified legal person involved in a merger to ensure that, notwithstanding the Taxation Act (chapter I-3), a company is not deemed to have disposed of a share which formed part of a qualified investment;

 (12) define the word “employee”;

 (13) determine the information that a company shall furnish where it waives, in favour of the shareholders of a company, a deduction in respect of all or part of the expenses incurred in making a distribution of securities to the public;

 (14) define the expression “additional participation in a qualified investment”.

Coming into force.

Any regulation made under this Act comes into force on the date of its publication in the Gazette officielle du Québec or on any later date fixed therein; it may also, once published and if it so provides, take effect from any date prior to its publication but not prior to the date from which the legislation under which it is made takes effect.

1985, c. 9, s. 16; 1986, c. 15, s. 229; 1987, c. 106, s. 6; 1988, c. 80, s. 13; 1989, c. 72, s. 18; 1992, c. 45, s. 5; 1997, c. 14, s. 327; 1998, c. 17, s. 64; 1999, c. 40, s. 305; 1999, c. 83, s. 304; 2001, c. 51, s. 257; 2010, c. 37, s. 137.

DIVISION V 
FINAL PROVISIONS

Minister responsible.

17. The Minister designated by the Government as responsible for the administration of the Act respecting Investissement Québec (chapter I-16.0.1) is responsible for the administration of this Act.

1985, c. 9, s. 17; 1988, c. 41, s. 89; 1994, c. 16, s. 51; 1999, c. 8, s. 20; 2002, c. 40, s. 339; 2010, c. 37, s. 138.

The Minister of the Economy, Innovation and Exports is responsible for the administration of this Act. Order in Council 422-2014 dated 7 May 2014, (2014) 146 G.O. 2 (French), 1908.

18. (This section ceased to have effect on 14 August 1990).

1985, c. 9, s. 18; U. K., 1982, c. 11, Sch. B, Part I, s. 33.

19. (Omitted).

1985, c. 9, s. 19.

REPEAL SCHEDULE

In accordance with section 17 of the Act respecting the consolidation of the statutes and regulations (chapter R-3), chapter 9 of the statutes of 1985, in force on 1 September 1985, is repealed, except section 19, effective from the coming into force of chapter S-29.1 of the Revised Statutes.