Economic Action Plan 2014 Act, No. 2 (S.C. 2014, c. 39)

(b) the CRIC is immediately after the investment time, or becomes after the investment time and as part of a transaction or event or series of transactions or events that includes the making of the investment, controlled by a non-resident corporation (in this section referred to as the “parent”), and any of the following conditions is satisfied:

• (i) if, at the investment time, the parent owned all shares of the capital stock of the CRIC that are owned — determined without reference to paragraph 212.3(25)(b) in the case of partnerships referred to in this subparagraph and as if all rights referred to in paragraph 251(5)(b), of the parent, each person that does not deal at arm’s length with the parent and all of those partnerships, were immediate and absolute and the parent and each of the other persons and partnerships had exercised those rights at the investment time — by the parent, persons that are not dealing at arm’s length with the parent and partnerships of which the parent or a non-resident person that is not dealing at arm’s length with the parent is a member (other than a limited partner within the meaning assigned by subsection 96(2.4)), the parent would own shares of the capital stock of the CRIC that

  • (A) give the holders of those shares 25% or more of all of the votes that could be cast at any annual meeting of the shareholders in respect of all shares of the capital stock of the CRIC, or

  • (B) have a fair market value of 25% or more of the fair market value of all of the issued and outstanding shares of the capital stock of the CRIC,

• (ii) the investment is an acquisition of shares of the capital stock of a subject corporation by a CRIC to which this subparagraph applies because of subsection (19), or

• (iii) under an arrangement entered into in connection with the investment, a person or partnership, other than the CRIC or a person related to the CRIC, has in any material respect the risk of loss or opportunity for gain or profit in respect of a property that can reasonably be considered to relate to the investment; and

(a) for the purposes of this Part and subject to subsections (3) and (7), the CRIC is deemed to have paid to the parent, and the parent is deemed to have received from the CRIC, at the dividend time, a dividend equal to the total of all amounts each of which is the portion of the fair market value at the investment time of any property (not including shares of the capital stock of the CRIC) transferred, any obligation assumed or incurred, or any benefit otherwise conferred, by the CRIC, or of any property transferred to the CRIC which transfer results in the reduction of an amount owing to the CRIC, that can reasonably be considered to relate to the investment; and

Marginal note:Dividend substitution election

(3) If a CRIC (or a CRIC and a corporation that is a qualifying substitute corporation in respect of the CRIC at the dividend time) and the parent (or the parent and another non-resident corporation that at the dividend time does not deal at arm’s length with the parent) jointly elect in writing under this subsection in respect of an investment, and the election is filed with the Minister on or before the filing-due date of the CRIC for its taxation year that includes the dividend time, then the dividend that would, in the absence of this subsection, be deemed under paragraph (2)(a) to have been paid by the CRIC to the parent and received by the parent from the CRIC is deemed to have instead been

• (a) paid by the CRIC or the qualifying substitute corporation, as agreed on in the election; and

• (b) paid to, and received by, the parent or the other non-resident corporation, as agreed on in the election.

Marginal note:Definitions

(4) The following definitions apply in this section.

“cross-border class”

« catégorie transfrontalière »

“cross-border class”, in respect of an investment, means a class of shares of the capital stock of a CRIC or qualifying substitute corporation if, immediately after the dividend time in respect of the investment,

• (a) the parent, or a non-resident corporation that does not deal at arm’s length with the parent, owns at least one share of the class; and

• (b) no more than 30% of the issued and outstanding shares of the class are owned by one or more persons resident in Canada that do not deal at arm’s length with the parent.

“dividend time”

« moment du dividende »

“dividend time”, in respect of an investment, means

• (a) if the CRIC is controlled by the parent at the investment time, the investment time; or

• (b) in any other case, the earlier of

  • (i) the first time, after the investment time, at which the CRIC is controlled by the parent, and

  • (ii) the day that is one year after the day that includes the investment time.

“qualifying substitute corporation”

« société de substitution admissible »

“qualifying substitute corporation”, at any time in respect of a CRIC, means a corporation resident in Canada

• (a) that is, at that time, controlled by the parent or by a non-resident corporation that does not deal at arm’s length with the parent;

• (b) that has, at that time, an equity percentage (as defined in subsection 95(4)) in the CRIC; and

• (c) shares of the capital stock of which are, at that time, owned by the parent or another non-resident corporation with which the parent does not, at that time, deal at arm’s length.

