S. 256(6) does not protect a company’s CCPC status where its shares are pledged to a pubco to secure an indemnity, not debt

S. 256(6) typically will deem a pledge of shares of a mooted Canadian-controlled private corporation to a public corporation, such as a bank, to secure indebtedness (which thereby entails a contingent right, described in s. 251(5)(b), of such pubco to acquire the pledged shares on default) not to entail control of the CCPC by the pubco. However, CRA notes that this provision does not work if the pledge instead secures an indemnity right of the pubco (which would not come within the classic definitions of "indebtedness" or "debt.")

Summaries of 4 February 2015 T.I. 2015-0565741E5 under s. 256(6) and s. 251(5)(b).