Note: the “Recommendations” referenced in this document are the Recommendations set out in the Report of the Uniform Income Trusts Act Working Group to the Uniform Law Conference of Canada, Civil Law Section (July 2006). The Recommendations have been included for ease of reference.
Income Trusts ACT
Part 1 - Interpretation and Application
Recommendation 1: Subject to the exceptions set out in recommendations 3 and 4 below, the Act only apply to: (a) trusts that are reporting issuers in Canada (the “income trust”); and (b) any trust a majority of whose units are, directly or indirectly, owned by or for the benefit of the income trust (the “subsidiary trust”). For purposes of the Act, reference to a trust would mean either an income trust or a subsidiary trust but not an mutual fund, as described more fully in recommendation 3 below.
1 (1) In this Act,
“affairs” means the relationship among the trustees and the unit-holders of an income trust;
“affiliated entity” means an entity that is affiliated with a trust within the meaning of section 3;
“associate” , in respect of a relationship with a person, means
(a) a body corporate of which that person beneficially owns or controls, directly or indirectly, shares or other securities currently convertible into shares carrying more than ten per cent of the voting rights under all circumstances or by reason of the occurrence of an event that has occurred and is continuing, or a currently exercisable option or right to purchase such shares or such convertible securities;
(b) a partner of the person acting on behalf of the partnership of which they are partners;
(c) another trust or estate in which the person has a substantial beneficial interest or in respect of which that person serves as a trustee or liquidator of the succession or in a similar capacity;
(d) a spouse of the person or an individual who is cohabiting with the person in a conjugal relationship, and has done so for a period of at least one year;
(e) a child of the person or of the spouse or individual referred to in clause (d); and
(f) a relative of the person or of the spouse or individual referred to in clause (d), if the relative has the same residence as that person;
“body corporate” includes a company or other body corporate wherever or however incorporated;
“Commission” means [specify provincial securities regulator];
“court” means the [specify provincial superior court];
“entity” means a body corporate, a partnership, a trust, a joint venture or an unincorporated association or organization;
“income trust” means a trust, other than a mutual fund, the units of which are traded on or through a prescribed marketplace;
“individual” means a natural person;
“mutual fund” means an issuer in which investors are entitled to receive, after demand, an amount calculated by reference to a proportionate interest in the net assets of the fund;
“ordinary resolution” means a resolution passed by a majority of the votes cast by the unit-holders who voted in respect of the resolution;
“parent trust” means, in relation to a subsidiary trust, an income trust through which a beneficial interest is held in
(a) a majority of the units of any class or series of the subsidiary trust; or
(b) more than fifty per cent of the assets held under the subsidiary trust;
“person” includes an individual, entity or personal representative;
“personal representative” means a person who stands in place of and represents another person including, but not limited to, a trustee, an executor, an administrator, a receiver, an agent, a liquidator of a succession, a guardian, a tutor, a curator, a mandatary or an attorney;
“prescribed” means prescribed by the regulations;
“reporting issuer” means a reporting issuer as defined under the Securities Act or under the securities legislation of another province or territory of Canada.
Recommendation 2: Where the securities legislation of a Province does not contain a definition of “reporting issuer”, “reporting issuer” will mean a trust (a) that has filed a final prospectus for which a receipt has been issued under Provincial securities legislation or (b) any of whose securities are listed and posted for trading on any exchange in Canada.
“reporting issuer” means an entity
(a) that has issued securities under a prospectus for which a receipt has been issued under securities legislation of a province or territory of Canada; or
(b) the securities of which are or were listed [and posted for trading on the Toronto Stock Exchange or the TSX Venture Exchange or are traded over the counter on the Canadian Trading Quotation System.]
“send” includes deliver;
“series” means, in relation to units of a trust, a division of a class of units;
“special resolution” means a resolution passed by a majority of not less than two-thirds of the votes cast by the unit-holders who voted in respect of that resolution;
“subsidiary trust” means a trust, other than an income trust, that is controlled by an income trust;
“trust” means an income trust or a subsidiary trust;
“trust instrument” means the document or documents that establish or continue a trust or a mutual fund, as amended from time to time.
