Since the 1st of July, 2014 the Act respecting the Legal Publicity of Enterprises oblige the trusts operating an enterprise of a commercial nature to register with the Quebec enterprise registrar. Trusts administered by an already registered person are exempted from this obligation.
It is appropriate to clarify the expression "operation of an enterprise of a commercial nature" in order to determine which trusts are subjected to this obligation.
Subparagraph 3 of section 1525 of the Civil Code of Quebec defines the expression "operation of an enterprise" by "the carrying on by one or more persons of an organized economic activity [...] consisting of producing, administering or alienating property, or providing a service". The expression "organized economic activity" refers to a set of acts or operations made for a specific purpose, which implies repeated acts or, at the very least, a transaction clearly indicating the intention to exercise an organized economic activity, such as the purchase of a business. The commercial nature can include the crafts, agricultural, commercial, professional, financial and industrial activities realized with the aim of making a profit.
It will thus be necessary to determine whether the trust operating property is doing so with a reasonable expectation of profit. Financing activities made by a social trust would not constitute the operation of an enterprise of a commercial nature according to the Quebec enterprise registrar.
It is necessary to validate the activities carried on by the trust and not its object. You should not either confuse the activities of the trust and those of the enterprises in which this trust invested as a shareholder.
A real estate investment trust holding a commercial, industrial or office building will be required to register itself as well as a trust that buys regularly an apartment building which it renovates and puts back on sale.
We cannot however conclude in the existence of the operation of an enterprise of a commercial nature if a trust holds only a family residence or duplex to the benefit of one or several specific persons without exercising another activity. Each case will have to be analyzed because the caselaw and doctrine do not fix the number of housing units or floors as from which we consider the existence of an enterprise. It is necessary to determine if the trust has a sufficiently organized economic activity.
The investment trusts, also called income trusts where the investors acquire "units" conferring on them the right to receive a portion of the trust's profits have the obligation to register.
The trusts holding an investment portfolio may be required to register if the investment activity is sufficiently organized to conclude in the existence of the operation of an enterprise. It will be the case in particular if the activities of the trust are similar to those of a securities broker (called also a stockbroker).
Testamentary trusts and family trusts created for the benefit of certain specified persons, if they do not operate an organized activity of a commercial nature, would not be subjected to the obligation of registration, as well as social trusts constituted in a purpose of general interest, for educational, cultural, philanthropic, religious or scientific purposes.*
* Words drawn from the guide "Obligation of registration regarding trusts operating an enterprise of a commercial nature" of the Quebec enterprise registrar, IN-525, 2014-11
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