CRA finds that euro and U.S.-dollar-denominated shares of a foreign affiliate are separate classes of shares

S. 90(2) deems a "pro rata" distribution on all the shares of a class of shares of a foreign affiliate (other than on a liquidation, redemption or QROC distribution) to be a dividend. FA’s articles provided that its share capital was divided into euro-denominated and U.S.-dollar-denominated shares and that when a dividend was declared on all its shares, the dividend would be paid in proportion to the paid-in capital of the respective shares expressed in euros or U.S. dollars – so that, for example, where the euro had appreciated relative to the U.S. dollar, the euro-denominated shares would receive more on a per share basis.

CRA ruled that FA would be considered to have two classes of shares, with the distribution on each class satisfying the pro rata test in s. 90(2).  This might be regarded as the flip side of a CRA position that shares labelled as two classes of shares will be regarded by CRA as one class if their substantive attributes are the  same (see, for example, 2013-0495821C6).

Neal Armstrong.  Summary of 2015 Ruling 2014-0527961R3 under s. 90(2).