I-3, r. 1 - Regulation respecting the Taxation Act

Section 359.1r3 Disposition versions

2016-02-17

359.1R3. For the purposes of the first paragraph of section 359.1 of the Act, a new share of the capital stock of a corporation is a prescribed share if, at the time it is issued, any of the following conditions is fulfilled:

(a)  under the terms or conditions of the share or any agreement in respect of the share or its issue,

i.  the amount of a dividend, determined by way of a formula or otherwise, that may be declared or paid on the share, referred to in this chapter as the “dividend entitlement”, may reasonably be considered to be

(1)  fixed,

(2)  limited to a maximum, or

(3)  established to be not less than a minimum, including any amount determined on a cumulative basis, where with respect to the dividend that may be declared or paid on the share there is a preference over any other dividends that may be declared or paid on any other share of the capital stock of the corporation,

ii.  the amount, determined by way of a formula or otherwise, that the holder of the share is entitled to receive in respect of the share on the dissolution, liquidation or winding-up of the corporation, on a reduction of the paid-up capital of the share or on the redemption, acquisition or cancellation of the share by the corporation or by the specified person in relation to the corporation, referred to in this chapter as the “liquidation entitlement”, may reasonably be considered to be fixed, limited to a maximum or established to be not less than a minimum,

iii.  the share is convertible or exchangeable into another security issued by the corporation, unless the following conditions are fulfilled:

(1)  it is convertible or exchangeable only into a property that is another share of the corporation, referred to in this subparagraph and in subparagraph 2 as a “particular share”, that, if issued, would not be a prescribed share, a right, including a right conferred by a warrant that, if it were issued, would not be a prescribed right and that, if it were exercised, would allow the person exercising it to acquire only a share of the corporation that, if the share were issued, would not be a prescribed share, or both a particular share and such a right, and

(2)  all the consideration receivable by the holder of the share on the conversion or exchange of the share is the particular share, the right described in subparagraph 1, or both the particular share and such right, or

iv.  the corporation has, either absolutely or contingently, an obligation to reduce the paid-up capital in respect of the share, or any person or partnership has, either absolutely or contingently, an obligation to cause the corporation to reduce the paid-up capital in respect of the share, otherwise than pursuant to a conversion or an exchange of the share, where the right to so convert or exchange does not cause the share to be a prescribed share under subparagraph iii;

(b)  any person or partnership has, either absolutely or contingently, an obligation, either immediately or in the future, other than an excluded obligation in relation to the share, to provide assistance, to make a loan or payment, to transfer property or otherwise to confer a benefit by any means whatever, including the payment of a dividend, and that obligation may reasonably be considered to be, directly or indirectly, a repayment or return by the corporation or a specified person in relation to the corporation of all or part of the consideration for which the share was issued or for which an interest in the partnership that acquires the share was issued;

(c)  any person or partnership has, either absolutely or contingently, an obligation, other than an excluded obligation in relation to the share, to effect any undertaking, either immediately or in the future, with respect to the share or the agreement under which the share is issued, including any guarantee, security, indemnity, covenant or agreement and including the lending of funds to, or on behalf of, the holder of the share or, where the holder is a partnership, to a member thereof or to a specified person in relation to the holder or the member of the partnership, as the case may be, or the placing of amounts on deposit with, or on behalf of, such holder, member or person, that may reasonably be considered to have been given to ensure, directly or indirectly, that

i.  any loss that the holder of the share and, where the holder is a partnership, a member thereof or a specified person in relation to the holder or a member of the partnership, as the case may be, may sustain by reason of the holding, ownership or disposition of the share or any other property is limited in any respect, or

ii.  the holder of the share and, where the holder is a partnership, a member thereof or a specified person in relation to the holder or a member of the partnership, as the case may be, will derive earnings by reason of the holding, ownership or disposition of the share or any other property;

