Canadian employees of a Canadian subsidiary of a foreign parent had "subscription rights" to acquire unlisted ordinary shares of the foreign parent. The subscription rights plan provided that at the same time the employee was granted a right she would acquire a non-interest bearing bond of the parent at an appropriate discount, and enter into put and agreements with a non-resident corporation ("Putcallco") under which the employee could cause Putcallco to acquire the employee's foreign parent shares at their fair market value at the time of exercise of the rights acquisition (as determined under a formula), and Putcallco could acquire those shares at their fair market value in the event the individual ceased to be an employee. The foreign parent and the Canadian subsidiary had agreed that when a subscription right was exercised by an employee, the Canadian subsidiary would be obliged to pay to the foreign parent the amount by which the fair market value of the shares acquired by the employee exceeded the exercise price.
The granting by the Canadian subsidiary to the employees of the right to surrender their subscription rights to it for a cash amount equal to the difference between the fair market value of a foreign parent share (determined on the same formula basis) and the exercise price would not result in a disposition under s. 7(1)(b) or result in a conferral of a benefit by the Canadian subsidiary on the foreign parent under s. 15(1).