Finance states that the B2B s. 212(3.6)(a) rule was intended to potentially apply re common share dividends
Canco pays interest on an interest-bearing loan from its parent, Forco 2, which declares and pays dividends on its common shares held by Forco 1. Was there an intent that s. 212(3.6)(a) would not apply given that there is no obligation in the common share terms to declare any dividends?
Finance indicated that the intention was to capture not only preferred dividends, but also common-share dividends on the basis that a dividend declaration on common shares generates an obligation to pay the dividend. However, whether the rule applied would depend on whether the linkage test was met, which would require consideration of relevant factors such as the timing and quantum of the dividend payments.