Businesses that are eligible for registration as CEDBs include companies and co-operative associations formed under the laws of Prince Edward Island. To be eligible for registration, the company or association must
1. have authorized capital consisting of at least one class of voting equity shares
2. have assets or revenues of less than $3 million;
3. have at least 75% of its salaries and wages paid in Prince Edward Island;
4. carry on active business, or have a constitution that restricts it to making specified investments in local businesses; and
5. have at least six directors who are residents of a defined community in which the eligible business carries on business.
The CEDB raises capital by issuing shares to individuals through a formal offering process in accordance with Prince Edward Island securities law. It is also to be noted that the shares cannot be distributed in any other jurisdiction.
The shares cannot be eligible for any other tax credit or deduction allowed under the Income Tax Act (Canada), except as a deduction for RRSP purposes.
An initial offering of shares of a CEDB must have at least 25 purchasers.
In the case of a company, the issued shares must be newly issued voting common shares of the company that are non-redeemable, nonconvertible, and that are not restricted in profit sharing or participation upon dissolution.