Shares underlying flow-through warrants need not qualify as flow-through shares

Although junior issuers commonly "sweeten" flow-through offerings with warrants with a view to the total proceeds, including those allocated to the warrants, qualifying for renunciation, it is rare for the issuer to covenant that the common shares to be issued on exercise of the warrants will also qualify as flow-through shares (as this effectively could amount in a commitment to engage in Canadian exploration in, say, four years’ time).

CRA agrees that this is unnecessary to qualify the warrants for flow-through treatment.  This is obvious on the statutory wording.  However, a badly-expressed earlier CRA position (2010-0384341C6) seemed to say the opposite.

Neal Armstrong. Summary of 5 September 2014 T.I. 2014-0534941E5 under s. 66(15) – flow-through share.