Regional Development Incentives Regulations, 1974 (C.R.C., c. 1388)

Determination of Amounts of Development Incentives

• 9 (1) Subject to subsection (2), in determining the amount of a development incentive that has been authorized under these Regulations, the Minister shall take into account

  • (a) the number of jobs created, or

  • (b) the wages and salaries determined by him to have been paid by the applicant with respect to the employment of persons in or based on the facility,

  averaged over the second and third years after the date on which the facility is brought into commercial production and adjusted to take into account such circumstances as he determines to be appropriate.

• (2) In determining the amount of a development incentive, the Minister shall not take into account

  • (a) any wages or salaries that, in his opinion, are excessive for the purposes of this section; or

  • (b) any amounts that increase the number of jobs or the total wage and salary bill of the applicant to an amount that is in excess of 125 per cent of the amount specified by the Minister for the number of jobs or the wage and salary bill in the authorization of the development incentive unless the creation of such jobs or the expenditure of such amounts was given approval by the Minister prior to the undertaking of the proposed plan or change thereto.

10 For the purposes of sections 7, 8 and 9, man days and wages and salaries paid by an assignee of the applicant’s rights, or by a person having a management or service contract with the applicant or such assignee, may be deemed by the Minister to have been paid by the applicant.

Working Capital and Capitalized Expenses

• 11 (1) The amount of working capital to be included in the capital to be employed in an operation shall be such amount of the excess of current assets over current liabilities other than loans as, in the opinion of the Minister, will be required for the operation when the operation is in production at its intended full capacity.

• (2) The amount of capitalized expenses that may be included in the total capital costs of a facility or commercial facility shall be such expenditures, other than the costs of fixed assets, as in the opinion of the Minister are

  • (a) necessarily incurred in bringing the facility or commercial facility into commercial production or operation; and

  • (b) in accordance with normal accounting practice, treated as capital expenditures and not as charges against income.

Conditions and Limitations

• 12 (1) A development incentive for an undertaking that the Minister determines to be an undertaking described in subsection (2) may only be authorized on condition that the development incentive is repayable in whole or in part at such time or times as the Minister prescribes in the offer of the development incentive and subject to the Act and the other provisions of these Regulations.

• (2) For the purposes of subsection (1), an undertaking described in this subsection is an undertaking

  • (a) that has a high risk of failure but for which there is a commensurate opportunity to achieve a high rate of return;

  • (b) whose rate of return would be too marginal without a development incentive but for which the authorizing of a development incentive that is not repayable would not be justifiable, taking into account the possible rate of return;

  • (c) that is not capable of proceeding because reasonable arrangements cannot be made for adequate financing by means of a loan guarantee under the Act or by other means; or

  • (d) that is of such a nature that it merits the offer of a development incentive but for which

    • (i) the authorizing of a development incentive that is not repayable would not be in the public interest, or

    • (ii) the applicant does not wish to receive a development incentive that is not repayable.

• 13 (1) Any offer of a development incentive or loan guarantee shall remain open for acceptance by the applicant for a period of 90 days from the day on which the offer is made by the Minister.

• (2) Any offer of a development incentive shall specify the date by which the construction or installation of the fixed assets of a facility must begin and the date by which the facility must be brought into commercial production.

• (3) The Minister may, if he is satisfied that the circumstances justify it, substitute a later date for either date specified in the offer in accordance with subsection (2).

• (4) If an applicant fails to meet a date specified in an offer of a development incentive in accordance with subsection (2) or a later date substituted therefor pursuant to subsection (3), the development incentive offered to the applicant shall be withdrawn.

14 It is a condition of the payment of a development incentive that is based in part on the number of jobs created directly in the operation that the applicant shall maintain payroll records adequate to permit verification of all wages and salaries paid in respect of the operation.

• 15 (1) Subject to subsection (2), no development incentive shall be authorized in respect of any facility unless the approved capital costs will, in the opinion of the Minister, be at least $25,000.

• (2) In the case of a proposal to establish a new facility or expand an existing facility to enable the manufacturing or processing of a product not previously manufactured or processed in the operation, a development incentive may be authorized, if

  • (a) the number of jobs to be created directly in the operation will, in the opinion of the Minister, be at least five; and

  • (b) the capital costs of the facility will be commensurate with the nature of the undertaking and at least $5,000.

• 16 (1) As a condition of authorizing a development incentive in respect of a facility, the Minister shall specify the minimum amount of the equity of the applicant in the operation, which amount shall be not less than 20 per cent of

  • (a) the approved capital costs of the facility as forecast for the purpose of the authorization, in the case of the establishment of the facility, or

  • (b) the approved capital costs of the facility as forecast for the purpose of the authorization plus the book value of the assets of the facility at the time of application, in the case of expansion or modernization of the facility.

• (2) Subject to subsection (3), the applicant shall provide the amount of equity specified by the Minister pursuant to subsection (1) on or before the date the facility is brought into commercial production.

• (3) Where the Minister is satisfied that special circumstances exist, he may extend the time for the provision by the applicant of all or part of the equity, specified by the Minister pursuant to subsection (1), but no such extension shall exceed 24 months from the date the facility is brought into commercial production and, notwithstanding section 29, no payment on account of the development incentive shall be made until all the equity has been provided.

