Administrator Approval Transactions

Last updated on November 9, 2022

Section 10 of the Small Business Venture Capital Act lists the criteria for an investment transaction to be considered an eligible investment.

If you have concerns about a proposed transaction, you are urged to obtain professional advice from a lawyer or an accountant to satisfy yourself that the substance and form of the transaction is not contrary to the Act.

Generally, it is considered to be contrary to the Act if you "structure around" the objectives of the program to attempt to do indirectly what cannot be done directly.

Some transactions, however, require the administrator's approval. These transactions are:


Convertible Debt

Under section 12 (1) of the Act and section 1 (3.1) of the Small Business Venture Capital Act Regulation, a VCC may issue convertible debt on a temporary basis that:

  • Is not secured by property that exceeds 50% of the debenture's value
  • Does not prevent the small business from or penalize it for incurring other debt
  • Does not pay an interest rate over 12% per annum calculated semi-annually and not in advance
  • Will be converted into equity shares of the small business within 18 months of being issued

Temporary Control of Small Business

Under section 13 (2) of the Act, if the small business is in financial difficulty, the administrator may permit a VCC to temporarily control the small business, under circumstances and on terms that the administrator may determine.


Time Extension

Under section 34 of the Act, the administrator may extend, with or without conditions, the time limit for doing anything under the Act or the Regulations and may grant the extension even if the time limit to be extended has expired.


Change to Articles or Share Structure

Under section 7 of the Act, without the written approval of the administrator of the Act, a VCC must not alter any of the following:

  • Its articles
  • Its authorized share structure
  • A provision of its articles related to a matter referred to in section 3 (1) (e)