Canadian Controlled Private Companies’ (CCPC) shares & RRSP eligible investments: What are your views?
March 18, 2013
Canadian Controlled Private Companies’ (CCPC) shares are RRSP eligible investments, provided the RRSP holder does not own more than 10% of the stock. This has been the case for some time.
In terms of new business formation and growth capital, friends and family and angels are important sources of funds. Having the ability to use RRSP funds or contribute CCPC shares to RRSPs is an important ally in founders raising money for their companies. However there are challenges.
Constraining Factors or Challenges
1. Fewer and fewer RRSP trustees are willing to accept CCPC shares in RRSPs.
2. Some trustees that accepted them in the past will not allow a sale transaction without a valuation report which is expensive; and the price at which the transaction is done must equal the valuation or it won’t be allowed.
3. A report of fair value from a business valuator often [usually] is not the same as the price at which a minority interest in a CCPC is sold by one investor to another.
4. In one instance a trustee would only permit the shares to be sold back to the company, which of course, is impossible because the company would be required to make the same offer to all shareholders.
++ Action Requested:
What are your views? Please add to the conversation at the CATA SR&ED, Tax & Finance
Group at this URL: http://www.linkedin.com/groups/SR-ED-Tax-Finance-Group-3246301/about