| September 20, 1990 | |
| Audit and Investigations | Technical Publications |
| Training Programs Division | Division |
| Mr. Vince Renda | Technical Review Section |
| Manager | G. Donell |
| (613) 957-9231 | |
| 7-902376 | |
| HBI-3882-1 EACC9732 |
SUBJECT: Updating of Flowchart entitled GA-8 Related Persons and Associated Corporations
This is in response to your letter dated September 6, 1990 concerning the wording of subsections 256(5.1) and (6).
You have stated that subsection 256(5.1) defines the expression "controlled directly or indirectly in any manner whatever" as relating exclusively to de facto control. It was the Department's view, adopted from various judicial decisions, that the expressions "control" and "controlled directly or indirectly in any manner whatever" referred to de jure control. The introduction of subsection 256(5.1) expands the judicially based de jure control concept to include de facto control situations where the expression "controlled directly or indirectly in any manner whatever" is used. In other words that expression refers to both de jure and de facto control whereas the word "control" or "controlled" refers to the judicially adopted de jure control only unless a specific provision defines control for a specific purpose such as subsection 186(2). The Department's view is that the wording of subsection 256(5.1) is sufficient to accomplish and support this viewpoint.
Having dealt with subsection 256(5.1) we are now faced with an apparent redundant phrase in subsection 256(6); that of "controlled or controlled directly or indirectly in any manner whatever". The phrase may seem misleading and lead the reader to the belief that "controlled" refers to de jure control while "controlled directly or indirectly in any manner whatever" only refers to de facto control thus supporting your statement that subsection 256(5.1) relates exclusively to de facto control.
Subsection 256(6) has application for purposes of the Act not simply the association rules. It is a saving provision which ensures that one corporation which otherwise controls another corporation will not be considered to control where the Minister is satisfied that certain conditions have been met. Its application extends to provisions such as the definition of a "Private Corporation" at paragraph 89(1)(f), the inadequate consideration rules at subsections 69(6) and (7) and other law where de facto control tests are not considered appropriate. The wording in those specific areas refer to "control" or "controlled", therefore in order to properly match or align the wording among these various provisions and subsection 256(6) it was considered necessary to include the phrase "controlled or controlled directly or indirectly in any manner whatever" in the preamble to subsection 256(6).
If you have any comments or questions, please do not hesitate to contact us.
Bernhard BuetowChiefTechnical Review SectionTechnical Publications DivisionLegislative Affairs Directorate
GD/hm(1-2) COR "D"
PS 21(1)(b)
c.c. Roy Shultis