Capital Leasing Pilot Project

This Policy establishes criteria and procedures that will be taken into consideration in the assessment of an organization’s application submitted to the Minister of Industry for the designation of lessors for the purposes of the Canada Small Business Financing (Establishment and Operation of Capital Leasing Pilot Project) Regulations.

PART A : CONDITIONS AND PROCEDURES

1. Pursuant to the Canada Small Business Financing (Establishment and Operation of Capital Leasing Pilot Project) Regulations (the Regulations) under the Canada Small Business Financing Act (CSBFA), “lessor” means:

a) a member of the Canadian Payments Association established by subsection 3(1) of the Canadian Payments Act;
i) as set out in paragraph 4(1)(b) or (c) or paragraph 4(2) (a) or (c) of that Act; or
ii) as set out in any of paragraphs 4(2) (d) to (h) of that Act, if the member provides, with their application to be a lessor under these Regulations, their Canadian Payments Association transit number and a certificate issued by the member’s external auditor stating that the member has been a commercial lessor in Canada for the past five years.

b) a local cooperative credit society, within the meaning of subsection 2(1) of the Canadian Payments Act, that is a member of a central cooperative credit society, within the meaning of that subsection, if that central cooperative credit society is a member of the Canadian Payments Association;

c) a leasing company incorporated in Canada or a lease funder carrying on business in Canada, with a place of business in Canada, that:

i) maintains a rating of “BBB” or better issued by a Canadian bond rating agency; or
ii) participates in a securitization program approved by a Canadian bond rating agency; or

d) any other organization designated by the Minister as a lessor for the purposes of the Regulations.

2. A lessor under the Regulations is:

a) authorized to submit capital leases to the Minister for registration; and

b) authorized to submit a claim for loss to the Minister.

3. The following criteria will be considered by the Minister for designation as a lessor pursuant to Section 17 of the Regulations. The Minister will consider whether an organization:

a) is carrying on business in Canada with a place of business in Canada and has been providing commercial/business financial services, including capital leasing, for the purpose of financing equipment for a period of at least five consecutive years prior to the date of the application for designation as a lessor;

b) is incorporated or constituted under the laws of Canada or of a Canadian province;

c) is not already a lessor pursuant to paragraphs (a) to (c) under the definition of “lessor” in subsection 1(1) of the Regulations;

d) is in good financial standing and is not subject to any proceedings relating to fraud, receivership, bankruptcy, insolvency, winding up or dissolution;

e) is not receiving capital and/or operational funding from Her Majesty in Right of Canada or of a Canadian province and has not done so during the five years prior to the date of the application; and

f) has shareholders’ equity of at least $1 million.

4. An organization that meets the criteria listed in paragraph 3) herein and that provides the documents outlined in Part B of this Policy, will be assessed for designation as a lessor pursuant to section 17 of the Regulations.

5. a) Subject to paragraph 6) herein, upon the Minister’s approval of an organization’s application, designation will be in effect for the duration of the CSBFA capital leasing pilot project. Ministerial lessor designation is effective upon notification of the lessor by the Canada Small Business Financing Program, Industry Canada .

b) Once designated, the lessor’s status is subject to annual reviews. For the purpose of these annual reviews and to maintain its designation as lessor under the CSBFA Capital Leasing Pilot Project, the designated lessor must submit, along with its annual report on its outstanding balances pursuant to Section 40 of the Regulations, a copy of its most recent audited financial statements. Where the most recent audited financial statements are older than 12 months, interim financial statements not older than 90 days shall also be provided.

6. The Minister may withdraw the designation of a designated lessor under the Regulations and such lessor would no longer be eligible to submit capital leases to the Minister for registration under the Regulations, if, among others:

a) the organization is in default of or can no longer meet any of the criteria outlined in paragraph 3) herein;

b) the organization has failed to provide the documents outlined in paragraph 5) b) herein;

c) any of the organization’s directors or officers are convicted of fraud.

7. The Minister may limit the number of lessors designated under section 17 of the Regulations, as this is a Pilot Project.

PART B: DOCUMENTS TO BE PROVIDED BY THE APPLICANT

1. A resolution from the Board of Directors of the applying organization certifying that:

a) the corporation applies for designation as a lessor under the CSBFA Capital Leasing Pilot Project;

b) the organization’s enclosed Articles of Incorporation or Letters Patent and Articles of Amendments, Amalgamation, Reorganization, Arrangement Continuance or Revival (where applicable) are true copies. The authorized business that the corporation may carry on includes commercial leasing;

c) the corporation’s enclosed current Certificate of Compliance from its jurisdiction of incorporation is a true copy;

d) the corporation’s enclosed current Insolvency Name Search from the Superintendent of Bankruptcy is a true copy and attests that the applicant is not subject to any proceedings relating to receivership, bankruptcy or insolvency;

e) the corporation and/or any of its directors or officers are not a party to any criminal or civil proceedings in respect of fraudulent corporate activities or a party to other litigation relating to the corporation’s business activities.

f) the organization is carrying on business in Canada with a place of business in Canada and has been providing commercial/business financial services, including capital leasing, for the purpose of financing equipment and has been doing so for a period of not less than five consecutive years prior to the date of the application for designation as a lessor;

g) the organization employs experienced commercial leasing personnel who are deemed to be competent to make and administer capital leases of up to $250,000 repayable over a term of up to ten years;

h) the Board and the corporation understand and accept the objectives of the Capital Leasing Pilot Project which are to increase the availability of financing for the establishment, expansion, modernization and improvement of small businesses. The Board accepts that the authority to make new capital leases under the Regulations expires at the end of the pilot project or as of the date the Minister exercises the right to withdraw the corporation’s designation as a lessor, as the case may be. Claims for those leases registered under the pilot project prior to the withdrawal of the designation, as the case may be, or prior to the expiration of the pilot project may still be submitted.
 2. An outside auditor’s certificate:

a) confirming that the applicant is carrying on business in Canada with a place of business in Canada and has been providing commercial/business financial services, including capital leasing, for the purpose of financing equipment for a period of at least five consecutive years prior to the date of the application for designation as a lessor;

b) confirming the number and location of the applicant’s branches/outlets in Canada;

c) confirming that the applicant employs experienced commercial leasing personnel who are deemed to be competent to make and administer capital leases of up to $250,000, repayable over up to ten years;

d) certifying the name and title of the person (or any replacement thereafter) empowered to act on behalf of the applicant; and

e) providing and certifying: the applicant’s legal and business names (in both official languages, if applicable); the applicant’s principal address and its mailing address, if different; the applicant’s appropriate telephone number, facsimile numbers and electronic address.

3. A copy of the applicant’s audited financial statements covering the preceding 5 years. Where the most recent audited financial statements are older than 12 months, interim financial statements not older than 90 days shall also be provided.

IMPORTANT

∙ Providing the information listed above does not guarantee that an applicant will be designated as a lessor.

∙ All applications will be considered on a case-by-case basis. It is possible that due to the particular circumstances of an application, the provision of additional information or documentation may be requested.

∙ Industry Canada may request a current credit report on the applicant using an independent third party who is a recognized provider of such credit references.

THE APPLICATION SHOULD BE FORWARDED TO:

Canada Small Business Financing Program
Capital Leasing Pilot Project
Industry Canada
235 Queen Street
Ottawa, Ontario
K1A 0H5

Updated: November 2004