When will the back-to-back loan rules in s. 15(2.17) apply where a corporation provides security to a lender to its shareholder. CRA noted that “where a security interest in the assets of the company is tantamount to putting assets in the hands of the intermediary for its general use, the shareholder loan rules will ordinarily apply.” On the other hand:
[W]here a financial institution lends money on commercial terms to an individual that is a shareholder of a corporation, the corporation provides a security interest in its property to the lender, and such property can only be used in the event of default on the loan as a means of repaying amounts owing by the debtor under the lending agreement, then the security interest would not ordinarily be considered a “specified right”.
CRA also noted that this quoted safe harbour is not affected if the security interest is granted by the corporation to secure more than one shareholder debt.