Interpretation
 11. (1) Subject to subsection (2), a debt obligation is a qualifying obligation for the purposes of this Division if it is issued after May 7, 1996 by a corporation that is a qualifying small business corporation at the time the obligation is issued.  O. Reg. 37/09, s. 11 (1). (2) A debt obligation issued by a corporation after May 7, 1996 is not a qualifying obligation if, under the terms of the debt obligation or any agreement relating to it, (a) the corporation is or may be required to repay more than 5 per cent of the principal amount of the debt obligation in any of the first five years following the date the debt obligation is issued, except in the event that the corporation becomes bankrupt or commits a default under the agreement or instrument under which the debt obligation was issued; (b) the holder may exchange or convert the debt obligation within five years after the date of its issue into a share or debt obligation that is not a qualifying share or qualifying obligation of the corporation; (c) the debt obligation, whether as a result of its terms or as a result of security provided by the corporation, is not subordinate in right of repayment to all other debt obligations of the corporation, other than the payment of debt obligations owing to a shareholder of the corporation or debt obligations each of which is a qualifying obligation, (i) that was issued to a bank or a specified corporation in which a bank had an ownership interest at the time the debt obligation was issued, if the debt obligation was issued before May 7, 1997, or (ii) that was issued to a deposit-taking institution, an insurance corporation that was related to a deposit-taking institution when the debt obligation was issued, or to a specified corporation that was related to a deposit-taking institution when the debt obligation was issued, if the debt obligation was issued after May 6, 1997; (d) the corporation is restricted from incurring other debts; or (e) a government, municipality or other public authority in Canada is or may be required to provide a guarantee or similar indemnity with respect to the debt obligation.  O. Reg. 37/09, s. 11 (2). (3) Subject to subsection (4), a share of the capital stock of a qualifying small business corporation is a qualifying share for the purposes of this Division if, (a) it is issued after May 7, 1996; and (b) the corporation was a qualifying small business corporation at the time the share was issued.  O. Reg. 37/09, s. 11 (3). (4) A share of the capital stock of a qualifying small business corporation is not a qualifying share if, under the terms and conditions of the share, any agreement relating to the share or any agreement entered into by the corporation or a person related to the corporation, (a) the corporation or a person related to the corporation may be required to redeem, acquire or cancel the share, or reduce the paid-up capital of the class to which the share belongs, within five years after the date of issue of the share, unless the redemption, acquisition or cancellation arises as a result of an exchange or conversion of the share into a qualifying share or qualifying obligation of the corporation; (b) the holder of the share may exchange or convert the share within five years after the date of its issue into a share or obligation that is not a qualifying share or qualifying obligation of the corporation; or (c) a government, municipality or other public authority in Canada is or may be required to provide a guarantee or similar indemnity with respect to the share or compensate any person for any loss that may be realized in respect of the share.  O. Reg. 37/09, s. 11 (4). (5) An individual is a qualifying sole proprietor for the purposes of this Division if he or she is a sole proprietor and resident in Ontario.  O. Reg. 37/09, s. 11 (5). (6) A partnership is a qualifying partnership for the purposes of this Division if, (a) the partnership carries on an active business primarily in Ontario through one or more permanent establishments in Ontario; (b) all or substantially all of the fair market value of the partnership’s assets is attributable to assets used principally in the active business; and (c) all of the members of the partnership who are partnerships are qualifying partnerships.  O. Reg. 37/09, s. 11 (6). (7) A business carried on by a qualifying sole proprietor or by the partners of a qualifying partnership is a qualifying small business for the purposes of this Division if, (a) the business is carried on by the proprietor or the partners of the partnership through one or more permanent establishments in Ontario; and (b) all or substantially all of the fair market value of the assets of the qualifying sole proprietorship used in carrying on the business, or of the qualifying partnership carrying on the business, is attributable to assets used principally in one or more active businesses carried on primarily in Ontario.  O. Reg. 37/09, s. 11 (7). (8) A reference in this subdivision to, (a) the making of an investment in a qualifying small business includes the making of a loan to the person or persons carrying on the business to be used in carrying on that business; (b) the holder of an investment means the lender or assignee of the lender in the case of a loan to a person other than a corporation; and (c) an investment that has been issued includes a loan that has been made to a person other than a corporation.  O. Reg. 37/09, s. 11 (8). (9) For the purposes of subdivision b of Division E of Part III of the Act and this Division, an associated group in respect of a corporation or qualifying small business includes the corporation or qualifying small business and all corporations and qualifying small businesses that are associated with it or would be associated with it if the following rules applied: 1. A qualifying sole proprietor is deemed to be a corporation, all the issued shares of the capital stock of which are owned by the sole proprietor. 2. A qualifying partnership is deemed to be a corporation having only one class of issued shares which have full voting rights under all circumstances, and each member of the partnership is deemed to own the proportion of the number of issued shares of the capital stock of the corporation as that member’s proportionate share of the income or loss of the partnership. 3. Two partnerships are deemed to be associated if each member of one partnership is related to each member of the other partnership. 4. A corporation or qualifying small business that is deemed to be associated with another corporation or qualifying small business is deemed to be associated with every corporation and qualifying small business deemed to be associated with the other corporation or qualifying small business.  O. Reg. 37/09, s. 11 (9). (10) If a qualifying small business corporation or qualifying small business employs one or more employees in connection with a business carried on by it, the corporation or small business is deemed to carry on that business primarily in Ontario at a particular time if not less than 50 per cent of the salaries and wages paid by the corporation or small business in connection with the business during the six months before that time, or during the period when the corporation or small business carried on that business if less than six months before that time, would be required for the purposes of Part IV of the Federal regulations to be included in the amount of salary or wages paid to employees of a permanent establishment of the corporation in Ontario.  O. Reg. 37/09, s. 11 (10). (11) For the purposes of subdivision b of Division E of Part III of the Act, (a) the amount of the total assets of an associated group measured immediately before an investment is made is the aggregate of the total assets of each member of the group determined as of the end of the last fiscal period of the member ending before the investment is made; and (b) the amount of the gross revenue of an associated group measured immediately before an investment is made is the aggregate amount of gross revenue of each member of the group determined for the last fiscal period of the member ending before the investment is made.  O. Reg. 37/09, s. 11 (11). (12) If the fiscal period referred to in clause (11) (b) of a member of the associated group is less than 365 days, the amount of the gross revenue of that member for that fiscal period is deemed to be the amount otherwise determined multiplied by the ratio of 365 to the number of days in the fiscal period.  O. Reg. 37/09, s. 11 (12).