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

Section 395r1 Disposition versions

2012-09-01

395R1. For the purposes of paragraph e of section 395 of the Act, a share of a class of the capital stock of a corporation is a prescribed share if that corporation issued it after 31 December 1982, if it is not referred to in section 395R2 and if

(a)  the corporation, any person related to it or of which it has effective management or control, or any partnership or trust of which the corporation or a person related to it is a member or beneficiary, is or may be required to redeem, acquire or cancel, in whole or in part, the share or to reduce its paid up capital at any time within 5 years from the date of its issue;

(b)  a person or partnership referred to in paragraph a provides or may be required to provide, in relation to the share, any form of guarantee, security or similar undertaking that could take effect within 5 years from the date of its issue, other than a guarantee, security or similar undertaking in respect of any amount of assistance or benefit from a government, municipality or other public authority in Canada or in respect of eligibility for such assistance or benefit;

(c)  the share, referred to in this section and sections 395R2 and 395R3 as the “convertible share”, is, under its terms or conditions, convertible, directly or indirectly, at any time within 5 years from the date of its issue, into debt or into a share, referred to in this section and sections 395R2 and 395R3 as the “acquired share”, that is or would be, if issued, a prescribed share;

(d)  immediately after the share was issued, the person to whom the share was issued or a person related to the latter, controls directly or indirectly or has an absolute or contingent right to control directly or indirectly or to acquire direct or indirect control of the corporation, either alone or together with a related person, a related group of persons of which the person is a member or a partnership or trust of which the person is a member or beneficiary, and the corporation has the right, under the terms or conditions in respect of which the share was issued, to redeem, purchase or otherwise acquire the share within 5 years from the date of its issue;

(e)  at the time the share was issued, the existence of the corporation was limited or could be limited, by reason of an arrangement that is not an amalgamation within the meaning of section 544 of the Act, to a period that ends within 5 years from the date of its issue; or

(f)  the terms or conditions of the share, referred to in this paragraph as the “first share”, or of an agreement in existence at the time of its issue provide that another share, referred to in this section and sections 395R2 and 395R3 as the “substituted share” that is, or would be, if it was issued, a prescribed share, may be substituted or exchanged for the first share within 5 years from the date of issue of the first share.

s. 395R2; O.C. 2509-85, s. 33; O.C. 91-94, s. 46; O.C. 1707-97, s. 98; O.C. 134-2009, s. 1.