2 For the purposes of this Act, an entity is controlled by an income trust if
(a) securities of the entity to which are attached more than fifty per cent of the votes that may be cast to elect directors, or persons acting in a similar capacity, of the entity are held, other than by way of security interest only, by or for the benefit of the income trust or by or for the benefit of the unit-holders of the income trust; and
(b) the votes attached to those securities are sufficient, if exercised, to elect a majority of the directors, or the persons acting in a similar capacity, of the entity.
3 For the purposes of this Act, a trust is affiliated with
(a) another trust if one of them is a subsidiary trust of the other;
(b) a body corporate or other entity if the trustees of the trust control the body corporate or other entity; or
(c) another trust, body corporate or other entity if both of them are affiliated with the same income trust.
Recommendation 3: Except with respect to recommendations 7, 8, 9, 36 and 37 below, the Act not apply to a trust in which investors are entitled to receive, on demand or within a specified period after demand, an amount computed by reference to the value of a proportionate interest in the whole or part of the net assets of the fund. (Note: the type of trust described above is defined as a “mutual fund” for the purposes of this proposal.)
Recommendation 5: The Act contain a declaration that its purposes are to clarify and modify certain laws applicable to income trusts and subsidiary trusts and to advance the cause of harmonizing the law applicable to these trusts with the laws in other Provinces.
Recommendation 6: The Act state that, except to the extent otherwise provided in any other statute of the Province, an income trust or subsidiary trust is not a legal person and that nothing in the Act shall be construed as making an income trust a body corporate.
Trusts, mutual funds not legal persons
4 Except to the extent otherwise provided in any other enactment, a trust or a mutual fund is not a body corporate or other legal person.
5 (1) Subject to subsection (3), this Act applies to an income trust or a subsidiary trust.
(2) Section 4, clauses 6 (1) (a), (b) and (c), subsections 6 (2), (3) and (4), and sections 7 and 9 apply to a mutual fund.
Recommendation 4: The Act not apply to a trust that is a non-resident of Canada for the purposes of the Income Tax Act (Canada).
(3) The Act does not apply to a trust that is a non-resident of Canada within the meaning of the Income Tax Act (Canada).
Recommendation 36: The Act set out express conflict of laws rules to determine the governing law of an income trust, a subsidiary trust or an ordinary mutual fund. If the declaration of trust sets out a law governing the trust instrument, that law will be the governing law of the trust. If the declaration of trust omits a choice of law provision, the governing law will be the place where the administration of the trust is principally carried out. Each Province is to give reciprocal recognition to a declaration of trust choosing the law of a sister Province.
Recommendation 37: The Act specify that, in addition to any other requirement provided for in a declaration of trust, holders of not less than 2/3rds of units voted may change the governing law of an income trust, subsidiary trust or ordinary mutual fund to another Province or jurisdiction. A declaration of trust may provide a greater, but not lesser, approval threshold.
6 (1) Other than the rules of conflict of laws, the following matters are governed by the law of the governing jurisdiction for a trust or a mutual fund:
(a) the validity of the trust or mutual fund;
(b) the construction of the trust or mutual fund;
(c) the administration of the trust or mutual fund;
(d) a matter set out in Parts 3, 4 and 5.
(2) Subject to subsection (3), the governing jurisdiction for a trust or mutual fund is,
(a) if the trust instrument states that it is governed by the laws of a province or territory of Canada, that province or territory; or
(b) if the trust instrument does not state that it is governed by the laws of a province or territory of Canada, the place where the administration of the trust or mutual fund is principally carried out.
(3) For the purposes of subsection (2), at a special meeting of the unit-holders of a trust or mutual fund, the unit-holders may, by special resolution, amend the trust instrument to designate or change a governing jurisdiction for the trust or mutual fund.
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