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  • ltbhdollars ltbhdollars Dec 7, 2004 3:05 PM Flag

    Capping Canroys, on Hold but not Dead

    Tug

    There is already a 50% cap via the charter requirements of most of these trusts however believe there may not have been much attention paid to this area and with enforcement being considered MHO is that Gov decided to make it federal langusge that is clear and concise. Therefore allowing no wiggle room when Gov lowers the boom.

    All MHO
    Luck
    LTBH

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    • COULD SEE WHERE BUYING TRUST OF TRUSTS could make the issue interesting........

      also have never heard of trading being suspended for foreigners only....yet........again could be interesting

      wonder who has to keep track, co's, brokers, transfer agents etc........

      in fund bylaws here there is a tendency to have limits only on initial offerings or purchases....changes there after are not usually a problem........unless is reflected in SEC filing for an individual........

      above is an intentionally overly generalized and unspecific statement....

      totally opinion..............tug

      • 2 Replies to tug8boat
      • Tug

        As it currently stands, the individual trusts are responsible (which in my opinion is foolish). as to the charters .... here is where its interesting and is only my best understanding of things .... two pronged issue:

        1) if 50% exceeded then is deemed foreign content by Canada for those that hold in Canadian version of IRA

        a) Canadian IRAs only allowed very low amount of foreign content; or

        b) investors IRA pays sizable ongoing penalty as long as over % allowable

        c) NO trust would wish to be virtually excluded or at least significantly limited to Canadian IRA investors. I believe the reason the charters stipulate the ownship percentage is to make it clear they qualify for Cdn IRAs.

        NOTE: they have a number of retirement vehicles and to prevent the nitpickers coming out of the woodwork, I have chosen to be generic (ie Cdn IRAs) because I truly do not understand the FULL picture of Canadian retirement accounts and might mistate one of the proper accronyms.

        2) There are at least 3 and believe more type structures for these trusts. Some of them (maybe all) face loss of tax benefits if they exceed 50% foreign ownership. This of course would be a major disruption of cash flow and therefore distributions to investors and the pps would plummit.

        In closing, as I said (BTW surprising how many US investors are not aware there was already 50% cap) think Canadian Gov thinking is to pass a very clear and concise uniform FEDERAL legislation and then crack down hard on offenders (which will start with all the dual listeds, as generally the OOTC symbols much less exposed).

        The perplexing thing to me is they are pushing this under the guise of limiting tax leakage. Now I understand how codefying the taxation of ROC could be argued in this light (even though they effectively but improperly receive this tax now) but think this ownership issue is in some manner something far different than a tax issue ... just have no idea what it might be.

        On my comment as to the companies being required to police ... do not think any of them are equiped to even attempt monitoring. And this would really be a case of the fox in the henhouse .. but again its pretty evident which ones are certainly over or close tothe 50%.

        All the above is my opinion and I am sure some of the details are not exactly correct although I believe the overall picture gives the proper perspective.

        LTBH

      • Trading not suspended for foreigners, but ERF and PGH secondaries this year restricted to Canadians only as part of the long-term plan to get under 50%.

 
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