The rules governing investments in a private corporation using RRSP funds are quite complex and beyond the scope of this summary. More information should be obtained from Revenue Canada Taxation or from your professional advisors.
Generally, RRSP's may be used to acquire any type of shares in an eligible Canadian-controlled private corporation (as defined in the Income Tax Act), whether issued by the company or acquired from existing shareholders.

Owner/Manager Investments

Controlling owner/managers and non arm's-length persons are not allowed to invest RRSP funds in shares of a corporation, or a related corporation, in which they, or non arm's-length persons, own, or have the option to purchase, 10% or more of the shares of any class of capital stock of the company. However, an investor can purchase more than 10% of a class of shares where the total investment is less than $25,000 and the investor is operating at arm's-length with the company.

Employee Investments

Previously established rules under the Income Tax Act generally prohibit employees from investing in the shares of their employer corporation using their RRSP funds if that corporation is controlled by an employee group. Recently introduced simplified rules may assist an unrelated employee group in acquiring control of a qualifying company. It may also be possible for employees to invest in the employer corporation using their RRSP's as an alternative to stock options or other share purchase plans.

The above provides general information only. It should not be regarded or relied upon as accounting or taxation advice or opinions. Logan Katz LLP Chartered Accountants would be pleased to provide more information or specific advice on matters of interest to you.
 

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