Ineligible Transactions

28.4 (1) An eligible investor must not make or hold an investment in an eligible business corporation if, as a result of that investment, the aggregate of all amounts of additional equity capital received by that eligible business corporation from all eligible investors, directly or indirectly, would be greater than $10 million.

(2) For the purposes of subsection (1), if in the opinion of the administrator one of the reasons for the separate existence of 2 or more eligible business corporations is to increase the amount received from one or more eligible investors, the eligible business corporations are deemed to be one eligible business corporation.

28.5 (1) Subject to subsection (2), an eligible investor must not make or hold an investment in an eligible business corporation if the eligible investor, either alone or in conjunction with one or more of the eligible investor's

(a) associates or affiliates,

(b) shareholders or their associates or affiliates,

(c) directors or their associates, or

(d) officers or their associates,

will own, directly or indirectly, shares or convertible rights carrying 50% or more of the votes for the election of directors of the eligible business corporation or will, in any manner, control the eligible business corporation.

(2) If the administrator considers that an eligible business corporation in which an eligible investor has invested is in financial difficulty, the administrator may permit that eligible investor to temporarily control the eligible business corporation, under circumstances and on terms and conditions that the administrator may determine.

28.91 (1) Except in prescribed circumstances, if an eligible business corporation, within 5 years after it issues a share or convertible right for which a tax credit certificate was issued under this Part, redeems, acquires or cancels the share, then the eligible business corporation must pay to the Minister of Finance an amount equal to the tax credit allowed for the share.

(2) The Lieutenant Governor in Council may make regulations requiring eligible business corporations who owe money payable to the Minister of Finance under subsection (1) to pay interest on the money at a prescribed rate and calculated from a prescribed date.

(3) If the administrator considers that an eligible business corporation

(a) has conducted its business and affairs in a manner consistent with this Act, and

(b) for at least 2 years, has not redeemed, acquired or cancelled a share or convertible right issued by it for which a tax credit certificate was issued under this Part,

the administrator may reduce the amount that would otherwise be payable under this section by an amount calculated as follows:

(c) firstly, multiply that amount otherwise payable by the number of days during which the share or convertible right referred to in paragraph (b) remained outstanding;

(d) secondly, divide the product obtained under paragraph (c) by 1825 to determine the amount of the reduction.

(4) If the administrator considers that an eligible business corporation

(a) has conducted its business and affairs in a manner consistent with this Act, and

(b) has incurred investment losses,

the administrator may reduce the amount that would otherwise be payable under this section in order to take the investment losses into account.

28.92 (1) If a person, within 5 years after the date of purchasing a share or convertible right for which a tax credit has been issued under this Part and in a transaction other than a redemption, acquisition or cancellation referred to in section 28.91, disposes of a share or convertible right for which a tax credit was issued under this Part, then the person must pay to the Minister of Finance an amount equal to the tax credit allowed for the share or convertible right.

(2) The Lieutenant Governor in Council may make regulations requiring persons who owe money payable to the Minister of Finance under subsection (1) to pay interest on the money at a prescribed rate and calculated from a prescribed date.

28.93 An eligible business corporation must not use, directly or indirectly, any funds raised by an issue of shares or convertible rights for which tax credits have been or are entitled to be claimed under section 28.95 for any of the following purposes:

(a) lending;

(b) investment outside British Columbia;

(c) investment in land, unless the investment is incidental or ancillary to the business activities, referred to in section 10 (1) (c), of the eligible business corporation;

(d) acquiring securities other than equity shares from an affiliate of an eligible business corporation that complies with the criteria set out in section 10 (1) (a) to (c);

(e) purchasing goods or services from

(i) an eligible investor whose investment is in the eligible business corporation, or

(ii) an associate of an eligible investor whose investment is in the eligible business corporation

other than goods or services that are sold at fair market value to the eligible business corporation in the ordinary course of the seller's business as a seller of such goods or services on the open market;

(f) payment of all or part of a debt obligation, unless

(i) the administrator considers that the payment is necessary for the financial viability of the eligible business corporation, or

(ii) the debt obligation was incurred with the prior approval of the administrator in anticipation of an investment in the eligible business corporation by an eligible investor;

(g) as part of a transaction or series of transactions directly or indirectly involving any of the following:

(i) the purchase or redemption of previously issued shares or convertible rights  of the eligible business corporation or one of its affiliates;

(ii) the retirement of any part of a liability to a shareholder of the eligible business corporation or one of its affiliates or to a shareholder's associate or affiliate;

(iii) the payment of dividends;

(iv) except in prescribed circumstances, the funding of all or part of the purchase by the eligible business corporation of all or a substantial portion of the assets of a proprietorship, partnership, joint venture, trust or corporation;

(v) the funding of all or part of the purchase by the eligible business corporation of any of the assets of a proprietorship, partnership, joint venture, trust or corporation at a price that is greater than the fair market value of the assets purchased;

(vi) other prescribed events;

(h) other prescribed purposes.

3 (1) Subject to the Act, prescribed rights and restrictions, for the purposes of the definition of "equity share" in the Act, are rights and restrictions attached to the share or convertible right or rights and restrictions contained in or forming part of an agreement, commitment or understanding in respect of the share or convertible right that

(a) create a debt between the holder or beneficial owner of the share or convertible right and any other person,

(b) impair or will impair the ability of a venture capital corporation to maintain the levels of equity capital invested in eligible investments required by section 8 of the Act,

(c) impair or will impair the ability of a corporation, in which a venture capital corporation has made an eligible investment, to carry on an ongoing business with a reasonable expectation of profit, or

(d) will entitle the holder or beneficial owner of the share or convertible right to reduce the impact of any loss he or she will sustain in holding or disposing of the share or convertible right.

(2) Notwithstanding subsection (1), prescribed rights and restrictions do not include rights and restrictions that become operative upon the death, permanent disability, bankruptcy or other similar hardship of a shareholder of the venture capital corporation or the small business in which the venture capital corporation makes an eligible investment if that shareholder is a party to a contract with the venture capital corporation and the small business.

(3) For the purpose of subsection (2), similar hardship means a hardship that, in the opinion of the administrator, warrants overriding the considerations referred to in subsection (1).

3.1 The following circumstances are prescribed for the purposes of section 28.6 (5) (d) of the Act:

(a) the share or convertible right transfer is a direct share or convertible right transfer by the purchaser to the purchaser's retirement savings plan or registered retirement income fund, or tax free savings account;

(b) the share or convertible right transfer is a direct share or convertible right transfer by the purchaser to a spousal retirement savings plan or registered retirement income fund;

(c) the share or convertible right transfer is a share or convertible right transfer to an executor or estate due to the death of a purchaser;

(d) the share or convertible right transfer occurs as the result of a company share or convertible right exchange right, share or convertible right reorganization, acquisition or amalgamation and

(i) the eligible business corporation remains registered under section 28.2 of the Act, and

(ii) the registered owner of the share or convertible right is the same

after the share or convertible right transfer takes place;

(e) the share transfer occurs as the result of the exercise of a warrant, option or right entitling the holder to purchase or acquire an equity share of an eligible business corporation as defined paragraph (a) of the definition of "equity share" in section 1 of the Act and the registered owner of the equity share so purchased or acquired is the same as the registered holder of the warrant, option or right.