Equity Investors Incentive
The Equity Investors Incentive provides new and expanding businesses in Prince Edward Island with a tool to encourage and attract private sector investment. The program provides a non-repayable incentive to investors to encourage investment in an approved Prince Edward Island-based investee business by increasing the return-on investment to investors.
Offered by Innovation PEI
Amount
Non-repayable direct rebate to investors of up to 20 percent of the purchase price of the equity investment; maximum investor rebate of $200,000 per approved investee company
Quick eligibility check
Who can apply
A business may be approved as an investee company provided that it:
- consults with Innovation PEI prior to submitting an application;
- is a taxable, private Canadian corporation;
- is registered to do business in Prince Edward Island;
- has its head office and its primary business operations in Prince Edward Island;
- has been in operation in PEI for a minimum of one year;
- is a provider of exportable goods or services in one of the following strategic sectors:
- bioscience
- aerospace and defence
- advanced manufacturing and processing
- renewable energy and clean technology
- information and communications technology
- creative and cultural industries
- first-of-its-kind exportable goods or services in other sectors may be considered.
- pays at least 75% of its payroll to employees residing in Prince Edward Island;
- has fewer than 50 employees;
- has assets less than $10 million;
- ensures compliance with securities legislation;
- has a well-developed business plan and demonstrates appropriate use of funds raised to support expansion and/or ongoing operations in Prince Edward Island;
- does not have any defaulted outstanding debt obligation on file in the Government of Prince Edward Island Central Default Registry.
Not all applicants meeting the minimum eligibility criteria will be approved. The program is subject to an annual budget and will prioritize support to high-growth potential businesses in strategic sectors that demonstrate economic benefits to Prince Edward Island.
New project submissions from an applicant in default on any reporting, project completion or financial obligation to Innovation PEI will not be reviewed until a resolution to the default is reached.
What criteria are used to evaluate requests?
Other conditions when evaluating an applicant’s request for assistance may include, but are not limited to:
- potential for long-term viability, including qualifications and track record of senior management;
- economic benefit to the Province of Prince Edward Island;
- employment creation;
- export sales and import substitution;
- environmental impact;
- availability of program funds; and
- level of assistance from other government programs offered or available.
Approved investee companies must ensure that shares issued comply with the Securities Act (Prince Edward Island). Approval of the Equity Investors Incentive from Innovation PEI does not constitute any approval that may be required from the Prince Edward Island Office of the Superintendent of Securities under the Securities Act (Prince Edward Island). Due diligence is required from all investee companies on this matter.
The investment must provide economic benefit to the province of Prince Edward Island.
Innovation PEI reserves the right to deny a grant application or request for payment if it suspects or detects fraudulent intent.
Approved equity issues may be common, preferred, redeemable, voting or non-voting shares and must represent no more than 49 percent, in aggregate, of the voting interest.
An application must be submitted before any financial or legal commitment has been made on to project.
- Eligible Investors
For an investment in an investee company to be eligible for the Equity Investors Incentive, it must be made by an eligible investor. An eligible investor must hold the qualified share(s) for four years.
An eligible investor is:
- an individual that:
- purchases the share(s) after the investee company has been approved and accepted the
letter of offer from Innovation PEI;
- is a Canadian citizen or permanent resident;
- has reached the age of majority in the province or territory in which they are resident;
and
- is dealing at arm’s length with the investee company, as defined Section 251 of the
Income Tax Act of Canada.
- a company that:
- purchases the share(s) after the investee company has been approved and accepted the
letter of offer from Innovation PEI;
- is a Canadian-controlled private corporation or other Canadian-controlled company; and
- is at arm’s length to the investee company as defined under Section 251 of the Income
Tax Act.
About the funding
The Equity Investors Incentive provides a non-repayable incentive in the form of a direct rebate to investors (individuals or companies) and is calculated at up to 20 percent of the purchase price of the equity investment in the investee company. The maximum investor rebate available per approved investee company is $200,000.
The Equity Investors Incentive is a rebate of up to 20% of the eligible investment, with the specific rate and maximum aggregate value of the incentive included within the terms of the LOO.
The letter of offer provides detailed information on triggering payment to eligible investors. Briefly, payments to eligible investors will occur when Innovation PEI receives, from the legal firm representing the investee company, a completed Report of Share Sale and Purchase for Equity Investors Incentive and documentation to evidence that:
- the eligible investor is a holder of qualifying shares;
Show all funding details
- the purchase price has been deposited to the accounts of the investee company;
- the investee company is in compliance with all other requirements and conditions of the LOO.
An investee company that raises funds with the consideration of an Equity Investors Incentive is expected to use those funds to expand an active business carried on by the investee company in Prince Edward Island. At the time of application for an Equity Investors Incentive, the investee company must identify what the funds raised will be used for and is limited to using the funds raised for the identified purpose(s).
Acceptable uses of funds raised by an investee company include:
- reduce requirements for conventional term debt and working capital financing,
- support expansion or diversification,
- product development or commercialization of new technology, products or processes,
- injection of technical or managerial expertise.
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