The family of Aroi companies is comprised of two corporate entities:
Aroi Mortgage Investment Corporation Inc.
This is the investment vehicle which is currently owned by 71 individuals with a total invested capital value of $5.4 million, the majority of which is deployed in the form of Mortgages secured against homes on mainland Nova Scotia belonging to Aroi’s clientele, who have an obligation to repay their debts to the company at interest rates ranging from 12 to 25 percent.
In return for compliance with a number of rules stipulated by section 130.1 of the Canadian Income Tax Act, Aroi Mortgage Investment Corp Inc. (The MIC) is exempt from corporate income taxation. The rules are as follow:
- The corporation is not permitted to retain earnings and must distribute them within 90 days of year end
- The corporation must provide audited financials to verify earnings were not retained
- At least 75% of the corporation’s lending activity must be Mortgages secured by residential Real property in Canada
- No more than 25% of the corporation’s lending activity may be secured against Commercial Real property in Canada
- All owners must hold the same classes of shares to ensure all are treated equitably.
- Shares of the company must be widely held by no less than 20 investors
- The maximum equity permitted to be owned by any one investor is 25 percent (10% for registered investments)
For added stability, each Shareholder receives one common voting share, and the balance of their investment in Preferred class non-voting shares.
The Board of Directors includes independent directors, in addition to the two founders who provide daily guidance for underwriting and client management through Aroi Management.
The MIC has no phone bills, no office expenses, and most importantly no employees. It has only a handful of reoccurring obligations:
- Legal fees for the issuance of new shares to investors, and for the discharge of paid out Mortgages
- Banking fees
- Interest charges on a small revolving credit line
- Accounting fees to obtain annual audited financials
- Lender registration and Incorporation fees
- Broker and referral commissions paid to the Principals for the sourcing of new Mortgages.
- These are equal to half of the commitment fee received from the borrower by the MIC and encourage Management to deploy the shareholder’s capital into Mortgages with short timelines of 6 to 24 months.
- An annual commission equal to two percent of the average capital deployed over the entire fiscal year.
- An investment commission equal to 1% of the year end capitalization.
Aroi Mortgage Investment Corporation Inc. – Articles of Incorporation
Aroi Management Incorporated
This company is home to the usual employee obligations, rent for office space, phone bills and marketing costs that most companies must live with. It is the party with which the contract linking the founders to the MIC resides.
The Inter-corporate Contract
This is the agreement which governs the business relationship between Aroi Mortgage Investment Corp. Inc. and the two founders who find, broker and adjudicate the Mortgage lending opportunities and ensure each borrower pays on-time. It puts forward a very fair approach to resolving disputes and details the very severe consequences, such as termination, that are available to the Aroi Mortgage Investment Corporation Inc. should the Principals fail to fulfill their duties in a careful and prudent manner.