Money In The Bank: Guidance From B.C. Court Of Appeal On Characterizing Funds As An Investment Or Loan

Published date27 July 2023
Subject MatterCorporate/Commercial Law, Litigation, Mediation & Arbitration, Corporate and Company Law, Contracts and Commercial Law, Arbitration & Dispute Resolution, Shareholders
Law FirmMcMillan LLP
AuthorCarina Chiu, Gray Morfopoulos and Jia Hwang

The decision of the British Columbia Court of Appeal in Broer v. Multiguide GmbH, 2023 BCCA 134, provides a useful case study on whether a court will consider an investment in a company to be an equity contribution or loan. In particular, this case illustrates the circumstances in which a court will consider parties' conduct subsequent to the injection of funds into a company in determining the true nature of the contribution.


In November 2014, the plaintiff, Multiguide GmbH ("Multiguide"), and RTB Safe Traffic, Inc. ("RTB"), formed Multiguide Technologies Inc. ("MTI") to sell and service pay-and-display parking metres (the machines that print the receipts people display on their dashboards when parking) in North America.

Multiguide and RTB each owned a 1/3 interest in MTI, along with a third party, Robert Ziola.

In December 2014, Multiguide and RTB each advanced ?100,000 to MTI (the "Advances"). The ultimate dispute in this case was whether these funds were equity investments or shareholders loans.

Multiguide identified its wire transfer as "Initial equity capital Multiguide GmbH". The contribution was initially reported in Multiguide's ledger as "Participation in Stock Corporations". Additionally, on the day of the transfer, Multiguide sent an email to RTB's corporate controller with the subject line: "Equity contribution to MTI".

In March 2015, MTI's external accountant sought clarification on whether the Advances should be recorded as loans or capital on financial statements. Multiguide responded that it "thought this was an equity input, but according to our lawyer this may be a loan." In response, the accountant then recorded each Advance as a loan on the draft financial statements, indicating that the record could be rectified after. The draft statements were subsequently sent to the principals of the parties as directors of MTI.

In April 2015 at MTI's AGM, the shareholders approved and signed the financial statements for MTI, in which the Advances were characterized as "Loan from shareholders." Several days later, Multiguide emailed its accountant stating that its Advance was a shareholder loan.

Concurrently, the business relationship between the parties deteriorated and they agreed to separate their interests. Multiguide demanded repayment of its Advance from MTI on the basis that it was a shareholder loan.


At trial, Multiguide alleged that the Advance from Multiguide to MTI was a shareholder loan, which became due and owing upon...

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