Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.
Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.
1995 Canadian Tax Foundation Conference
Revenue Canada Forum
Acquisition of Control by a Group
Recently we have been asked to clarify our position concerning when persons would be considered to be a group that has acquired de jure control of a corporation, particularly in the context of of a closely-held corporation.
It remains the Department's view that it is a question of fact whether persons who own the majority of voting power in a corporation constitute a group that has de jure control of the corporation. Two or more persons who become the owners of a majority of the voting shares of a corporation will generally be considered to have acquired control of the corporation where there is an agreement amongst them to vote their shares jointly, where there is evidence that they act in concert to control the corporation, or where there is evidence of their intention to act in concert to control the corporation. A group of persons would be regarded as acting in concert when the group acts with considerable interdependence in transactions involving a common purpose. A common link or interest between members of a group is required to ensure that an acquisition of control is the result of a jointly decided action, rather than a mere fortuitous event.
Although the requirement to act in concert is relevant in determining whether a group of persons controls any corporation, it is the Department's view that certain presumptions are appropriate in the case of closely-held corporations. For example, in a closely-held situation, the fact that shareholders jointly adopt mutually advantageous measures is an important indicator of acting in concert. Furthermore, it is the Department's view that in almost all cases where the voting power in a corporation is equally divided between two shareholders, the corporation will be controlled by the group consisting of the two shareholders. In order to rebut this presumption of control by the group, it would be necessary to show that no one is controlling the corporation and that the decision-making process in the corporation is effectively deadlocked. In our view, this would be very unusual; however, an example might be where the two shareholders cannot agree on the how to run the corporation and have consequently applied to a court for an order authorizing the dissolution of the company.
Author:Tim Bryant/Mark Symes
File:952970
Date:November 21, 1995
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