Marginal note:Sequential investments — paragraph (10)(f)

(5.1) In the case of an investment (in this subsection referred to as the “second investment”) in a subject corporation by a CRIC described in paragraph (10)(f), the total referred to in paragraph (2)(a) in respect of the second investment is to be reduced by the total referred to in paragraph (2)(a) in respect of a prior investment (in this subsection referred to as the “first investment”) in the subject corporation by another corporation resident in Canada if

• (a) the first investment is an investment that is described in paragraph (10)(a) or (b) and to which paragraph (2)(a) applies;

• (b) immediately after the investment time in respect of the first investment, the other corporation is not controlled by the parent; and

• (c) the other corporation becomes, after the time that is immediately after the investment time in respect of the first investment and as part of a transaction or event or series of transactions or events that includes the making of the first investment, controlled by the parent because of the second investment.

Marginal note:Anti-avoidance rule — cross-border class

(6) A particular class of shares of the capital stock of a CRIC or a qualifying substitute corporation that, in the absence of this subsection, would be a cross-border class in respect of an investment is deemed not to be a cross-border class in respect of the investment if

• (a) a particular corporation resident in Canada that does not deal at arm’s length with the parent

  • (i) acquires shares of the particular class (or shares that are substituted for those shares) as part of a transaction or event or series of transactions or events that includes the investment, or

  • (ii) owns shares of the particular class (or shares that are substituted for those shares) and, as part of a transaction or event or series of transactions or events that includes the investment,

    • (A) the paid-up capital in respect of the particular class is increased otherwise than as a result of an acquisition described in subparagraph (i), and

    • (B) the increase in paid-up capital in respect of the particular class can reasonably be considered to be connected to funding provided to the particular corporation or another corporation resident in Canada (other than the corporation that issued the particular class) by the parent or a non-resident person that does not deal at arm’s length with the parent, unless

      • (I) the funding results in an increase, equal to the amount funded, in the paid-up capital of shares of a class of the capital stock of the particular corporation, or the other corporation, that is a cross-border class in respect of the investment, and

      • (II) the increase referred to in subclause (I) occurred at or before the time of the increase to the paid-up capital in respect of the particular class; and

• (b) it can reasonably be considered that one of the main reasons for the acquisition or for the funding, as the case may be, was to increase the amount of a deduction required under paragraph (7)(b) or (c) in computing the paid-up capital in respect of shares of the particular class held by the particular corporation.

Marginal note:Reduction of deemed dividend

(7) If paragraph (2)(a) applies to an investment in a subject corporation made by a CRIC,

• (a) where the CRIC demonstrates — in respect of one or more classes of shares of the capital stock of the CRIC, or of a qualifying substitute corporation, all the issued and outstanding shares of which are owned, immediately after the dividend time in respect of the investment, by persons that deal at arm’s length with the CRIC — that an amount of paid-up capital in respect of each of the classes arose as a consequence of one or more transfers of property, directly or indirectly, to the CRIC and that all of the property transferred was used by the CRIC to make, in whole or in part, the investment (or, in the case of an investment described in paragraph (10)(f), the direct acquisition referred to in that paragraph), then

  • (i) the amount, determined without reference to this subsection, of the dividend deemed under paragraph (2)(a) to have been paid and received, is reduced by the lesser of

    • (A) that amount, and

    • (B) the total of all amounts of paid-up capital so demonstrated by the CRIC, and

  • (ii) in computing the paid-up capital in respect of each class described in this paragraph, at any time after the dividend time, there is to be deducted an amount equal to the portion of the amount determined under subparagraph (i) that can reasonably be considered to relate to that class;

• (b) where the amount, determined without reference to this paragraph, of the dividend deemed under paragraph (2)(a) to have been paid and received is equal to or greater than the total of all amounts each of which is an amount of paid-up capital immediately after the dividend time, determined without reference to this paragraph, of a cross-border class in respect of the investment, then

  • (i) the amount of the dividend is reduced by the total referred to in this paragraph, and

