Canco held the preferred, but not the common, shares of a Barbados International Business Company (“FA”), and its preferred shares were redeemed. Although the facts are mostly redacted, it would appear that the resolution pursuant to which FA redeemed the shares provided that a portion of the proceeds paid on the redemption were a dividend, and Canco apparently relied on this wording rather than making a s. 93(1) election. After discussing whether such treatment could give rise to a dividend to Canco, the Directorate went on to state:
If there is, in part, a dividend… to the extent the purpose of issuing the...Shares is to skew exempt surplus to the Canadian shareholder…consideration [should] be given as to the potential application of subsection 95(6) and/or subsection 245(2).