WHAT IS A MORTGAGE INVESTMENT CORPORATION?
A mortgage investment corporation (MIC) is a specific type of corporation that enables individuals or entities to invest in private mortgages by purchasing shares in the mortgage investment corporation. In a mortgage investment corporation, individuals pool their money and may sometimes acquire loans from institutional lenders to fund their private mortgage portfolio. A MIC may have to register with the Ontario Securities Commission in order to attract investors. The Income Tax Act authorizes the formation of MICs and places specific guidelines to the MIC must adhere to. Some of these requirements include:
- The MIC must be a Canadian corporation;
- No shareholder may own more than 25% of the MIC’s outstanding shares;
- The MIC may not own or invest in real estate outside of Canada;
- A minimum of 50% of the MIC’s assets must come from residential mortgages, cash, or insured deposits from the Canada Deposit Insurance Corporation or a credit union;
- A MIC must not invest more than 25% of its assets into real estate, not including any real property acquired from foreclosure or another mortgage default remedy; and
- The liabilities of the MIC do not exceed those set out in the Income Tax Act.
A MIC is considered a flow-through entity. This means that profits are taxed at an individual shareholder level and not at the corporate level. It is important to note that while a MIC must invest its funds within Canada, it may accept investors from outside of Canada. There are many laws and regulations that a MIC must comply with, and it is highly recommended to consult with an experienced business lawyer to provide legal advice to a MIC throughout its operations.
If you are an individual or entity looking to start a MIC, contact us today to set up an initial consultation where a member of our business law team will answer any questions you may have about operating a MIC.
Disclaimer: The information contained in this article is not to be construed as legal advice. The content is drafted and published only for the purpose of providing the public with general information regarding various real estate and business law topics. For legal advice, please contact us.
About the Author:
Shahriar Jahanshahi is the founder and principal lawyer at Jahanshahi Law Firm with a practice focus on representing business star-ups and investors in the province of Ontario. For further information about Shahriar Jahanshahi, click here.