  • (ii) in computing, at any time after the dividend time, the paid-up capital in respect of each cross-border class in respect of the investment, there is to be deducted an amount equal to the paid-up capital in respect of that class immediately after the dividend time, determined without reference to this paragraph;

• (c) where paragraph (b) does not apply and there is at least one cross-border class in respect of the investment,

  • (i) the amount, determined without reference to this paragraph, of the dividend is reduced to nil,

  • (ii) in computing, at any time after the dividend time, the paid-up capital in respect of a particular cross-border class in respect of the investment, there is to be deducted the amount, if any, that when added to the total of all amounts that are deducted under this paragraph in computing the paid-up capital of other cross-border classes, results in the greatest total reduction because of this paragraph, immediately after the dividend time, of the paid-up capital in respect of shares of cross-border classes that are owned by the parent or another non-resident corporation with which the parent does not, at the dividend time, deal at arm’s length,

  • (iii) if the proportion of the shares of a particular class owned, in aggregate, by the parent and non-resident corporations that do not deal at arm’s length with the parent is equal to the proportion so owned of one or more other cross-border classes (in this subparagraph all those classes, together with the particular class, referred to as the “relevant classes”), then the proportion that the reduction under subparagraph (ii) to the paid-up capital in respect of the particular class is of the paid-up capital, determined immediately after the dividend time and without reference to this paragraph, in respect of that class is to be equal to the proportion that the total reduction under subparagraph (ii) to the paid-up capital in respect of all the relevant classes is of the total paid-up capital, determined immediately after the dividend time and without reference to this paragraph, of all the relevant classes, and

  • (iv) the total of all amounts each of which is an amount to be deducted under subparagraph (ii) in computing the paid-up capital of a cross-border class is to be equal to the amount by which the dividend is reduced under subparagraph (i); and

• (d) if the amount of the dividend is reduced because of any of subparagraphs (a)(i), (b)(i) and (c)(i),

  • (i) the CRIC shall file with the Minister in prescribed manner a form containing prescribed information and the amounts of the paid-up capital, determined immediately after the dividend time and without reference to this subsection, of each class of shares that is described in paragraph (a) or that is a cross-border class in respect of the investment, the paid-up capital of the shares of each of those classes that are owned by the parent or another non-resident corporation that does not, at the dividend time, deal at arm’s length with the parent, and the reduction under any of subparagraphs (a)(ii), (b)(ii) and (c)(ii) in respect of each of those classes, and

  • (ii) if the form is not filed on or before the CRIC’s filing-due date for its taxation year that includes the dividend time, the CRIC is deemed to have paid to the parent, and the parent is deemed to have received from the CRIC, on the filing-due date, a dividend equal to the total of all amounts each of which is the amount of a reduction because of any of subparagraphs (a)(i), (b)(i) and (c)(i).

(ii) the total that would be determined under subparagraph (i) if this Act were read without reference to paragraph (2)(b) and subsections (7) and (9), and

(i) the total of all amounts required by paragraph (2)(b) or subsection (7) to be deducted in computing the paid-up capital in respect of the class before that time

Marginal note:Paid-up capital reinstatement

(9) If, in respect of an investment in a subject corporation made by a CRIC that is described in any of paragraphs (10)(a) to (f), an amount is deducted under paragraph (2)(b) or subsection (7) in computing the paid-up capital in respect of a class of shares of the capital stock of a particular corporation and, at a time subsequent to the investment time, there is a reduction of paid-up capital referred to in subparagraph (b)(i) or a receipt of property referred to in the description of A in subparagraph (b)(ii), then the paid-up capital in respect of the class is to be increased, immediately before the subsequent time, by the lesser of

• (a) the amount, if any, by which

  • (i) the total of all amounts deducted, before the subsequent time, under paragraph (2)(b) or subsection (7), in respect of the investment, in computing the paid-up capital in respect of the class

  exceeds

  • (ii) the total of all amounts added under this subsection, in respect of the investment, to the paid-up capital in respect of the class before the time that is immediately before the subsequent time, and

