CRA indicates that dematerialization of a corporation’s shares would not cause their disposition

Pursuant to a provision of a Business Corporations Act (similar to s. 54 of the Ontario Business Corporations Act), certificated securities (represented by share certificates) of a corporation may be replaced with uncertificated securities (represented by electronic records), by way of a notice (a notice of shareholder interest) to each shareholder setting out the information required to be stated on a share certificate (a process known as dematerialization) or, conversely, uncertificated securities or notices of shareholder interest, may be replaced with share certificates. Furthermore, a shareholder, who has lost its share certificate and has signed a declaration of loss and indemnity, can receive a replacement share certificate or a notice of shareholder interest from the corporation.

CRA indicated that these processes would not in themselves trigger a disposition, stating:

[A] share certificate or notice of shareholder interest is simply evidence of the ownership of a share (or shares). … [Y]ou have advised … that … there is no change in the capital structure of the Corporation, the number of outstanding shares, the number of shares held by any shareholder, or the interest, rights, or privileges attached to any share.

[Accordingly] …. the actions undertaken would not, in and of themselves, constitute a redemption, acquisition, or cancellation of any share of the Corporation, or otherwise result in a disposition of a share of the Corporation.

Neal Armstrong. Summary of 28 June 2022 External T.I. 2022-0933661E5 under s. 248(1) – disposition.