| 19(1) | File No. 5-8530 |
| S. Leung | |
| (613) 957-2116 |
August 31, 1989
Dear Sirs:
This is in reply to your letter of August 18, 1989 wherein you requested our view on whether the appointment by a court of a receiver to manage the assets and business of a corporation would result in an acquisition of control of that corporation by a person or group of persons for purposes of subsections 111(5) and 249(4) of the Income Tax Act (the "Act").
Subsections 111(5) and 249(4) of the Act provide rules which apply where "control of a corporation has been acquired by a person or group of persons". Since neither of these provisions uses the expression "controlled, directly or indirectly in any manner whatever," the concept of control in fact found in subsection 256(5.1) of the Act would not be relevant for determining whether or not there has been an acquisition of control. In circumstances where subsection 256(5.1) does not apply control of corporation will generally exist where the person or group of persons has the ability to elect a majority of the directors of the corporation.
Since it is our understanding that a court appointed receiver would not normally have the right to elect a majority of the corporation's directors, we agree with your view that, generally the appointment by a court of a receiver to manage the assets and business of the corporation would not result in an acquisition of control by a person or group of persons. Consequently, subsections 111(5) and 249(4) of the Act would no be applicable as a result of such an appointment.
The foregoing opinion is not a ruling and in accordance with the guidelines explained in Information Circular 70-6R, is not binding on the Department.
Yours truly,
for DirectorReorganizations and Non-Resident DivisionSpecialty Rulings DirectorateLegislative and IntergovernmentalAffairs Branch