• (b) an amount that

  • (i) if the investment is described in paragraph (10)(a), (b) or (f), the paid-up capital in respect of the class is reduced at the subsequent time as part of or because of a distribution of property by the particular corporation and the property (in this paragraph referred to as the “distributed shares”) is shares of the capital stock of the subject corporation or shares of the capital stock of a foreign affiliate of the particular corporation that were substituted for shares of the capital stock of the subject corporation, is equal to the amount determined by the formula

    A/B

    where

    A 

    is

    • (A) if the investment is described in paragraph (10)(b), the portion of the fair market value, immediately before the subsequent time, of the distributed shares that can reasonably be considered to relate to the contribution of capital that is the investment, and

    • (B) if the investment is described in paragraph (10)(a) or (f), the lesser of

      • (I) the portion of the fair market value, immediately before the subsequent time, of the distributed shares that can reasonably be considered to relate to the shares (in this paragraph referred to as the “acquired shares”) of the capital stock of the subject corporation that were acquired on the investment (other than any portion described in clause (A)), and

      • (II) the proportion of the amount determined under subparagraph (a)(i) that the amount determined under subclause (I) is of the fair market value, immediately before the subsequent time, of the acquired shares, or the portion of the fair market value of shares that were substituted for the acquired shares that can reasonably be considered to relate to the acquired shares, and

    B 

    is

    • (A) if the particular corporation is, immediately after the dividend time, a qualifying substitute corporation in respect of the CRIC, the particular corporation’s equity percentage (as defined in subsection 95(4)) in the CRIC immediately after the dividend time, and

    • (B) in any other case, 100%, and

  • (ii) in any other case, is equal to the amount determined by the formula

    A × B/C

    where

    A 

    is the amount that is equal to the fair market value of property that the particular corporation demonstrates has been received at the subsequent time by it or by a corporation resident in Canada that was not dealing at arm’s length with the particular corporation at that time (in this subparagraph referred to as the “recipient corporation”)

    • (A) as proceeds from the disposition of the acquired shares, or other shares to the extent that the proceeds from the disposition of those other shares can reasonably be considered to relate to the acquired shares or to shares of the capital stock of the subject corporation in respect of which an investment described in paragraph (10)(b) was made, other than

      • (I) the fair market value of shares of the capital stock of another foreign affiliate of the taxpayer acquired by the recipient corporation as consideration for the disposition and as an investment to which subsection (16) or (18) applies, and

      • (II) proceeds from a disposition of shares to a corporation resident in Canada for which the acquisition of the shares is an investment to which subsection (16) or (18) applies,

    • (B) as a reduction of paid-up capital or dividend in respect of a class of shares of the capital stock of the subject corporation or the portion, of a reduction of paid-up capital or dividend in respect of a class of shares of the capital stock of a foreign affiliate of the particular corporation that were substituted for shares of the capital stock of the subject corporation, that can reasonably be considered to relate to the subject shares, or

    • (C) if the investment is described in paragraph (10)(c) or (d) or subparagraph (10)(e)(i),

      • (I) as a repayment of or as proceeds from the disposition of the debt obligation or amount owing, other than

        • 1. if the debt obligation or amount owing was acquired by another foreign affiliate of the taxpayer, the portion of the fair market value of property received by the particular corporation as a result of an investment by the particular corporation that is described in paragraphs (10)(a) to (f) to which subsection (16) or (18) applies, or

        • 2. as proceeds from a disposition to a corporation resident in Canada and that is affiliated with the particular corporation, and where subsection (16) or (18) applies to the other corporation in respect of its acquisition, or

      • (II) as interest on the debt obligation or amount owing,

    B 

    is the amount determined under paragraph (a) in respect of the class, and

    C 

    is the total of all amounts each of which is an amount determined under paragraph (a) in respect of all classes of shares of the capital stock of the particular corporation or of any corporation that does not deal at arm’s length with the particular corporation.

Marginal note:Exchange of debt obligation for shares

(9.1) For the purposes of subsection (9), if at any time a debt obligation that relates to a particular investment described in paragraph (10)(c) or (d) or subparagraph (10)(e)(i) is exchanged for shares of a subject corporation and as part of the exchange there is an acquisition of shares described in subparagraph (18)(b)(i) or paragraph 18(d), then all amounts, in respect of the particular investment, deducted under paragraph (2)(b) or subsection (7) from, or added under subsection (9) to, the paid-up capital in respect of a class of shares before that time are deemed to have been deducted or added, as the case may be, in respect of the acquisition of the shares and not the particular investment.

