The Invest in Saskatchewan Program encourages Saskatchewan employees and individuals to invest in funds or pools of capital called Labour-sponsored Venture Capital Corporations (LSVCC). These corporations invest in Saskatchewan-based small- and medium-sized businesses. These investments assist job creation/maintenance and also provide a greater sense of control for employee groups, labour associations and other worker groups.

Individuals investing in the shares of a provincially registered Labour-sponsored Venture Capital Corporation will be eligible for both a provincial tax credit equal to 20% of the cost of their investment and a 15% federal tax credit on the first $5,000 invested in each year. There are two types of funds that may be registered under the Act. These are the Employee Funds and the broad-based Pool Funds, which are open to all residents of the province.

Objective -- Through labour associations, encourage Saskatchewan residents to make equity investments in small- and medium-sized Saskatchewan-based businesses that will:

• create and maintain jobs;
• encourage long-term investment in local communities;
• strengthen the provincial economy by providing venture capital to Saskatchewan companies which assists with the growth and development of these businesses; and
• build a lasting and productive relationship between labour, business and government for the benefit of Saskatchewan.
  

Definition -- A Type A LSVCC is a broadly-based investment corporation that is permitted to issue shares to any Saskatchewan resident. The funds raised must be invested in a number of eligible businesses.

Eligible Sponsors -- Only labour associations as defined by The Trade Union Act are eligible to sponsor a Type A fund.

Benefits to Sponsors

• An opportunity for the labour association to take a proactive role in the economic growth and diversification of the province.
• The labour association has input on where the funds will be invested.
• The labour association appoints members who sit on the board of directors of the Labour-sponsored Venture Capital Corporation, and have the controlling interest in the LSVCC.

Eligible Investors -- Individuals who are residents of Saskatchewan on the last day of the taxation year.

Benefits to Investors

• Investors receive a 20% provincial tax credit on the first $5,000 per year per investor, and a 15% federal tax credit on the first $5,000. Tax credits are available only to the first purchaser of shares.
• If shares of the LSVCC are purchased in the first 60 days of the calendar year, the tax credit may be claimed for that calendar year or the previous calendar year, or a combination of those two years. Unused tax credits cannot be refunded.
• Investments may be RRSP-eligible.
• Presents an opportunity for increased personal profit through dividends and/or capital appreciation and assists with long-term savings.

Eligible Businesses

Must:

• be corporations or co-operatives;
• not have more than 500 employees who currently reside in Saskatchewan; and
• pay at least 25% of their salaries and wages to Saskatchewan residents.

Other Stipulations

• The LSVCC may raise $25 million per year.
• Capital equal to the amount of provincial tax credits issued to investors must be deposited with a trustee. These trust funds are released by the province once the Type A fund makes all required investments.
• The LSVCC may not purchase more than 49% of an eligible business.
• Capital raised must be invested into eligible businesses within two years from the end of the fiscal year in which it was raised.
• Investors are required to hold the investment for a minimum of eight years.
• Investments may be cashed in early if tax credits are repaid.

How to Proceed

It is advisable to work with the staff of Enterprise Saskatchewan throughout the process to ensure that all requirements are met.

• Secure the support of a labour association. Upon request, Enterprise Saskatchewan staff will make presentations to the membership as part of the education process.
• Obtain preliminary approval from Enterprise Saskatchewan. Your initial proposal should include an outline of the information that will be in your prospectus.
• Complete corporate registration of the LSVCC, which must be registered according to The Business Corporations Act.
• Apply for approval from the Saskatchewan Financial Services Commission (SFSC), Securities Division. Contact the SFSC (Phone 787-5867; Fax 787-5899) early in the process to ensure compliance.
• Register under the LSVCC program at Enterprise Saskatchewan.

Objectives

• encourage employees to invest in the firm that employes them; and
• create new funds for expansion of small- or medium-sized businesses.

Benefits to Employers

• Improves corporate performance.
• Increases employee involvement and commitment, and improves teamwork, co-operation and communications, which reduces labour-management conflict.
• Helps diversify the ownership of the business.
• Provides additional funds (equity capital) for business expansion.
• Provides a retiring business owner with a method to transfer ownership of the business to the employees.
• Promotes equal opportunity for all employees to acquire shares and participate in the growth of the company.
• Improves the company's ability to attract, retain and motivate a high-quality, skilled workforce.

Eligible Businesses

Must:

• be corporations or co-operatives;
• have between five and 500 employees who currently reside in Saskatchewan; and
• pay at least 25% of their salaries and wages to Saskatchewan residents.

Benefits to Employees

• Presents an opportunity for increased personal profit through dividends and/or capital appreciation, and assists with long-term savings.
• Job preservation, security, job satisfaction and quality of work life.
• An opportunity to participate in the ownership of the firm that employs them.
• Investors receive a 20% province tax credit on the first $5,000 per year per investor, and a 15% federal tax credit on the first $5,000. Tax credits are available only to the first purchaser of shares.
• If shares of the LSVCC are purchased in the first 60 days of the calendar year, the tax credit may be claimed for that calendar year or the previous calendar year, or a combination of those two years. Unused tax credits cannot be refunded.
• Investments may be RRSP-eligible.
  

Eligible Investors -- Residents of Saskatchewan on the last day of the taxation year and an employee of the eligible business or an associated corporation of the eligible business.

Other Stipulations

• An employee-controlled investment fund must be established to facilitate investments.
• The fund must be incorporated by the employee association.
• The fund may not issue equity shares for a total value in excess of $5 million.
• The fund must provide for equal opportunity for all employees to purchase shares -- which are participating and voting -- and share in the proceeds upon dissolution.
• An employee holding shares in both the fund and the business it invests in may not hold more than 10% of the shares of either.
• Investments must be held for eight years or tax credits must be repaid.
• The fund is required to invest in the employer company within six months.

How to Proceed

• Select a project co-ordinator:
  • may be any individual or organization agreed to by employees, including professionals contracted to perform the function.
  • other professionals such as lawyers and accountants may be requested by the co-ordinator to assist with certain specialized requirements.
• Discuss the proposal with Enterprise Saskatchewan staff and obtain a procedures kit. Describe in writing the activities of the business and details of the proposal, paying particular attention to the number of employees, percentage of salaries and wages paid in Saskatchewan, and how this proposal will create or maintain jobs. You will then receive a preliminary eligibility ruling.
• Follow requirements of Saskatchewan Financial Services Commission (GRO 45-902).
• Present the proposal to employees (do not raise any funds at this time). Enterprise Saskatchewan staff are prepared to assist you with the presentation.
• If employees wish to proceed, follow the steps outlined in your procedures kit.
• Establish an employee investment fund and raise money through the sale of shares to employees.
• Apply to Enterprise Saskatchewan for registration.
• If the fund is approved, a formal letter of approval and certificate of registration will be provided.

This information is intended to introduce you to the Labour-sponsored Venture Capital Program and is not intended as a substitute for the governing Act or Regulations.