Enterprise Saskatchewan

The employee investment program encourages employees to invest in the company they work for and receive a combined 35% tax credit (a provincial tax credit of 20% and a federal tax credit of 15%) in return. Under this program, employees working with their employer can set up and invest in an LSVCC fund, which in turn invests into their company of employment.

Employees who invest in the fund receive a combined 35% tax credit on the first $5,000 they contribute each year. Tax credits are available only to the first purchaser of shares. If shares of the LSVCC are purchased in the first 60 days of the calendar year, the tax credit may be claimed for that tax year or the previous tax year, or a combination of those two years. Unused tax credits cannot be refunded. Investments may be RRSP eligible. Investments must be held for eight years or tax credits must be repaid.

In addition to the tax credits, employee ownership gives employees an opportunity to share in the success and to own a piece of the company where they work.

The program helps create a more engaged and productive workforce by allowing employees a feeling of ownership. The program can be effectively used for recruitment and retention of high-quality employees. It is also an effective tool for succession planning. The fund can provide equity capital for business expansion.

Eligible companies must be corporations or co-operatives, with between five and 500 employees who reside in Saskatchewan and at least 25% of salaries paid in Saskatchewan.

In order to create an LSVCC fund under this program, there must be at least five employees willing to establish the fund. As well, the employer must be willing to sell a portion of the business to the employees.

A group of employees form an incorporated employee-controlled investment fund, which manages their capital. The fund is required to invest any money raised into the employer company within six months of selling any shares. The fund must provide for equal opportunity for all employees to purchase shares. These equity shares are participating and voting. All shareholders share in the proceeds upon dissolution of the fund. The fund may not issue equity shares in excess of $5 million. Below are the steps to set up an Employee Investment Fund:

• Contact Enterprise Saskatchewan for additional information.
• The employees select a project co-ordinator (may be any individual, organization or professional contracted to perform the function). Other professionals such as lawyers and accountants may be requested by the co-ordinator to assist with certain specialized requirements.
• Confirm the employer is willing to consider an employee ownership program.
• Develop a brief proposal, which you can send to Enterprise Saskatchewan for a preliminary eligibility ruling. Enterprise Saskatchewan will provide a Procedures Kit at this time.
• Follow the requirements of The Saskatchewan Financial Services Commission (GRO 45-902).
• Present the proposal to employees (do not raise any funds at this time). Enterprise Saskatchewan can assist you with the information and presentation.
• If employees and the employer wish to proceed, follow the steps outlined in the procedures kit.
• Establish an employee investment fund and apply to Enterprise Saskatchewan for registration.
• If the fund is approved, a formal letter of approval and certificate of registration will be provided.
• Raise money through the sale of shares to employees.
• Invest the capital into the employer’s business.