Marginal note:Continuity for paid-up capital reinstatement

(9.2) If at any particular time shares (in this subsection referred to as the “new shares”) of a class of the capital stock of a corporation resident in Canada are acquired, in a transaction to which any of sections 51, 85, 85.1, 86 and 87 apply, in exchange for a share (in this subsection referred to as the “old share”) of a class of the capital stock of a particular corporation that is either the corporation or another corporation resident in Canada, then for the purposes of subsections (8) and (9),

• (a) if the corporation that issues the new shares is not the particular corporation, it is deemed to be the same corporation as, and a continuation of, the particular corporation;

• (b) the new shares are deemed to be the same share, and of the same class of the capital stock of the particular corporation, as the old share; and

• (c) if the old share remains outstanding after the exchange, it is deemed to be a share of a different class of the capital stock of the particular corporation.

(iii) because a dividend has been declared, but not yet paid, by the subject corporation;

Marginal note:Control

(15) For the purposes of this section and paragraph 128.1(1)(c.3),

• (a) a CRIC or a taxpayer to which paragraph 128.1(1)(c.3) applies (in this paragraph referred to as the “specific corporation”), that would, in the absence of this subsection, be controlled at any time

  • (i) by more than one non-resident corporation is deemed not to be controlled at that time by any such non-resident that controls at that time another non-resident corporation that controls at that time the specific corporation, unless the application of this paragraph would otherwise result in no non-resident corporation controlling the specific corporation, and

  • (ii) by a particular non-resident corporation is deemed not to be controlled at that time by the particular corporation if the particular corporation is controlled at that time by another corporation that is at that time

    • (A) resident in Canada, and

    • (B) not controlled by any non-resident person; and

• (b) if at any time a corporation would not, in the absence of this subsection, be controlled by any non-resident corporation, and a related group (determined without reference to paragraph 251(5)(b)), each member of which is a non-resident corporation, is in a position to control the corporation, the corporation is deemed to be controlled at that time by

  • (i) the member of the group that has the greatest direct equity percentage (within the meaning assigned by subsection 95(4)) in the corporation at that time, or

  • (ii) where no member of the group has a direct equity percentage in the corporation that is greater than that of every other member, the member determined by the corporation or, if the corporation does not make a determination, by the Minister.

(b) officers of the CRIC, or of a corporation resident in Canada that did not, at the investment time, deal at arm’s length with the CRIC, had and exercised the principal decision-making authority in respect of the making of the investment and a majority of those officers were, at the investment time, persons each of whom was resident, and working principally,

(c) at the investment time, it is reasonably expected that

• (i) officers of the CRIC, or of a corporation resident in Canada that does not deal at arm’s length with the CRIC, will have and exercise the ongoing principal decision-making authority in respect of the investment,

• (ii) a majority of those officers will be persons each of whom will be resident, and working principally, in Canada or in a country in which a connected affiliate is resident, and

• (iii) the performance evaluation and compensation of the officers of the CRIC, or of the corporation resident in Canada that does not deal at arm’s length with the CRIC, who are resident, and work principally, in Canada, or in a country in which a connected affiliate is resident, will be based on the results of operations of the subject corporation to a greater extent than will be the performance evaluation and compensation of any officer of a non-resident corporation (other than the subject corporation, a corporation controlled by the subject corporation or a connected affiliate) that does not deal at arm’s length with the CRIC.

Marginal note:Dual officers

(17) For the purposes of paragraphs (16)(b) and (c), any person who is an officer of the CRIC, or of a corporation resident in Canada that does not deal at arm’s length with the CRIC, and of a non-resident corporation that does not, at the investment time, deal at arm’s length with the CRIC (other than the subject corporation, a subject subsidiary corporation or a connected affiliate) is deemed to not be resident, and to not work principally, in a country in which a connected affiliate is resident.

