An employee who subscribed directly for treasury shares, and subsequently transferred them to a new corporation could benefit from the Reg 6205(2) exclusion from ITA s. 110.6(8) to the extent that that transaction did not occur under the same arrangement. In this context, what is an "arrangement" and when is it can be considered to end? After referring to dictionary definitions of arrangement, CRA stated
[T]he purpose of the provisions of ITR subsection 6205(2) is to grant the status of "prescribed shares", for purposes of ITA subsection 110.6(8), to shares issued pursuant to an arrangement the primary purpose of which is to effect a total or partial freeze in favour of persons not dealing at arm's length with the shareholder effecting the freeze, employees of the corporation or a corporation controlled by it, or a combination of such persons and employees. The question of whether the primary purpose of an arrangement is to ensure that the increase in the value of a corporation's property is attributed to "other shares" is a question of fact. An arrangement could have been put in place primarily for purposes other than those provided in paragraph 6205(2)(a), including to achieve certain financial, structural or other objectives, or to obtain certain tax benefits.
The questions of what constitutes an arrangement in a particular situation and, secondly, when that arrangement ends, are ones of fact.