A corporation ("Marr's") controlled by Mr. Marr paid $2,000 to subscribe for redeemable preferred shares representing a majority of the voting rights of a corporation ("Duha") previously controlled by the Duha family. A shareholders' agreement provided that new shares could only be issued with the unanimous consent of the existing shareholders and that the board was to comprise any three of: Mr. & Mrs. Duha, Mr. Marr; and a friend of Messrs. Duha and Marr who previously had served on the Duha board. One day later, Marr's sold the shares of a subsidiary ("Outdoor") with significant non-capital losses to Duha.
Iacobucci C.J. found that Marr had acquired control of Duha when it subscribed for the redeemable preferred shares, with the result that there was no subsequent acquisition of control of Outdoors by Duha due to the exception in s.256(7)(a)(i) (respecting acquisitions by related corporations). The prohibition in the shareholders' agreement against the issuance of further shares without the written consent of all the shareholders imposed a clear restriction upon the directors' power to manage (i.e., issue shares pursuant to s. 25(1) of the Corporations Act (Manitoba)). Accordingly, the agreement was a unanimous shareholders' agreement that was required to be taken into account in determining who had de jure control of Duha. However, even taking into account its inability to issue new shares without unanimous shareholder approval, there was not such a restriction that Marr's could be said to have lost the ability "to exercise effective control over the affairs and fortunes of the corporation" (Duha) through its majority shareholding.