Royalty trust
A royalty trust is an investment trust that holds royalty interests in oil, gas or mineral production and passes the income to its unitholders. Royalty trusts were once common in the Canadian energy sector, but most converted to corporations after federal tax rules for specified investment flow-through (SIFT) trusts, announced in 2006 and fully effective in 2011, removed their tax advantage.
How BC law treats it
Trust units are securities, so offering them to investors is a distribution that requires a prospectus or an exemption under the Securities Act, RSBC 1996, c 418 and National Instrument 45-106 Prospectus Exemptions.
What it means for your business
A royalty trust is rarely a practical structure for a BC small business today; a corporation is usually simpler and more tax efficient.
Risks and common mistakes
Raising money from investors through trust units without a prospectus or a valid exemption breaches securities law and can lead to regulatory sanctions.
For the full explanation, see our entry on Securities.
General information about British Columbia and Canadian law, current to October 2026. It is not legal advice.
