A parent wishes to access the s. 84.1(2.31) or (2.32) rules regarding a transfer of shares of Parent Inc. (constituting qualified small business corporation shares) to a holding company for the parent’s adult children, who have been actively engaged in the business of Parent Inc.
Regarding the requirements in s. 84.1(2.31)(g) or s. 84.1(2.32)(h) for a timely transfer of business “management” to the children (specified in s. 84.1(2.3)(i) to refer to the direction or supervision of business activities), CRA stated:
[W]here the parent remains a director of Parent Inc. and steps are not taken to completely and permanently cease to hold such office, within the time periods stipulated by paragraphs 84.1(2.31)(g) and 84.1(2.32)(h), including any longer period that is reasonable in the circumstances, the requirements of subparagraphs 84.1(2.31)(g)(ii) and 84.1(2.32)(h)(ii) would not be satisfied … regardless of whether the parent is the sole director or one of the directors, and regardless of whether the direction of the day-to-day activities is in the hands of the children.
Where the parent did not continue as a director or officer of Parent Inc., the more that the tasks for which the parent remains responsible involve significant decision-making power in the context of the particular business, the more they could constitute "management" within the meaning of s. 84.1(2.3)(i). For instance, discretionary control over a corporation's cash expenditures is a significant function that could constitute a function of managing or supervising the activities of the business, within the meaning of s. 84(2.3)(i).