Marginal note:Exception — corporate reorganizations

(18) Subject to subsections (18.1) to (20), subsection (2) does not apply to an investment in a subject corporation made by a CRIC if

• (a) the investment is described in paragraph (10)(a) or (d) and is an acquisition of shares of the capital stock, or a debt obligation, of the subject corporation

  • (i) from a corporation resident in Canada (in this paragraph referred to as the “disposing corporation”) to which the CRIC is, immediately before the investment time, related (determined without reference to paragraph 251(5)(b)), and

    • (A) each shareholder of the disposing corporation immediately before the investment time is

      • (I) either the CRIC or a corporation resident in Canada that is, immediately before the investment time, related to the parent, and

      • (II) at no time that is in the period during which the series of transactions or events that includes the making of the investment occurs and that is before the investment time, dealing at arm’s length (determined without reference to paragraph 251(5)(b)) with the parent or a non-resident corporation that participates in the series and is, at any time that is in the period and that is before the investment time, related to the parent, or

    • (B) the disposing corporation is, at no time that is in the period and that is before the investment time, dealing at arm’s length (determined without reference to paragraph 251(5)(b)) with the parent or a non-resident corporation that participates in the series and is, at any time that is in the period and that is before the investment time, related to the parent, or

  • (ii) on an amalgamation described in subsection 87(1) of two or more corporations (each of which is in this subparagraph referred to as a “predecessor corporation”) to form the CRIC if

    • (A) all of the predecessor corporations are, immediately before the amalgamation, related to each other (determined without reference to paragraph 251(5)(b)), and

    • (B) either

      • (I) none of the predecessor corporations are, at any time that is in the period during which the series of transactions or events that includes the making of the investment occurs and that is before the investment time, dealing at arm’s length (determined without reference to paragraph 251(5)(b)) with the parent or a non-resident corporation that participates in the series and is, at any time that is in the period and that is before the investment time, related to the parent, or

      • (II) if the condition in subclause (I) is not satisfied in respect of a predecessor corporation, each shareholder of that predecessor immediately before the investment time is

        1. either the CRIC or a corporation resident in Canada that is, immediately before the investment time, related to the parent, and

        2. at no time that is in the period and that is before the investment time, dealing at arm’s length (determined without reference to paragraph 251(5)(b)) with the parent or a non-resident corporation that participates in the series and is, at any time that is in the period and that is before the investment time, related to the parent;

(viii) as a result of a disposition of the shares by the CRIC to a partnership and to which subsection 97(2) applies;

(c) the investment is an indirect acquisition referred to in paragraph (10)(f) that results from a direct acquisition of shares of the capital stock of another corporation resident in Canada

• (i) from a corporation (in this paragraph referred to as the “disposing corporation”) to which the CRIC is, immediately before the investment time, related (determined without reference to paragraph 251(5)(b)), and

  • (A) each shareholder of the disposing corporation immediately before the investment time is

    • (I) either the CRIC or a corporation resident in Canada that, immediately before the investment time, is related to the parent, and

    • (II) at no time that is in the period during which the series of transactions or events that includes the making of the investment occurs and that is before the investment time, dealing at arm’s length (determined without reference to paragraph 251(5)(b)) with the parent or a non-resident corporation that participates in the series and is, at any time that is in the period and that is before the investment time, related to the parent, or

  • (B) the disposing corporation is, at no time that is in the period and that is before the investment time, dealing at arm’s length (determined without reference to paragraph 251(5)(b)) with the parent or a non-resident corporation that participates in the series and is, at any time that is in the period and that is before the investment time, related to the parent,

• (ii) on an amalgamation described in subsection 87(1) of two or more corporations (each of which is in this subparagraph referred to as a “predecessor corporation”) to form the CRIC, or a corporation of which the CRIC is a shareholder, if

  • (A) all of the predecessor corporations are, immediately before the amalgamation, related to each other (determined without reference to paragraph 251(5)(b)), and

  • (B) either

    • (I) none of the predecessor corporations are, at any time that is in the period during which the series of transactions or events that includes the making of the investment occurs and that is before the investment time, dealing at arm’s length (determined without reference to paragraph 251(5)(b)) with the parent or a non-resident corporation that participates in the series and is, at any time that is in the period and that is before the investment time, related to the parent, or

