CRA applies the "holder-by-holder" method to treat contingent s. 251(5)(b) rights as being exercised re all the other shareholders

X, the sole shareholder of a CCPC, sells 25% of his shares to Acquireco, whose shareholders (also executives) are his son (as to 30%) and 10 unrelated individuals (each with 7%). The Acquireco shareholders’ agreement provides that, on any voluntary departure, the remaining shareholders have a proportionate right to acquire the departing employee’s shares.

In finding that X’s son would be deemed to control Acquireco by virtue of s. 251(5)(b)(i), so that s. 84.1 would apply to X’s sale to Acquireco, CRA stated:

As a general rule, the CRA will apply this presumption [in s. 251(5)(b)(i)] by taking into account the rights of Mr. X's son in respect of all other shareholders ("holder-by-holder" method). Accordingly, Mr. X's son would have rights to all of the shares because he would have rights to the shares of each of the shareholders if each of them became a shareholder affected by an event provided for in the agreement.

Neal Armstrong. Summary of 6 October 2017 APFF Roundtable, Q.17 under s. 251(5)(b)(i).