Stewart McKelvey

RECENT CHANGES TO LICENSING POLICY FOR THE ATLANTIC CANADA E INSHORE FISHERY By Kim Walsh ffective April 1, 2011, the Government of Canada Department of Fisheries and Oceans (DFO) instituted a change in its licensing policy for Atlantic Canada's inshore fishery. Eligible licence holders may now voluntarily apply to have some or all of their licences re-issued to a wholly-owned company. A wholly-owned company is defined as a private Canadian corporation where all the voting and non- voting shares are issued to one individual (in this case, the current licence holder). To transfer an eligible licence to a wholly-owned company the transfer request must be made in writ- ing, and must include the following: • A copy of the Certificate of Incorporation of the company which shows the company's registration number and its official name; • A certificate from legal counsel or a registered pro- fessional accountant that verifies all voting and • A declaration by the individual who holds 100 per cent of the shares of the company which states that • The 100 per cent controlling shareholder must meet the independent core eligibility criteria as de- the company has not entered into a controlling agreement as defined by DFO's policy on Preserv- ing the Independence of the Inshore Fleet in Can- ada's Atlantic Fisheries (PIIFCAF). A controlling agreement is defined as an agreement between the licence holder and another person or entity that would influence the licence holder's decision to re- quest a licence transfer. This declaration must be signed by the individual, in his or her capacity as a corporate officer, at a DFO office and witnessed by a DFO employee. fined by PIIFCAF. Once the licence holder brings 2 SUMMER 2012 DOING BUSINESS IN ATLANTIC CANADA non-voting shares have been issued to (and are controlled by) the current licence holder (this may also take the form of a sworn affidavit); the above information to their local area licensing administrator, it will take approximately 30 days for DFO to process the transfer request. DFO has stated that privileges currently available to independent core fishers (such as buddying-up or a stacking agreement) will also be available to the wholly-owned company. It is important to note that the wholly-owned company will be subject to DFO's owner operator policy and the fleet separation policies. The owner operator policy states that the owner of the company being issued the licence(s) will be required to fish the licence(s) personally. Under the fleet separation poli- cies, in order to be issued an inshore licence, the com- pany must be a private corporation within the mean- ing of Canadian law, and all voting and non-voting shares must be issued to an individual who meets the Independent Core criteria in PIIFCAF. This new policy has many potential benefits for inshore fish harvesters. The Supreme Court of Can- ada decision in Saulnier (Receiver of) v. Royal Bank of Canada, 2008 SCC 58, states that a fishing licence is property for certain purposes. Taken together, the Saulnier decision and this new policy resolved much of the uncertainty surrounding tax issues for corpor- ate owned fishing licences. Further, in July 2011, Can- ada Revenue Agency (CRA) issued guidelines for the income tax treatment of transactions involving the transfer of inshore licences. Essentially, for licences sold on or before May 1, 2006, the sale is taxable as a capital gain or eligible capital property, depending on use by the purchaser. For licences sold after May 1, 2006, the sale is taxable as eligible capital property. Thus, inshore harvesters in Atlantic Canada who transferred their licences to family-owned companies before April 1, 2011 should seek professional advice as to whether or not the transaction would result in significant tax liabilities. CRA will permit you to un-

• Cover