(d)  the corporation or a specified person in relation to the corporation, within 5 years after the date the share is issued, may reasonably be expected

i.  to acquire or cancel the share in whole or in part otherwise than on a conversion or exchange of the share that meets the conditions set out in subparagraphs 1 and 2 of subparagraph iii of paragraph a or otherwise than as a consequence of an amalgamation of a subsidiary wholly-owned corporation, a winding-up of a subsidiary wholly-owned corporation to which section 556 of the Act applies, or the payment of a dividend by a subsidiary wholly-owned corporation to its parent,

ii.  to reduce the paid-up capital of the corporation in respect of the share otherwise than on a conversion or exchange of the share that meets the conditions set out in subparagraphs 1 and 2 of subparagraph iii of paragraph a or otherwise than as a consequence of an amalgamation, a winding-up, or the payment of a dividend referred to in subparagraph i, or

iii.  to make a payment, transfer or other transaction, directly or indirectly, otherwise than pursuant to an excluded obligation in relation to the share or otherwise than as a consequence of an amalgamation, a winding-up or the payment of a dividend referred to in subparagraph i, by way of a dividend, loan, purchase of shares, financial assistance to any purchaser of the share or, where the purchaser is a partnership, a member thereof, or in any other manner whatever, that may reasonably be considered to be a repayment or return of all or part of the consideration for which the share was issued or for which an interest in the partnership that acquires the share was issued;

(e)  any person or partnership may reasonably be expected to respect, within 5 years after the date the share is issued, any undertaking which, if it were in force at the time the share was issued, would cause the share to be a prescribed share by reason of paragraph c; or

(f)  it may reasonably be expected that, within 5 years after the date the share is issued,

i.  any of the terms or conditions of the share or any existing agreement relating to the share or its issue will be modified in such a manner that the share would be a prescribed share if it had been issued at the time of the modification, or

ii.  any new agreement relating to the share or its issue will be entered into in such a manner that the share would be a prescribed share if it had been issued at the time when the new agreement is entered into.

s. 359.1R3; O.C. 91-94, s. 11; O.C. 1707-97, s. 98; O.C. 1466-98, s. 126; O.C. 134-2009, s. 1; O.C. 66-2016, s. 10.

2012-09-01

359.1R3. For the purposes of the first paragraph of section 359.1 of the Act, a new share of the capital stock of a corporation is a prescribed share if, at the time it is issued, any of the following conditions is fulfilled:

(a)  under the terms or conditions of the share or any agreement in respect of the share or its issue,

i.  the amount of a dividend, determined by way of a formula or otherwise, that may be declared or paid on the share, referred to in this chapter as the “dividend entitlement”, may reasonably be considered to be

(1)  fixed,

(2)  limited to a maximum, or

(3)  established to be not less than a minimum, including any amount determined on a cumulative basis, where with respect to the dividend that may be declared or paid on the share there is a preference over any other dividends that may be declared or paid on any other share of the capital stock of the corporation,

ii.  the amount, determined by way of a formula or otherwise, that the holder of the share is entitled to receive in respect of the share on the dissolution, liquidation or winding-up of the corporation, on a reduction of the paid-up capital of the share or on the redemption, acquisition or cancellation of the share by the corporation or by the specified person in relation to the corporation, referred to in this chapter as the “liquidation entitlement”, may reasonably be considered to be fixed, limited to a maximum or established to be not less than a minimum,

iii.  the share is convertible or exchangeable into another security issued by the corporation, unless the following conditions are fulfilled:

(1)  it is convertible or exchangeable only into a property that is another share of the corporation, referred to in this subparagraph and in subparagraph 2 as a “particular share”, that, if issued, would not be a prescribed share, a right, including a right conferred by a warrant that, if exercised, would allow the person exercising it to acquire only a share of the corporation that, if issued, would not be a prescribed share, or both a particular share and such right, and

