Frequently Asked Questions— Investment Framework (IF)

General

  1. Why are you introducing the Investment Framework (IF)?
  2. Did you consult the defence and security industry about this change?
  3. Why is the Investment Framework (IF) focused only on investments at small medium businesses (SMB)? What about other Canadian companies?
  4. Why is the Investment Framework (IF) focused only on innovation-related activities? What about other types of business activities?
  5. What exactly do you mean by the terms "R&D", "SMB", or "Marketing"? They may have different meanings in different situations.
  6.  Can two IRB obligors invest in the same IF project?
  7. What is the 5 percent cap and why are you imposing it?
  8. How did you arrive at the specific multipliers for the Investment Framework (IF)?
  9. Can one Investment Framework (IF) project involve more than one level of multiplier?
  10. Once the IRB credits on an IF project are confirmed and/or awarded, are they guaranteed? Are there any circumstances which would result in their revocation?
  11. Should an IF project, or the SMB, fail at any point during the IF project, will IRB credits be revoked?
  12. If any future sales arise out of an Investment Framework (IF) investment, are they eligible for IRB credit?
  13. How will the IF work in collaboration with other IRB Policy terms, such as the SMB requirement, the technology list requirement, or banking?
  14. Will the Investment Framework (IF) replace any existing Industrial and Regional Benefits (IRB) Policy terms?
  15. Will the IF be retroactive? Will it only apply on future projects, or can a contractor with an existing IRB obligation bring forward an IF proposal?
  16. Are investments permitted in a currency other than Canadian?
  17. Contractors are required to obtain an independent valuation of any in-kind Investment Framework (IF)> investments. Are there any rules or guidelines regarding which valuation firm they select?
  18. How will Industry Canada ensure that sensitive corporate information will be adequately protected?
  19. At the end of an IF project, who would own the IP that gets developed, the contractor or the SMB?

 

  1. Why are you introducing the Investment Framework (IF)?

    The overarching goal of all seven of the 2009 IRB policy enhancements is to encourage strategic and high-quality business activities in Canada. More specifically, the government wants to use the IRB Policy to leverage an increase in the number and value of long-term research and development (R&D) and commercialization activities happening at Canadian small and medium sized businesses (SMB).

    http://www.ic.gc.ca/eic/site/042.nsf/eng/00117.html#q1
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  2. Did you consult the defence and security industry about this change?

    We consulted widely with industry stakeholders, at all stages of IF development. All of the IRB Policy changes were discussed during industry consultations dating back to 2008. Industry Canada sought independent third-party expertise to validate the IF model, engaging Ernst & Young in 2011 to provide us with advice and industry best practices. Finally, prior to launch, we completed additional consultations with industry stakeholders.

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  3. Why is the Investment Framework (IF) focused only on investments at small medium businesses (SMB)? What about other Canadian companies?

    The government recognizes the important role that SMBs play in our economy. SMBs account for a large portion of the Canadian economy, contribute significantly to our GDP and create new jobs.

    We also recognize that SMBs face particular challenges, such as accessing global value chains, dedicating adequate resources to R&D, and accessing funding. The Jenkins Expert Panel Report also identified these challenges as contributing to the innovation gap in Canada.

    Experts agree that high-growth SMBs represent an area of opportunity where efforts to support them could have a significant impact on Canada's economic performance.

    http://www.ic.gc.ca/eic/site/042.nsf/eng/00117.html#q3
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  4. Why is the Investment Framework (IF) focused only on innovation-related activities? What about other types of business activities?

    Innovation is the key to gaining a competitive advantage in the modern economy and the IF is targeted to innovation-related business activities.

    The IRB Policy contains other measures related to many types of business activities, such as purchase of goods, general investments, consortia, etc.

    http://www.ic.gc.ca/eic/site/042.nsf/eng/00117.html#q4
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  5. What exactly do you mean by the terms "R&D", "SMB", or "Marketing"? They may have different meanings in different situations.

    The Applicant Guide contains specific definitions of all key terms. These definitions will apply to all IF proposals.

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  6. Can two IRB obligors invest in the same IF project?

    Yes. However, each IRB obligor must submit a separate IF submission outlining their particular investment to the IRB Authority for review and approval.

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  7. What is the 5 percent cap and why are you imposing it?

    The 5 percent cap means that the total multiplied IRB credits associated with IF activities cannot exceed five (5) percent of the total IRB obligation value on any procurement project.  We have included the cap as a limit to ensure that we implement this new IRB crediting tool with prudence. 

    All IF criteria, including the cap, will be monitored closely during the initial implementation period and reviewed after three years. r

    http://www.ic.gc.ca/eic/site/042.nsf/eng/00117.html#q7
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    Multipliers

  8. How did you arrive at the specific multipliers for the Investment Framework (IF)?

    The IF multipliers were carefully developed to ensure they provide IRB credits which reflect the duration, impact and breadth of an activity's future economic benefits.

