de jure control

At issue was whether a start-up Canadian private corporation engaged in SR&ED was a Canadian-controlled private corporation (“CCPC”). Shareholder1, Shareholder2 and Shareholder3, which were controlled by X (a non-resident of Canada), held less than 41% of the (Class A) voting shares of the Corporation, having a nominal economic value; and resident Canadian investors together with the trust (the “Trust) referred to below, held the balance of the Class A shares.

Respecting where two unrelated individuals each held exactly 50% of the (voting common) shares of their employer corporation, the Directorate first noted:

According to the Court in Duha, to determine whether effective control exists, one must consider:

a) the corporation’s governing statute;

b) the share register of the corporation; and