Despite a great plan, great people, or a great product, many small businesses struggle to raise equity capital.
Qualified small Manitoba businesses can incentivize eligible accredited investors by selling equity shares that provide investors with a 45% non-refundable tax credit against Manitoba taxes under the Manitoba Small Business Venture Capital Tax Credit (SBVCTC) program. Offerings can range from $100,000 to $10,000,000, and investors can invest between $10,000 and $500,000. Unused tax credits can be carried forward up to 10 years and carried back for 3 years.
To be qualified, a company must be a Canadian Controlled Private Corporation (CCPC) with a permanent establishment in Manitoba, carry on an active business, have either no more than 100 full-time employees or less than $15,000,000 in annual gross revenue, have at least 25% of its employees resident in Manitoba, have at least $25,000 in stated capital, not be a reporting issuer and have raised less than $10,000,000 previously using the program. Once a corporation has received approval, it has 12 months to close, unless an extension is granted.
Capital raised through the SBVCTC program must be used within three years only for the purpose approved in the application. Among other things, proceeds raised cannot be used to invest outside Manitoba; to lend; to pay for a reorganization; to pay dividends or return of capital to shareholders; to buy, develop or maintain land or equipment for sports; to support an activity that does not promote economic development or is contrary to public policy; or to support an ineligible activity. The regulations set out activities that are ineligible for purposes of the SBVCTC program, including providing a regulated professional service; providing maintenance services to a non-arm’s length party; providing management, administrative, financial or similar services; leasing, developing or selling real estate; farming (except for commercial crop production in a climate-controlled environment), fishing, hunting or similar activities; franchise business; operating a restaurant, lounge or bar (other than brew pubs); amusement or gaming; performing arts facilities or events; and educational, health care, social services, and similar activities.
As a trusted legal advisor, our role is to help our clients assess eligibility for the SBVCTC program, assist with the application process, ensure that a suitable corporate governance structure is in place, and ensure that the offering is carried out successfully in accordance with tax and securities laws.
We would be very pleased to work with you. Please contact us for further information.
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