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.
To be deemed an approved investee company, a Prince Edward Island business must receive approval of its application and enter into a contract with Innovation PEI before accepting investments from eligible investors.
This web page provides an overview of the Equity Investors Incentive; detailed information is provided in the Equity Investors Incentive Guidelines.
Who is eligible for Equity Investors Incentive?
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:
- 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.
What funding is available?
The incentive is 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 investors’ rebate for all eligible investors will not exceed $200,000 per approved investee company.
What are eligible activities?
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.
The assistance provided by the program should:
- reduce requirements for conventional term debt and working capital financing through the provision of additional equity;
- provide financing and ease monthly cash flow burdens for small businesses;
- provide funds to support expansion, diversification, product development or commercialization; and
- provide a means of injecting technical and managerial expertise into Island-based companies.
An application must be submitted before any financial or legal commitment has been made on to project.
Who are eligible investors?
Approval of an investee company is not an endorsement or recommendation to purchase by Innovation PEI. Innovation PEI assumes no responsibility for the eventual success or failure of the investee company. It is the responsibility of the purchaser (“eligible investor”) to complete due diligence on the investee company - to assess the merits and pass judgment on his or her investment. Innovation PEI does not guarantee any investment. The investor is at risk for his or her investment.
Eligible investors include:
Any Canadian person, Canadian-controlled private corporation or other Canadian-controlled company that is at arm’s length to the investee company as defined under Section 251 of the Income Tax Act (Government of Canada). Additional details are included in the Equity Investors Incentive Guidelines.
The Equity Investors Incentive requires a four-year monitoring period. Each year, approved investee companies must complete a reporting questionnaire, provide yearly financial statements and a notarized record of all share transactions, and supply other information on the ongoing activity of the business, as requested. During this period of time, equity shares upon which Innovation PEI has paid incentives may not be redeemed by the company. Should the company elect to redeem shares the incentive paid by Innovation PEI will be due and payable by the investee company to Innovation PEI.
For each project approved, a letter of offer will be forwarded to the investee company which, when accepted, shall constitute a contract between Innovation PEI and the investee company.