Equity Tax Credit for Community Economic Development Investment Funds: businesses

Eligible investments

Eligible investments must be newly issued common voting shares that are non-redeemable, non-retractable, non-convertible and are not restricted in profit sharing or participation upon dissolution.

Shares cannot be eligible for any other tax credit or deduction allowed under the Income Tax Act, except as a deduction for Registered Retirement Savings Plan (RRSP) purposes.

Eligible businesses

Corporations and co-operatives incorporated pursuant to the laws of Canada, including community economic development (CED) corporations and co-operatives.

community economic development corporations and co-operatives are those organizations created to assist or develop local businesses within the community.

Eligible businesses must meet the following criteria:

• involved in active business or investing in other eligible businesses
• less than $25 million in assets and/or revenues, including associated companies
• at least 25% of salaries and wages paid in Nova Scotia
• corporations must have authorized capital consisting of common voting shares
• co-operatives must be marketing, producing or employee co-operatives
• corporations must have at least 3 eligible investors taking part in the specified issue

Prohibited uses of funds

Funds raised by the eligible business must be used in an active business and cannot be used for any of the following purposes:

• acquiring securities, other than eligible investments in an eligible business
• paying dividends or repaying a debt to a director, officer or shareholder of the CEDIF or an associate of the director, officer or shareholder
• purchasing services or assets provided by the Government of Nova Scotia or its agencies or corporations, where:
  • those services or assets are to be used in a business or activity that is the same or similar to the activity previously carried on by government or its agencies or corporations
  • the CEDIF has received, either directly or indirectly, any financial assistance from any government, municipality or public authority with respect to the acquisition of those services or assets
• part of a transaction or series or transactions directly or indirectly involving:
  • redemption or purchase of previously issued shares of the CEDIF or its affiliates
  • retirement of a liability of a shareholder of the CEDIF or its affiliates
  • payment of dividends
  • funding the purchase of all or substantially all of the assets of an existing business, except a business in receivership or in bankruptcy where an eligible investor or group of investors did not own at any time more than 10% of the voting shares of the business in receivership or in bankruptcy
• funding of the purchase by the CEDIF of any services or assets at a price that is greater than the fair market value