Fifty percent of the voting shares of the taxpayer together with most of its capital (in the form of preferred shares and an interest-free loan) was held by a non-resident corporation ("Mimetix"), which sublicensed to the taxpayer the non-exclusive right to conduct in Canada clinical trials and other investigations involving the taxpayer's principal product.
Although two of the three directors of the taxpayer and its president were individuals who were not employees of Mimetix, Mimetex was found to have the control of the taxpayer contemplated in s. 256(5.1) given that: the only individuals who actually exercised control and supervision over the taxpayer were an individual ("Eaton") who was the Chief Executive Officer of Mimetex and a director of the taxpayer, and another individual (who was the President of Mimetex) who had been appointed as a signing officer of the taxpayer by Eaton without consulting the Canadian directors; and the Canadian directors (one of whom nominally was the President of the taxpayer) had very little knowledge about important particulars of the affairs of the taxpayer and did not make any decisions concerning its operations.