    • (II) if the condition in subclause (I) is not satisfied in respect of a predecessor corporation, each shareholder of that predecessor immediately before the investment time is

      1. either the CRIC or a corporation resident in Canada that, immediately before the investment time, is related to the parent, and

      2. at no time that is in the period and that is before the investment time, dealing at arm’s length (determined without reference to paragraph 251(5)(b)) with the parent or a non-resident corporation that participates in the series and is, at any time that is in the period and that is before the investment time, related to the parent,

• (iii) in an exchange to which subsection 51(1) applies,

• (iv) in the course of a reorganization of the capital of the other corporation to which subsection 86(1) applies,

• (v) to the extent that an investment (other than one described in paragraph (10)(f)) is made in the subject corporation by the other corporation, or by a particular corporation resident in Canada to which the CRIC and the other corporation are related at the investment time, using property transferred, directly or indirectly, by the CRIC to the other corporation or the particular corporation, as the case may be, if the two investments

  • (A) occur within 90 days of each other, and

  • (B) are part of the same series of transactions or events, or

• (vi) as a result of a disposition of the shares by the CRIC to a partnership and to which subsection 97(2) applies; or

(d) the investment is an acquisition of shares of the capital stock of the subject corporation that is described in paragraph (10)(a), or an indirect acquisition referred to in paragraph (10)(f) that results from a direct acquisition of shares of the capital stock of another corporation resident in Canada, if

• (i) the shares are acquired by the CRIC in exchange for a bond, debenture or note, and

• (ii) subsection 51(1) would apply to the exchange if the terms of the bond, debenture or note conferred on the holder the right to make the exchange.

Marginal note:Exchange — pertinent loan or indebtedness

(18.1) Subsection (18) does not apply to an investment that is an acquisition of property if the property can reasonably be considered to have been received by the CRIC as repayment in whole or in part, or in settlement, of a pertinent loan or indebtedness.

Marginal note:Preferred shares

(19) Subparagraph (1)(b)(ii) applies, and subsection (16) and paragraphs (18)(b) and (d) do not apply, to an acquisition of shares of the capital stock of a subject corporation by a CRIC if, having regard to all the terms and conditions of the shares and any agreement in respect of the shares, the shares cannot reasonably be considered to fully participate in the profits of the subject corporation and any appreciation in the value of the subject corporation, unless the subject corporation would be a subsidiary wholly-owned corporation of the CRIC throughout the period during which the series of transactions or events that includes the acquisition occurs if the CRIC owned all of the shares of the capital stock of the subject corporation that are owned by any of

(iii) each shareholder of the new corporation is deemed not to acquire indirectly any shares as a result of the amalgamation; and

Marginal note:Indirect investment

(23) Subsection (2) applies to an investment in a subject corporation made by a CRIC to which, in the absence of this subsection, subsection (2) would not apply because of subsection (16) or (24), to the extent that one or more properties received by the subject corporation from the CRIC as a result of the investment, or property substituted for any such property, may reasonably be considered to have been used by the subject corporation, directly or indirectly as part of a series of transactions or events that includes the making of the investment, in a transaction or event to which subsection (2) would have applied if the CRIC had entered into the transaction, or participated in the event, as the case may be, instead of the subject corporation.

(a) all the properties received by the subject corporation from the CRIC as a result of the investment were used, at a particular time that is within 30 days after the investment time and at all times after the particular time, by the subject corporation

• (i) to derive income from activities that can reasonably be considered to be directly related to active business activities carried on by a particular corporation and all of the income is income from an active business because of subparagraph 95(2)(a)(i), or

• (ii) to make a loan or acquire a property, all or substantially all of the income from which is, or would be, if there were income from the loan or property, derived from amounts paid or payable, directly or indirectly, to the subject corporation by a particular corporation and is, or would be, income from an active business because of subparagraph 95(2)(a)(ii);

(b) the particular corporation was, at the particular time, a controlled foreign affiliate of the CRIC for the purposes of section 17; and

(c) the particular corporation is, throughout the period that begins at the investment time and during which the series of transactions or events that includes the activities of, or the making of the loan or acquisition of property by, the subject corporation occurs, a corporation in which an investment made by the CRIC would not be subject to subsection (2) because of subsection (16).