• (4) Except for the amount of operational losses, as determined by the Minister, or other reductions effected with the prior concurrence of the Minister, the applicant shall maintain the amount of equity specified by the Minister pursuant to subsection (1) for a period of 24 months after the date the facility is brought into commercial production in the case of a facility in respect of which a development incentive is based on the approved capital costs only, or 36 months after the date the facility is brought into commercial production in the case of a facility in respect of which a development incentive is based in part on the number of jobs created in the operation.

17 It is a condition of a development incentive or a loan guarantee in respect of a facility or commercial facility that the applicant shall

• (a) undertake to train and employ to the maximum extent practicable persons who are, at the time of the application, resident in the designated region in which the facility or commercial facility is located; and

• (b) provide reasonable opportunities to manufacturers in Canada to supply the machinery and equipment included in the eligible assets of the facility or commercial facility, where such machinery and equipment are competitive in performance, price and delivery date.

• 18 (1) It is a condition of a development incentive in respect of a facility or commercial facility that, if the amount or present value of assistance referred to in paragraph 6(c) of the Act is changed from the amount or present value that was taken into consideration by the Minister when authorizing the development incentive, the amount of the development incentive may be varied, taking into account the extent of the change.

• (2) Assistance taken into consideration in accordance with paragraph 6(c) of the Act shall be deemed to include the present value of any difference between prevailing market terms for loans or leases and any more favourable terms on which loans or leases are made to the applicant.

• 19 (1) If, in the opinion of the Minister, an applicant makes a significant change in the plans specified in his application without having obtained prior written approval of the Minister, the Minister may re-evaluate the application and amend or withdraw any development incentive previously authorized.

• (2) For the purpose of subsection (1), a change in ownership, management, financing, location, plant size or timing may be deemed by the Minister to constitute a significant change in the plans specified in an application.

20 In the case of an application for a development incentive to purchase the assets of an existing facility, the Minister shall, for the purposes of the Act, deem that a new facility will be established as a result of the purchase, if he is satisfied that

• (a) at the time of his receipt of the application, commercial production in the facility had ceased, or was about to cease;

• (b) the cessation of commercial production in the facility is or was dictated by circumstances clearly beyond the control of the vendor of the facility;

• (c) the purchase of the assets is a bona fide arm’s length transaction and has not been contrived for the purpose of demonstrating eligibility for a development incentive; and

• (d) the purchase price of the facility is calculated only in relation to the fair value of the tangible assets comprising the facility.

• 21 (1) It is a condition of a development incentive in respect of a facility that if,

  • (a) during the 24 months immediately following the day on which the facility is brought into commercial production, in the case of a facility in respect of which the development incentive is based only on the approved capital costs, or

  • (b) during the 36 months immediately following the day on which the facility is brought into commercial production, in the case of a facility in respect of which the development incentive is based in part on the number of jobs created in the operation,

  the facility or part of the facility is destroyed or damaged, the applicant shall repay to Her Majesty such part of the development incentive as is determined by the Minister to be

  • (c) the amount of the development incentive paid on account of the approved capital costs of the eligible assets destroyed or damaged, or

  • (d) an amount equivalent to any proceeds of insurance received by the applicant or his assignees that relate to the eligible assets destroyed or damaged,

  whichever is the lesser amount.

• (2) Notwithstanding subsection (1), if the Minister is satisfied that the eligible assets destroyed or damaged have been replaced or repaired or that they will be replaced or repaired without undue delay, he may permit the applicant to retain the amount otherwise repayable.

• (3) Where, subsequent to the making of any repayment pursuant to subsection (1), the applicant replaces or repairs within a reasonable time, as determined by the Minister, all or part of the eligible assets destroyed or damaged, the Minister shall direct that the amount repaid, or the appropriate proportion thereof, be returned to the applicant.

• (4) Where destroyed or damaged assets are replaced or repaired within a time deemed reasonable by the Minister, the new or repaired assets shall be deemed to be the same as those assets originally approved, taking into account such changes in approved capital costs as the Minister deems appropriate.

• 22 (1) Unless otherwise specified in the authorization by the Minister, it is a condition of a development incentive in respect of a new facility that the applicant for the development incentive shall, for a period of at least 36 months after the day the facility is brought into commercial production, continue to carry on, at substantially the same rate as at the time of his application in respect of the new facility, every other operation utilizing a facility in Canada, in which a product is manufactured or processed that is the same as or similar to a product manufactured or processed in the operation of which the new facility constitutes the necessary components.

• (2) Where a firm subject to control in common with the applicant manufactures or processes products that are the same as or similar to those products contemplated in the operation of which the new facility constitutes the necessary components, and such firm fails to continue to carry on such manufacturing or processing operations in accordance with subsection (1), the applicant shall be deemed not to have complied with that subsection.

• (3) To the extent that the conditions referred to in subsections (1) and (2) apply to an applicant and such applicant fails to comply with those conditions, he may be deemed to be ineligible to be paid all or part of the development incentive and may be required to repay to Her Majesty such amount paid on account thereof as is determined by the Minister.