Kruger Inc. was the 51% shareholder of the taxpayer and was entitled under the unanimous shareholders agreement between it and the other shareholder (SGF) to appoint three of the five directors. However, Jorré J noted that a wide range of decisions were specified in the USA to require unanimous director (or shareholder) approval (including the annual appointment of the President and the hiring or termination of other senior managment, management compensation, and the entering into of contracts out of the ordinary course of business and any borrowing (in excess of $1M) or lending by the company). As a consequence, he characterized Kruger as having control of only operating, and not strategic, decisions, so that Kruger did not have de jure control.
In considering whether Kruger had de facto control, reference also could be made to non-USA agreements, namely, for the provision by Kruger of management services, and the marketing by it of the taxpayer's products, including the sale of wood pulp to Kruger itself, as well as to Kruger's specialized industry knowledge. However, these were not enough to establish de facto control, given significant built-in restrictions in those agreements and given the significant role of SGF.
See summary under s. 256(1)(a).