(2)  all the consideration receivable by the holder of the share on the conversion or exchange of the share is the particular share, the right described in subparagraph 1, or both the particular share and such right, or

iv.  the corporation has, either absolutely or contingently, an obligation to reduce the paid-up capital in respect of the share, or any person or partnership has, either absolutely or contingently, an obligation to cause the corporation to reduce the paid-up capital in respect of the share, otherwise than pursuant to a conversion or an exchange of the share, where the right to so convert or exchange does not cause the share to be a prescribed share under subparagraph iii;

(b)  any person or partnership has, either absolutely or contingently, an obligation, either immediately or in the future, other than an excluded obligation in relation to the share, to provide assistance, to make a loan or payment, to transfer property or otherwise to confer a benefit by any means whatever, including the payment of a dividend, and that obligation may reasonably be considered to be, directly or indirectly, a repayment or return by the corporation or a specified person in relation to the corporation of all or part of the consideration for which the share was issued or for which an interest in the partnership that acquires the share was issued;

(c)  any person or partnership has, either absolutely or contingently, an obligation, other than an excluded obligation in relation to the share, to effect any undertaking, either immediately or in the future, with respect to the share or the agreement under which the share is issued, including any guarantee, security, indemnity, covenant or agreement and including the lending of funds to, or on behalf of, the holder of the share or, where the holder is a partnership, to a member thereof or to a specified person in relation to the holder or the member of the partnership, as the case may be, or the placing of amounts on deposit with, or on behalf of, such holder, member or person, that may reasonably be considered to have been given to ensure, directly or indirectly, that

i.  any loss that the holder of the share and, where the holder is a partnership, a member thereof or a specified person in relation to the holder or a member of the partnership, as the case may be, may sustain by reason of the holding, ownership or disposition of the share or any other property is limited in any respect, or

ii.  the holder of the share and, where the holder is a partnership, a member thereof or a specified person in relation to the holder or a member of the partnership, as the case may be, will derive earnings by reason of the holding, ownership or disposition of the share or any other property;

(d)  the corporation or a specified person in relation to the corporation, within 5 years after the date the share is issued, may reasonably be expected

i.  to acquire or cancel the share in whole or in part otherwise than on a conversion or exchange of the share that meets the conditions set out in subparagraphs 1 and 2 of subparagraph iii of paragraph a or otherwise than as a consequence of an amalgamation of a subsidiary wholly-owned corporation, a winding-up of a subsidiary wholly-owned corporation to which section 556 of the Act applies, or the payment of a dividend by a subsidiary wholly-owned corporation to its parent,

ii.  to reduce the paid-up capital of the corporation in respect of the share otherwise than on a conversion or exchange of the share that meets the conditions set out in subparagraphs 1 and 2 of subparagraph iii of paragraph a or otherwise than as a consequence of an amalgamation, a winding-up, or the payment of a dividend referred to in subparagraph i, or

iii.  to make a payment, transfer or other transaction, directly or indirectly, otherwise than pursuant to an excluded obligation in relation to the share or otherwise than as a consequence of an amalgamation, a winding-up or the payment of a dividend referred to in subparagraph i, by way of a dividend, loan, purchase of shares, financial assistance to any purchaser of the share or, where the purchaser is a partnership, a member thereof, or in any other manner whatever, that may reasonably be considered to be a repayment or return of all or part of the consideration for which the share was issued or for which an interest in the partnership that acquires the share was issued;

(e)  any person or partnership may reasonably be expected to respect, within 5 years after the date the share is issued, any undertaking which, if it were in force at the time the share was issued, would cause the share to be a prescribed share by reason of paragraph c; or

(f)  it may reasonably be expected that, within 5 years after the date the share is issued,

i.  any of the terms or conditions of the share or any existing agreement relating to the share or its issue will be modified in such a manner that the share would be a prescribed share if it had been issued at the time of the modification, or

ii.  any new agreement relating to the share or its issue will be entered into in such a manner that the share would be a prescribed share if it had been issued at the time when the new agreement is entered into.

s. 359.1R3; O.C. 91-94, s. 11; O.C. 1707-97, s. 98; O.C. 1466-98, s. 126; O.C. 134-2009, s. 1.