Words and Phrases - "de jure control"

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11 May 2017 Internal T.I. 2016-0665931I7 - Related to participating employer

under Duha, a 50% shareholder potentially can have de jure control

Respecting where two unrelated individuals each held exactly 50% of the (voting common) shares of their employer corporation, the Directorate first noted:

According to the Court in Duha, to determine whether effective control exists, one must consider:

a) the corporation’s governing statute;

b) the share register of the corporation; and

c) any specific or unique limitation on either the majority shareholder’s power to control the election of the board or the board’s power to manage the business and affairs of the company, as manifested in either:

i. the constating documents of the corporation; or

ii. any unanimous shareholder agreement.

The Directorate then noted that as “the determination of whether a person exercises de jure control … must also take into consideration whether any specific or unique limitation on a shareholder’s power to control the election of the board or the board’s power to manage the business and affairs of the company, is manifested in either the constating documents of the corporation, or any unanimous shareholder agreement,” it followed that either individual could have de jure control and be related to the employer under s. 251(2)(b)(i).

Words and Phrases
de jure control
Locations of other summaries Wordcount
Tax Topics - Income Tax Regulations - Regulation 8000 - Subsection 8300(1) - Individual Pension PLan two unrelated 50% shareholders potentially could both be related to the corporation based on Duha USA rights and s. 251(5)(b) rights 248
Tax Topics - Income Tax Act - Section 251 - Subsection 251(5) - Paragraph 251(5)(b) s. 251(5)(b) deemed control does not undercut actual de jure control 138