Key Takeaways
- • Manitoba's newly released Economic Development Strategy plans to modernize the Small Business Venture Capital Tax Credit Program, with changes expected to be implemented in the near future, according to MLT Aikins.
- • The annual program budget would rise 36% to $30 million, and the minimum investment from eligible investors would fall from $10,000 to $5,000.
- • Simple agreements for future equity (SAFEs) and investments through limited partnerships (LPs) would become eligible under the program, preserving the tax credit for investors.
- • Venture capital corporations (VCCs), which operate under British Columbia's and Saskatchewan's programs, were notably absent from the announced changes.
Summary
Manitoba's newly released Economic Development Strategy includes plans to modernize the Small Business Venture Capital Tax Credit Program, according to a client insight published by Winnipeg-based law firm MLT Aikins and authored by Todd Thomson and Kyle Mirecki. The firm described the changes as responsive to calls from local investors and the broader startup community. The modifications are expected to be implemented in the near future, though the province has not yet set a specific effective date.
The announced changes include four core elements. The annual program budget would increase by 36% to $30 million. The minimum investment from eligible investors would be reduced from $10,000 to $5,000. Simple agreements for future equity (SAFEs) would become eligible under the program, allowing investors and eligible small businesses (ESBs) to use SAFEs without forfeiting the tax credit. Additionally, investments could be made through limited partnerships (LPs), enabling investors to invest through a single entity while still personally benefiting from the credit.
The authors noted a notable omission: venture capital corporations (VCCs) were not included. VCCs operate under British Columbia's Small Business Venture Capital Program and Saskatchewan's Technology Startup Incentive Program, and previously existed under Alberta's Investor Tax Credit Program before it was discontinued. VCCs are created solely to raise funds and invest in ESBs, with the tax credits flowing to the VCC's investors rather than the VCC itself. The firm suggested the absence may reflect the greater complexity of implementing and overseeing VCCs relative to the other changes.
MLT Aikins cautioned that uncertainty over implementation timing could temporarily chill investment, as investors and ESBs may hold off while awaiting the expanded program. The firm argued that implementing the changes promptly will be vital to sustaining ESB funding activity. The firm said it continues to monitor for terms and conditions governing the use of SAFEs and LPs under the program and will publish an update once available.
The announced changes include four core elements. The annual program budget would increase by 36% to $30 million. The minimum investment from eligible investors would be reduced from $10,000 to $5,000. Simple agreements for future equity (SAFEs) would become eligible under the program, allowing investors and eligible small businesses (ESBs) to use SAFEs without forfeiting the tax credit. Additionally, investments could be made through limited partnerships (LPs), enabling investors to invest through a single entity while still personally benefiting from the credit.
The authors noted a notable omission: venture capital corporations (VCCs) were not included. VCCs operate under British Columbia's Small Business Venture Capital Program and Saskatchewan's Technology Startup Incentive Program, and previously existed under Alberta's Investor Tax Credit Program before it was discontinued. VCCs are created solely to raise funds and invest in ESBs, with the tax credits flowing to the VCC's investors rather than the VCC itself. The firm suggested the absence may reflect the greater complexity of implementing and overseeing VCCs relative to the other changes.
MLT Aikins cautioned that uncertainty over implementation timing could temporarily chill investment, as investors and ESBs may hold off while awaiting the expanded program. The firm argued that implementing the changes promptly will be vital to sustaining ESB funding activity. The firm said it continues to monitor for terms and conditions governing the use of SAFEs and LPs under the program and will publish an update once available.
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