A Mortgage Investment Corporation:- Key Elements
March 10, 2025

By: Gregory M. Prekupec and Rutendo Muchinguri

 

A Mortgage Investment Corporation (“MIC”) is defined in the Income Tax Act[1] as a form of a company that has the following key characteristics:

  • Must be a Canadian corporation, either federal or provincial;
  • Its only undertaking is the investing of funds of the corporation;
  • It does not manage or develop any real estate;
  • Has a minimum of 20 Shareholders; and
  • Is tax exempt.

MICs provide an alternative to residential financing outside of traditional financial institutions such as banks and credit unions for individuals who are either self-employed or who cannot qualify for traditional financing. As a result, MICs offer higher risk yet high yield investment.

Typically, the MIC will have a Manager or Administrator, who can be an individual or an entity who is responsible for providing management services of the MIC’s investment portfolio in exchange for management fees. Shareholders of the MIC buy into the share capital of the MIC in exchange for dividends. An MIC is recognised as a “flow through entity” which means that it must pay out all its income as dividends to Shareholders to maintain its tax exemption status.

Depending on how the MIC intends to raise capital, there may be a requirement to register with the Ontario Securities Commission if the MIC publicly offers its shares to the public. In this event, the MIC must register as a reporting issuer with the OSC and go through the prospectus filing process. Alternatively, the MIC may be exempted from the OSC registration requirement if it falls under any one of the prospectus exemptions – accredited investor exemption; offering memorandum exemption or private issuer exemption.

In Ontario, if an MIC directly arranges or sells mortgages in Ontario it must have a  mortgage brokerage licence issued by the Financial Services Regulatory Authority of Ontario. Alternatively, the Manager of the MIC can directly sell mortgages on behalf of the MIC which removes the need for the MIC to need this licence. An MIC that actively solicits investments from the public may need to register as an exempt market dealer with the OSC. Many MICs work with entities that are already registered as exempt market dealer.

MICs provide fairly flexible alternative financing and present interesting challenges for compliance to legal and accounting professionals alike.

[1] Section 130.1 of the Income Tax Act.

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