Bagtech - Federal Court of Appeal finds that voting restrictions in a shareholder agreement are relevant to de jure control if any clause in the agreement qualifies it as a USA

A unanimous shareholder agreement for a corporation which was majority-owned by non-residents restricted the voting rights of the non-residents, so that the resident shareholders were entitled to elect a majority of the board.

The Crown unsuccessfully argued that, as a USA is defined as an agreement that restricts the powers of the directors (rather than the voting rights of the majority shareholders), these voting restrictions should be ignored.  Gauthier JA effectively indicated that once an agreement qualifies as a USA by virtue of containing any restriction on the directors' powers, any voting restriction contained elsewhere in the agreement can be taken into account for de jure control purposes.  Therefore, the corporation qualified as a Canadian-controlled private corporation.

Neal Armstrong.  Summary of Price Waterhouse Cooper, Trustee in Bankruptcy of Bioartificial Gel Technologies (Bagtech) v. The Queen, 2013 FCA 164 under s. 125(7) - Canadian-controlled private corporation.