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Vol. 141, No. 44 — November 3, 2007 Regulations Amending the Export Development Canada Exercise of Certain Powers RegulationsStatutory authority Export Development Act Sponsoring department Department of Foreign Affairs and International Trade REGULATORY IMPACT ANALYSIS STATEMENT (This statement is not part of the Regulations.) Description The Regulations amend the Export Development Canada Exercise of Certain Powers Regulations (the "Regulations") which were made in 1994 and amended in 2004. The Regulations govern Export Development Canada's ("EDC") use of its powers provided in the Export Development Act (the "Act"), including its power to acquire equity interests. The Regulations define an equity interest as "an ownership interest in an entity." Equity interests are generally acquired through investment in an entity, for example through the purchase of corporate shares. Currently, the Regulations permit EDC to acquire an equity interest (other than a foreign project equity interest) if the value of the equity investment to be made (together with the value of any equity that EDC already holds in the entity) does not exceed the lesser of (i) 25% of the total equity in the entity at the time of EDC's acquisition; or (ii) $10,000,000. The Regulations also permit EDC to make foreign project equity interest acquisitions if the value of the equity interest to be acquired by the EDC together with the value of any equity interest already held by the EDC in that entity does not exceed 25% of the value of all equity interests in the entity at the time of EDC's acquisition. EDC may make equity investments above these limits, but the Regulations then require the approval of the Governor in Council, on the recommendation of the Minister for International Trade and the Minister of Finance. In 2005, EDC adopted the Enhanced Equity Program, which is targeted in part on a significant expansion directed to emerging markets. The strategy is designed to concentrate on equity acquisitions that offer the requisite networks, company-building skills and understandings of foreign market protocol and culture. The Government's Global Commerce Strategy announced in Budget 2007 stated that new regulatory amendments would be introduced to give EDC greater flexibility to invest in international partnerships, thereby creating opportunities for Canadian firms to expand the scope of their international business and eventually to transition into global companies. The amendments to the Regulations (i) remove the ceiling of $10,000,000 imposed on equity investments (other than foreign project equity interests which have no ceiling); and (ii) enable any equity investment over the remaining limit of 25% of the value of all equity interests in the entity at the time of the acquisition by EDC, to be made with the approval of the Minister for International Trade and the Minister of Finance, without the necessity of the approval of the Governor in Council. Alternatives One alternative to these amendments would be the maintenance of the status quo. This alternative causes EDC to be less responsive to investment opportunities in support of Canada's small and medium-sized enterprises. Another alternative would be to repeal the Regulations entirely. This alternative would free EDC to invest and divest equity interests with less government oversight. However, given the breadth of powers of the Act and the limits of EDC's capital base, it may be appropriate to continue to provide the regulatory guidance to EDC concerning the use of these powers. Benefits and costs Amending the Regulations will have a positive impact on Canadian business, allowing EDC to leverage time-sensitive investment opportunities in support of Canada's small and medium-sized enterprises by helping these enterprises expand and grow their businesses internationally. Administrative efficiency will also be improved, since transactions will no longer have to be referred to the Governor in Council for approval. Timely decision-making will be facilitated, which may be critical to EDC's ability to participate fully in the benefits of investment opportunities. There are no additional costs incurred with these amendments to the Regulations. Consultation The Enhanced Equity Program is viewed as a unique concept in the Canadian marketplace and has received a positive initial reaction from Canadian companies, institutional investors, fund managers, and "thought leaders," such as certain equity industry executives, managers, writers and influencers. EDC sought the views of, among others, various industry experts, venture capital, private equity and institutional investors, and Canadian exporters. Views were gathered on EDC's strategy through formal engagement, surveys, meetings and conference calls. All expressed support for a streamlined approach to the equity authorisation process. The proposed amendments are released for the first time for public consultation. Compliance and enforcement EDC is subject to the strict control and accountability rules of the Financial Administration Act. The key control and accountability instruments called for under that Act include (a) corporate plan; (b) capital budget; (c) operating budget; (d) borrowing plan; (e) annual report; and (f) special examination by the Auditor General of Canada. EDC is also subject to a legislative review every 10 years, as stipulated in the Act. EDC's equity investments are made in accordance with an equity plan that is subject to annual review and approval by its Board of Directors. The Board of Directors is also presented with quarterly updates on the investment portfolio's performance.
Martin Jensen
Notice is hereby given, pursuant to subsection 10(8) (see footnote a) of the Export Development Act (see footnote b), that the Governor in Council, pursuant to subsections 10(6) (see footnote c) and (7) (see footnote d) of that Act, proposes to make the annexed Regulations Amending the Export Development Canada Exercise of Certain Powers Regulations. Interested persons may make representations concerning the proposed Regulations within 60 days after the date of publication of this notice. All such representations must cite the Canada Gazette, Part I, and the date of publication of this notice, and be addressed to Martin Jensen, Acting Director, International Financing Division, Department of Foreign Affairs and International Trade, 125 Sussex Drive, Ottawa, Ontario K1A 0G2 (e-mail: martin.jensen@international.gc.ca). Ottawa, October 25, 2007
MARY PICHETTE REGULATIONS AMENDING THE EXPORT DEVELOPMENT CANADA EXERCISE OF CERTAIN POWERS REGULATIONS AMENDMENTS 1. The definition "foreign project equity interest acquisition" in section 2 of the Export Development Canada Exercise of Certain Powers Regulations (see footnote 1) is repealed. 2. (1) Subsection 4(2) of the Regulations is replaced by the following: (2) Subject to subsections (4) and (5), an acquisition by the Corporation requires the approval of the Minister and the Minister of Finance, if the value of the equity interest to be acquired by the Corporation together with the value of any equity interest already held by the Corporation in that entity exceeds 25 per cent of the value of all equity interests in the entity at the time of acquisition by the Corporation. (2) The portion of subsection 4(3) of the Regulations before paragraph (a) is replaced by the following: (3) For the purposes of subsection (2), the value of all equity interests in the entity at the time of acquisition by the Corporation COMING INTO FORCE 3. These Regulations come into force on the day on which they are registered. [44-1-o] S.C. 1993, c. 26, s. 4(2) S.C. 2001, c. 33, s. 2 S.C. 1993, c. 26, s. 4(2) S.C. 1993, c. 26, s. 4(2) SOR/94-410; S.C. 2001, c. 33, par. 30(i)
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