Canada Gazette

Regulations Amending the Canada Small Business Financing (Establishment and Operation of Capital Leasing Pilot Project) Regulations

Whereas, pursuant to subsection 13(5) of the Canada Small Business Financing Act (see footnote a), the Minister of Industry caused a copy of the proposed Regulations Amending the Canada Small Business Financing (Establishment and Operation of Capital Leasing Pilot Project) Regulations, substantially in the form set out in the annexed Regulations, to be laid before the House of Commons on September 18, 2006 and before the Senate September 26, 2006;

Therefore, Her Excellency the Governor General in Council, on the recommendation of the Minister of Industry, pursuant to sections 13 and 14 of the Canada Small Business Financing Act (see footnote b), hereby makes the annexed Regulations Amending the Canada Small Business Financing (Establishment and Operation of Capital Leasing Pilot Project) Regulations.

REGULATIONS AMENDING THE CANADA SMALL BUSINESS FINANCING (ESTABLISHMENT AND OPERATION OF CAPITAL LEASING PILOT PROJECT) REGULATIONS

1. Paragraph (d) of the definition "coût du matériel" in subsection 1(1) of the French version of the Canada Small Business Financing (Establishment and Operation of Capital Leasing Pilot Project) Regulations (see footnote 1) is replaced by the following:

20. (1) A capital lease shall set out the total financing amount, the payment terms, the frequency of the scheduled payments and the date on which the capital lease is entered into. It shall set out either the bargain purchase option price or the residual value of the equipment, as the case may be.

3. (1) Paragraph 31(1)(d) of the English version of the Regulations is replaced by the following:

(2) Despite subsection (1), if the non-compliance referred to in any of paragraphs (1)(a) to (d) is inadvertent, the Minister shall pay to the lessor the amount of any eligible loss, calculated in accordance with subsection 44(7), sustained on the portion of the total financing amount of the capital lease that relates to equipment and that is in compliance with these Regulations.

4. Section 34 of the English version of the Regulations is replaced by the following:

34. Despite section 41, if a lessor does not provide a report as required by section 40 until after the time required by that section and the non-compliance is inadvertent, the Minister, after receiving the report, shall pay to the lessor the amount of any eligible loss, calculated in accordance with subsection 44(7), sustained as a result of a lessee's default on a capital lease to which the report relates.

5. Paragraph 35(2)(b) of the French version of the Regulations is replaced by the following:

b) le nombre total de contrats de location-acquisition cédés par le cédant en vertu du présent article pendant la durée du présent règlement n'est pas supérieur au plus élevé de 20 ou de 1 % du nombre de contrats de location-acquisition passés par lui au cours de la même période.

6. Paragraph 39(1)(a) of the English version of the Regulations is replaced by the following:

(a) the lessor approves the transferee as the lessee in accordance with the due diligence requirements referred to in section 19, and the aggregate outstanding balance in respect of the lessee or any related lessee or borrower does not exceed $250,000;

7. Paragraph 43(4)(c) of the French version of the Regulations is replaced by the following:

c) les dépens et les frais accessoires relatifs aux procédures judiciaires contre le locataire;

8. (1) Subparagraph 44(7)(b)(i) of the Regulations is replaced by the following:

(i) the greater of the residual value of the equipment set out in the registration form referred to in subsection 12(1), or the net amount received by the lessor on any sale or other disposition or on any capital lease of the equipment,

(2) Subparagraph 44(7)(b)(iii) of the English version of the Regulations is replaced by the following:

(iii) any amount paid by the lessor to a secured creditor, if the secured creditor has any security interest or rights in the equipment financed by the capital lease, and the security interest or rights rank ahead of the lessor's security interest or rights.

(3) The portion of subsection 44(8) of the Regulations before paragraph (a) is replaced by the following:

(8) If a lessor enters into a new capital lease with another lessee, of equipment that was already the subject of a capital lease, the net amount received by the lessor referred to in subparagraph (7)(b)(i) shall be calculated by determining the aggregate of the following amounts, namely,

9. Subsection 47(3) of the English version of the Regulations is replaced by the following:

(3) Every lessor shall, for the purpose of an audit or examination under these Regulations, give all reasonable assistance to any person designated by the Minister to carry out the audit or examination, provide access to all relevant sites, answer, orally or in writing, all questions relating to the subject-matter of the audit or examination and provide all information and documents in their possession and all copies required for the purpose of the audit or examination. The designated person shall not remove the documents or copies from the relevant sites without the permission of the lessor.

10. These Regulations come into force on the day on which they are registered.

On April 1, 2002, the Canada Small Business Financing (Establishment and Operation of Capital Leasing Pilot Project) Regulations (the Capital Leasing Regulations) came into force. These regulate the capital leasing pilot project, which increases access to financing for small businesses by encouraging lessors in the private sector to make commercial capital leases for equipment. Small businesses benefit from alternatives for meeting their financing needs, which is supported under the Canada Small Business Financing Act. The pilot project is a five-year test of the feasibility and usefulness of extending the Canada Small Business Financing Act to capital leasing. This pilot project will end March 31, 2007.

In June 2004, pursuant to its mandate, the Standing Joint Committee for the Scrutiny of Regulations reviewed and commented on the Capital Leasing Pilot Project (CLPP) regulations. Industry Canada agrees with the majority of the committee's technical suggestions for improving drafting and accordingly, is proposing the attached package of regulatory amendments for consideration.

All the changes are technical and non-substantive in nature and have the objective of improving the clarity of drafting and avoiding any discrepancies between the English and French versions of the Regulations.

For example, in paragraph 35(2)(b) of the Regulations, there is an inconsistency between the French and the English versions. The English version refers to "the greater of 20 and 1%" while the French version states "au plus élevé de 19 ou de 1 %". The greater of 20 and 1% is correct. The French version is modified to: "au plus élevé de 20 ou de 1 %". No change is required to the English version.

An other example, in paragraph 39(1)(a) of the Regulations, the word "to" is superfluous and leads to confusion in the following sentence: "the aggregate outstanding balance in respect of the lessee or to any lessee or borrower". By deleting that word, the paragraph becomes clearer.

There are no alternatives to the regulatory amendments. The only way to clarify the drafting of the existing provisions as suggested by the Standing Joint Committee is through a regulatory amendment.

The risk exposure to the Crown will not be increased as a result of the amendments. Lessors benefit from having regulations that are clear and less subject to misinterpretation.

The general public has not been consulted on these amendments since they will not be affected by them. As these are non-substantive drafting amendments that do not affect the delivery of the program, other departments have not been consulted. Furthermore, the proposed changes have been shared with active lessors and we have received no reaction from them. For these reasons we are also seeking exemption from pre-publication.

The existing compliance and enforcement provisions contained in the enabling legislation remain unchanged as a result of these amendments.

Peter Webber
Director
Small Business Financing Policy
Industry Canada
Telephone: (613) 941-2684
FAX: (613) 954-5492
E-mail: webber.peter@ic.gc.ca

Harvey Wong
Director
Canada Small Business Financing Program Directorate
Industry Canada
Telephone: (613) 946-3391
FAX: (613) 952-0290
E-mail: wong.harvey@ic.gc.ca