Franchisor and Manager each hold 50% of the shares (being common shares) of Franchisee. The shareholders’ agreement for Franchisee provides, in the event the Manager wishes to depart, a mandate to Franchisor to identify an independent acquiror of the shares of Manager Would this right come within s. 256(1.4)? CRA responded:
[I]t would be reasonable to conclude that the franchisor does not have a right to the shares in the capital stock of the franchisee owned by the manager is the owner nor to acquire them within the meaning of paragraph 256(1.4)(a) by virtue only of the provision granting a mandate to the franchisor to find another independent shareholder to acquire the shares held by the manager in the capital stock of the corporation.