Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.
APFF - 1995
Question 5
Rights to acquire shares
For purposes of determining whether two persons are related, paragraph 251(5)(b) of the Act provides generally that where a person has a right under a contract, in equity or otherwise, either immediately or in the future and either absolutely or contingently to shares in a company or to acquire them, that person is deemed to have the same position with respect to the control of the corporation as if the person owned the shares at that time. Similar provisions can be found in paragraph 256(1.4)(a) when it comes to determining whether two corporations are associated.
In some cases, a person may have a future right to acquire shares in a corporation but the number of shares that can be acquired in this manner must be calculated on the basis of the fair market value of the shares at a future date. It is therefore not possible to determine at the current time the number of shares to which the person in question is entitled.
How are the provisions of paragraphs 251(5)(b) and 256(1.4)(a) of the Act to be applied when the number of shares to which the person is entitled cannot be determined?
Answer by the Department of Revenue
Under such circumstances, there are various possibilities open for applying this provision. It seems to us that the interpretation that we may put on it would depend in large measure on the rights of the parties and the terms of their agreements. Since we have not had the opportunity to consider the application of this provision in this type of situation with actual facts, we prefer not to speculate on the position(s) that we could adopt.