ATR-22R (14 April 89)

Favourable ss.15(1), 56(2) and 86(2) rulings were given with respect to an estate freeze transaction under s. 86(1) entailing the issuance of "special shares" which were non-voting, bore a quarterly non-cumulative cash dividend of 1.75% of the redemption price, were redeemable and retractable for the redemption amount, provided that any preference, right, condition or limitation attaching to the special shares could be amended only on a 2/3 vote of the shareholders of each class, and provided that no dividends could be paid on any other class if the resulting net assets of the corporation after the payment of such dividends would be less than the aggregate redemption price of these special shares.

A favourable ruling is given on an estate-freeze transaction where 100 common shares of the frozen company are issued to father for $1 each, who then gifts those common shares to his 40-year old son.

Favourable rulings are given where:

1. Holdco "exchanges" 100% of the issued common shares of Opco for redeemable retractable non-voting special shares with a 7% non-cumulative dividend, special class voting rights and the standard asset depletion protections;
2. 100 common shares are issued to Mr. X for $1 each; and
3. Mr. X gifts the common shares to his 40-year old son.

S.26(27) does not apply to a change of common shares into special shares pursuant to a s. 86 reorganization of a pre-1972 company, where the shareholder had acquired its common shares after 1971.