Community Economic Development Corporations and Cooperatives (CEDCs)

A community economic development corporation or cooperative (CEDC) is a local business that raises funds for a defined community-economic purpose by selling shares (or other eligible securities) to investors in New Brunswick. A local group of officers and directors controls the funds and directs them towards development within their communities.

For New Brunswickers, CEDCs represent an opportunity to channel their investment dollars into their local economy and obtain a tax credit from the Government of New Brunswick for their investment. 

How are the funds used?

To qualify for CEDC funds, a project must have a measurable financial return. A CEDC is meant to fund projects that generate revenue—for example, developing a farmers market or a skating rink with rental income might be eligible projects, developing a new children’s playground would not qualify.

The minimum amount to be raised by a CEDC within 12 months is $10,000 and the maximum amount of capital that may be raised is $3,000,000. If the CEDC doesn’t raise the minimum amount, all monies are returned to the investors.

How do I invest in a CEDC? 

If you are considering investing in a CEDC, you should contact the CEDC for more information.  You may complete an Expression of Interest Form to indicate your intention to purchase and subscribe for securities in the CEDC. This does not mean you are committing to investing in the securities but tells the company that you are interested in knowing more about the opportunity. The company will send you an offering document, a subscription agreement and a copy of all promotional material about the investment to help you decide. The offering document outlines what you would be purchasing with your investment dollars, who is making the securities available, the expected total value of the offering and how the funds are to be used. Because these are exempt market investments, it is important to remember that they are risky investments. Neither the Commission nor the Government of New Brunswick (through the Department of Finance and Treasury Board) assesses, reviews, or approves the merits of the investment, or approves the offering document.

Take the time to read the offering document and be sure that you understand the business plan and the risks associated with the investment opportunity. You may also want to discuss any investments you are considering with your financial professional, who can help you determine if the investment fits your risk tolerance level and if it is appropriate for you.

The minimum investment per individual is $1,000. The maximum amount an individual can invest is $250,000. If the investor is a trust or a corporation, the minimum investment is $50,000 and the maximum is $500,000.  
 

The risks

Exempt markets 

When you purchase securities in a CEDC, you are investing in the “exempt market.” Exempt market opportunities are riskier than opportunities that trade on public exchanges because they allow securities to be offered without a prospectus document. Securities sold in exempt markets do not have the same level of liquidity as publicly traded securities and you are not provided with the same level of disclosure or media information. 

Illiquidity

CEDC securities are illiquid, meaning they are not easy to sell. If there is a chance you will need the money that you intend to invest in the short term, a CEDC may not be a good fit for you. 

As an investor in a CEDC, you may cancel your agreement to purchase the securities by sending notice to the CEDC within two business days of signing the agreement, giving you time to change your mind without penalty. After those two days, and if the CEDC raises the minimum amount it needs, there is a holding period of four years. If you sell your securities before the holding period is up, you will be subject to potential negative consequences, such as the requirement to repay your tax credit. Even after the holding period has ended, there is no secondary market for these securities, meaning that unless the CEDC is willing (and able) to buy back the securities from you, there may be no one for you to sell them to.

Less information provided

The offering document prepared by the CEDC does not contain as much information as you would find in a typical prospectus filing. You may receive much less information about the CEDC than you expect.

Unaudited financial statements

CEDCs are not required to file audited financial statements like other public issuers, but instead, provide annual financial statements with a review engagement report by an independent accountant. If the CEDC has not yet completed a full year of operations, it will only include partial financial statements showing its operations for the year to date.

Start-up risk

CEDCs are often start-ups and small businesses. Statistically speaking, a high percentage of start-ups and early-stage businesses fail. Investing in these businesses is risky, and you could lose your entire investment. If your risk tolerance is low, investing in a start-up or early-stage business may not be suitable for you.

Uncertain returns

The return on investment is always uncertain and depends on many uncontrollable factors. You should only invest if you can afford to lose your entire investment.
 

The benefits

Investing in your community

CEDC investors assist with the growth of local businesses and contribute to economic development in New Brunswick. 

Returns on your investment

CEDC investors may receive returns in the form of dividends on their investment or upon the sale of shares.

Tax benefits 

The CEDC program is linked to the New Brunswick Small Business Investor Tax Credit (SBITC) program, which offers a 50% personal income tax credit and a 15% corporate and trust tax credit to investors on eligible investments made in CEDCs.
 

Additional Resources:

Expression of Interest Form
Subscription Agreement
Consent Form – Collection and Use of Information