    The multipliers are based on substantial market research and data analysis, in sectors where typical IRB activities take place, such as aerospace, electronics and machinery. The specific data that was studied related to: historical sales and investment data over 10 years; the useful life of investments; and, levels of Canadian content.

    http://www.ic.gc.ca/eic/site/042.nsf/eng/00117.html#q8
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  9. Can one Investment Framework (IF) project involve more than one level of multiplier?

    Yes.

    http://www.ic.gc.ca/eic/site/042.nsf/eng/00117.html#q9
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    Schedule of IF credits

  10. Once the IRB credits on an IF project are confirmed and/or awarded, are they guaranteed? Are there any circumstances which would result in their revocation?

    The IRB credits related to an IF project are calculated and confirmed at the beginning of an IF project. Half of these credits are awarded once the investment has been made and the remaining half are awarded in increments throughout the life of the IF project.

    IRB credits are subject to revocation only in cases of investment misrepresentation, early removal of the investment, or a failure to meet annual IF reporting requirements. The Applicant Guide provides complete details.

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  11. Should an IF project, or the SMB, fail at any point during the IF project, will IRB credits be revoked?

    No. The failure of an IF project or SMB will not, in itself, lead to the revocation of IRB credits. Industry Canada recognizes that innovation-related activities at an SMB can have inherently high levels of risk. We have designed the IF credits in such a way as to share this risk and thereby encourage more activity in this important area.

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    Alignment with other IRB terms and conditions

  12. If any future sales arise out of an Investment Framework (IF) investment, are they eligible for Industrial and Regional Benefits (IRB) credit?

    The IF is designed to award IRB credit based on the value and type of the investment only.

    However, any IRB obligor can purchase a SMB product that has been developed and commercialized through an IF investment. These purchases would be proposed as separate IRB activities, assessed for eligibility and valued using the IRB crediting methods in place for such purchase activities.

    http://www.ic.gc.ca/eic/site/042.nsf/eng/00117.html#q12
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  13. How will the IF work in collaboration with other IRB Policy terms, such as the SMB requirement, the technology list requirement, or banking?

    The IF is being introduced as a new IRB terms and condition. It does not replace any of the existing terms and conditions, and will be used in alignment with them.

    With respect to any minimum SMB requirement, the full multiplied value of an IF investment would count towards meeting a SMB requirement.

    With respect to any minimum technology list requirement, the full multiplied value of an IF investment could count towards meeting the technology list requirement, if the IF activity happens to align with the contents of the technology list.

    With respect to banking, IF transactions may be deposited in the IRB bank. However, all existing banking guidelines and processes will apply as usual.

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  14. Will the Investment Framework (IF) replace any existing Industrial and Regional Benefits (IRB) Policy terms?

    No. The IF is being introduced as a new IRB term.

    http://www.ic.gc.ca/eic/site/042.nsf/eng/00117.html#q14
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  15. Will the IF be retroactive? Will it only apply on future projects, or can a contractor with an existing IRB obligation bring forward an IF proposal?

    Contractual language has been developed for the IF which will be included in the IRB terms and conditions for new projects as they move forward.

    Contractors on existing projects may submit an IF proposal. If their IF proposal is approved by the IRB Authority, the contractual IF language will be inserted into their contract through the usual contract change processes.

    However, Contractors who already have an active investment IRB transaction on their project will not be permitted to replace or revalue it using the new IF terms.

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  16. Are investments permitted in a currency other than Canadian?

    Yes. However, for IRB valuation and crediting purposes, the exchange rate in effect on either the date of IF approval from the IRB Authority (cash) or the date of the third party valuation report (in-kind) shall be used.

    http://www.ic.gc.ca/eic/site/042.nsf/eng/00117.html#q16
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    In-kind Valuation

  17. Contractors are required to obtain an independent valuation of any in-kind Investment Framework (IF) investments. Are there any rules or guidelines regarding which valuation firm they select?

    Contractors may choose the firm from which to obtain a valuation report. However, Industry Canada wants to ensure that all valuation reports meet a consistent level of comprehensiveness, independence and content, and has therefore included specific requirements for valuation firms in the Applicant Guide.

    http://www.ic.gc.ca/eic/site/042.nsf/eng/00117.html#q17
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    Security of information

  18. How will Industry Canada ensure that sensitive corporate information will be adequately protected?

    The IRB Authority recognizes that investment decisions often involve sensitive and commercially confidential company information. The receipt, storage and protection by Industry Canada of a company's commercially confidential information are governed by applicable federal laws and processes, such as the Access to Information Act, the Privacy Act, and the government's security clearance framework.

    All IRB officials have obtained appropriate training and clearances to access sensitive and commercially confidential information.

    IF Applicants are encouraged to clearly mark their documents, identifying each page as belonging to them and containing sensitive, commercially confidential information.<

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    SMB Issues

  19. At the end of an IF project, who would own the IP that gets developed, the contractor or the SMB?

    Decisions about IP ownership are made by the companies involved in the IF project, not Industry Canada. However, we recognize that these decisions may have an impact on the overall value of the investment and therefore would be reflected in the third party valuation report.

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