Hypertec – Court of Quebec finds that expenses of a special committee formed to deal with a shareholder dispute were incurred to restore management operations and were currently deductible

As a result of an impasse in the boards of directors for the various companies in Hypertec group due to conflict between the two families owning the companies, the Louiselle family launched an oppression action against the Robert family and various companies within the group. The court then ordered the establishment of a special committee to address the group's financing needs. This committee then incurred expenses (the “Expenses”) of $1.3 million, including almost $1 million paid to PwC for an investigation of the group's finances and operations as mandated by the court order, with the balance paid as legal fees.

Fournier JCQ found that the ARQ had not pleaded at all the factual basis for denying the Expenses under the Quebec equivalent of s. 18(1)(b) and that this deficiency could not be cured by the Quebec equivalent of ITA s. 152(9).

However, Fournier JCQ went on to indicate obiter that the Expenses was not capital expenditures, stating:

[117] It is certain that any expenses aimed at resolving a deadlock in a company’s board of directors and/or better informing its shareholders are beneficial to the company and provide it with advantages that may even be enduring.

[118] However, that was not the intended result or purpose of the Expenses. These were rather incurred to restore a climate of trust and to respond to the requests of certain shareholders seeking accurate information to enable them to make the necessary decisions for the continuation of the company’s operations.

Neal Armstrong. Summaries of Hypertec Systèmes inc./Hypertec Systems Inc. v. Agence du revenu du Québec, 2025 QCCQ 6704 under s. 18(1)(a) – legal and professional fees, and s. 152(9).