BDC's own Act builds in a disclosure and recusal regime for any applicant connected to one of its own directors or officers — a governance mechanic distinct from the Bank's lending mandate, and one a buyer with an advisor or co-investor sitting on BDC's Board should not assume does not apply to them.
Key takeaways
SECTION 01 OF 03
BDC's Act draws a hard line for the most direct case: “The Bank shall not grant a loan, investment or guarantee to a director or officer of the Bank.” (Business Development Bank of Canada Act, s.32) That much is unconditional — there is no disclosure or Board-approval route around it. The more common situation a buyer might actually encounter is narrower but still real: not the applicant themselves, but someone connected to them — a firm they are a partner, shareholder, director or officer of — being an “interested person” or a director or officer of the Bank.
Section 31 defines “interested person” by specific family relationships to a director — a spouse or common-law partner, child, brother, sister or parent, and certain in-law relationships built from those — and “applicant” as “a person who applies to the Bank for assistance in the form of a loan, investment, guarantee, purchase or lease.” A published Treadstone Law case study illustrates the more general point that a development-bank-financed purchase can carry conditions a buyer does not expect going in — there, a personal-guarantee condition rather than a conflict-of-interest one; Treadstone Law's case study on development-bank financing conditions in Haliburton.
SECTION 02 OF 03
Section 33(1) puts the burden on the party seeking financing: “An applicant must disclose in writing to the Bank whether the applicant is an interested person or, if the applicant is a firm or corporation, whether a partner of the firm or a shareholder, director or officer of the corporation is an interested person or a director or officer of the Bank.” That is an affirmative disclosure obligation — it is not framed as something BDC's own diligence is expected to catch on its own, and a corporate applicant has to look through its own ownership and management to answer it accurately.
Where that disclosure comes back positive, s.33(2) escalates the file automatically: “the application must be submitted to the Board for approval before the Bank enters into an agreement to provide the assistance” — an ordinary credit-committee approval is not enough once the connection exists. And s.33(3) removes the connected director from the room entirely: “A director must not be present at a meeting of the Board when the Board is considering an application, or vote on a resolution relating to it” where the applicant is a person related to that director, or a firm or corporation the director (or a related person) is a partner, shareholder, director or officer of.
SECTION 03 OF 03
An acquisition structure with several co-investors, a holding company, or a search-fund-style sponsor group has more moving parts than a single individual applicant — more people and entities whose relationships have to be checked against s.31's definition before the disclosure in s.33(1) can be answered accurately. Missing a connection is not a technicality: it is the disclosure the Act requires before BDC can lawfully enter into the agreement at all in that scenario, and the recusal in s.33(3) exists precisely so a connected director cannot influence the very approval the disclosure triggers.
This is a different mechanic from BDC's complementary-services limit or its leverage ceiling covered elsewhere in this hub (the case file on BDC's complementary mandate and the companion article on BDC's leverage ceiling) — it is a governance safeguard on who is deciding, not a limit on what BDC is built to do or how much it can lend in aggregate.
No. BDC’s Act flatly bars any loan, investment or guarantee to a director or officer of the Bank, with no disclosure or Board-approval route around it. That is unconditional under section 32, distinct from the narrower disclosure regime for someone merely connected to a director.
Someone connected to a director by specific family relationships — a spouse or common-law partner, child, brother, sister or parent, and certain in-law relationships built from those. A firm’s own partners, shareholders, directors or officers can also trigger the rule if they hold that relationship to a director.
The applicant. Section 33(1) requires the applicant to disclose in writing whether it, or a partner, shareholder, director or officer of it, is an interested person or a director or officer of the Bank — BDC’s own diligence is not framed as something expected to catch it.
Sources
Canadian small-business transaction data is not published anywhere, so most valuations in this country quote an American benchmark. The Deavo–Treadstone Acquisition Index is a daily record of Canadian listings built to replace that: asking-price distributions by province and city are published now, and days on market, departure rates and asking-to-sale spreads follow as the series lengthens. Leave an email and we will tell you as each measure lands.
No pitch, no listings. One email when the first report lands.
