One of the measures announced in the last Québec budget was the conversion of the SME Growth Stock Plan (SME Growth Plan) to the Québec Stock Savings Plan II (QSSP II). The budget would extend the plan to December 31, 2014.

A more simple and accessible plan

More SME will qualify under the new plan because the asset-value threshold of Qualified Issuing Corporations is increased from $100 million to $200 million and, just as was the case for the SME Growth Plan, there is no need for the SME to hold a minimum asset-value.

Investors might be interested in this new plan because the minimum hold period is reduced and the tax credit is temporarily raised to 150%.

The QSSP II works in almost exactly the same way as the SME Growth Plan, except that, administratively, it is simpler and cheaper for a SME to have its shares certified as valid shares because, since June 30, 2009, certification is obtained by using a form instead of an advance ruling.

QSSP II eligibility requirements


A Canadian corporation that issued a public offering of shares will qualify if, on the date of the final prospectus receipt or the date of the prospectus filing exemption, i) its assets are valued at less than $200 million; ii) its central management is situated in Québec iii) more than one-half of the wages paid by the corporation in the course of its last taxation year was paid to employees of an establishment located in Québec; and iv) throughout the preceding 12 months, the corporation carried on a business and had at least 5 full-time employees, none of whom are insiders or persons related to insiders. With respect to the investments, they will qualify if no more than 50% of the value of the corporation's assets consists of investments other than qualifying investments.

As well, those corporations who have carried out a qualifying transaction as defined in the "Capital Pool Company Program" of the TSX Venture Exchange may be granted the designation of Qualified Issuing Corporation by Revenu Québec.

Qualifying securities

The only securities eligible under the QSST II are qualifying securities, such as securities issued by an investment fund and valid or qualifying shares. Convertible securities, such as a debentures or convertible preferred shares are not eligible.

A qualifying share is a common share with full voting rights and which satisfies the conditions previously applicable under the SME Growth Plan.

A valid share is a share that appears on a list prepared by the Autorité des marchés financiers (hereinafter « the AMF ») and that is acquired by means of a stock transaction carried on a Canadian stock exchange. The AMF also publishes a list of the Qualifying Issuing Corporations that have made a SME Growth Plan offering during the previous four years. A corporation that has not made a public offering under the SME Growth Plan may also have its name added to the AMF list, provided that it meets the eligibility criteria, by requesting an advance ruling to that effect from Revenu Québec.

Securities issued by an investment fund, which meet the conditions of the old SME Growth Plan, also qualify under the QSSP II. The minimum hold period and the quasi-permanent coverage obligation still apply. Also, the new securities issued by an investment fund and that meet the conditions of the old SME Growth Plan also qualify under the QSSP II.

Tax credit

The greatest benefit provided by the new plan is an increased tax credit. The adjusted cost of a valid or qualifying share is raised from 100% to 150%. This increase is temporary and will apply to qualifying and valid shares acquired between March 19, 2009 and January 1, 2011 and that are added to the plan no later than January 31 in the year following their acquisition. Thereafter, the rate of 100% will once again apply to qualifying and valid shares. This will be the case for shares acquired between December 31, 2010 and January 1, 2015 and that are added to the plan not later that January 31 of the year following their acquisition.

Reduction of the minimum hold period

One of the most significant changes in the QSSP II is the reduction of the minimum hold period from three to two years. The QSSP II requires that the acquirer undertakes to own, until December 31 of the following two taxation years, qualifying and valid shares or qualifying securities, the total adjusted cost of which is at least equivalent to the amount of deduction claimed over the preceding two taxation years.

Deficit period

Finally, as for the SME Growth Plan, if an investor does not replace a qualifying share withdrawn from his plan with a valid share within 21 days, this could impact the calculation of the investor's income, in proportion to the total adjusted cost of his qualifying shares included in the plan as of December 31 of a given year. More particularly, this could translate into the inclusion of additional income or in a lesser deduction with respect to the QSSP II than would otherwise be allowable.


The new QSSP II is an improved version of the previous plan. Even though the QSSP II has similar qualifying criteria and functions in a similar way to the previous plan, it has undergone changes that make it more accessible. Indeed, the raising of the maximum asset-value of Qualified Issuing Corporations, the reduction of the minimum hold period of the qualifying share and the increased tax credit up to 150% in certain cases can make this plan attractive to investors.

In these times of economical downturn, will these new investment incentives stimulate investment in our SME? Only time will tell, but we suspect that the increased tax credit may convince certain hesitant investors to invest in SME.