Venture capital in Canada has faced significant funding
challenges in recent years. The downturn in the global economy
— together with the credit crisis, volatile capital
markets, and a dearth of initial public offerings — has
further exacerbated the problem. Venture capital deal activity in
Canada slowed significantly in 2008. Across the country only $1.3
billion was invested, a 36 per cent drop over the prior year and
the lowest level in 12 years.
Perhaps there is a glimmer of hope on the horizon. Recent
announcements by a number of provincial governments across Canada
appear to recognize the important role venture capital and angel
investors serve in creating jobs and supporting innovative,
entrepreneurial businesses. This is particularly the case in
strategic, export-driven sectors such as information and
communications technology, life sciences, bio-technology, and
alternative energy and clean technology. Here are some details
regarding the recent announcements:
As part of its 2009 provincial budget, Québec announced
the establishment of a new $825-million fund to finance venture
capital funds in partnership with the Caisse de dépôt
et placement du Québec and FTQ Solidarity Fund. In the same
budget, Québec also announced the commitment of $125 million
for three new funds to finance new high-tech businesses.
Ontario announced funding through the Ministry of Research and
Innovation for the establishment of the Emerging Technologies Fund,
which will invest up to $250 million directly into Ontario-based
companies in the clean technology, life sciences, digital media,
and communications technology sectors. The money will be invested
on a co-investment basis with other private sector investors. The
initial announcement set an aggressive timetable for initial
investments to commence as early as July 2009.
Ontario also announced the first local commitments made by the
Ontario Venture Capital Fund (OVCF), a "fund of funds"
established by the Ontario government and a number of private and
public sector institutional investors focused principally on
investing in venture capital funds. The OVCF will commit up to $15
million to Georgian Partners, a new venture fund focused on
information technology, information aggregation, and enterprise
software opportunities. The OVCF will also commit $20 million to
Edgestone, an established venture investor currently raising its
third fund. And in the near future, the OVCF will announce a number
of additional local venture capital fund commitments.
Alberta announced the names of the board members and details
regarding potential investments for the Alberta Enterprise
Corporation. The corporation will invest as a limited partner in
venture capital funds with a local presence in Alberta. Up to $100
million will be available for commitment into venture funds focused
on underserved sectors, including information and communications
technologies, life sciences, environmental technologies, and
In British Columbia, the B.C. Renaissance Capital Fund issued a
further request for qualifications for up to three fund managers to
invest and manage up to $55 million of capital commitments from the
B.C. Renaissance Capital Fund. This further commitment from the
B.C. Renaissance Fund, established in 2007 to stimulate both the
quantity and quality of venture capital management in British
Columbia, brings the total amount to $90 million. By the end of
2008, three venture capital firms had completed fundraising with
prior commitments from the fund. The current request for
qualification requires applicants to demonstrate success in
investing in one or more of the designated key sectors of
information technology, new media, and clean technology, and also
to demonstrate experience in understanding the local B.C. market
In addition, provincial governments in Nova Scotia,
Newfoundland and Labrador, and Saskatchewan announced increased tax
credits in respect of investments made in labour-sponsored funds.
It is expected this will encourage additional investments from
retail investors in labour-sponsored venture funds active in those
A number of details will need to be worked out with regard to
most of these announcements. It also remains to be seen when we can
realistically expect to see money directly invested in innovative
entrepreneurial businesses in Canada. Taken as a whole, perhaps
these announcements represent a turning point for venture capital
funding in Canada.
For information on research and development and other relevant
tax incentives aimed directly at innovative businesses, see our tax
commentaries on the recent
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Under the Income Tax Act, the Employment Insurance Act, and the Excise Tax Act, a director of a corporation is jointly and severally liable for a corporation's failure to deduct and remit source deductions or GST.
Under the Income Tax Act, the Employment Insurance Act, the Canada Pension Plan Act and the Excise Tax Act, a director of a corporation is jointly and severally liable for a corporation's failure to deduct and remit source deductions.
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