Federal Court of Appeal confirms trust deed gave public corporation de facto control over a private corporation wholly owned by the trust

In Bresse Syndics Inc. v. The Queen, 2021 FCA 115 (sub nom. CO2 Solution Technologies Inc.), the Federal Court of Appeal (“FCA”) considered the extent to which a public corporation (“Pubco”) held de facto control over a corporation (the Appellant) wholly owned by a trust the trustees of which were the prevailing directors of Pubco. As background, the Appellant claimed refundable tax credits associated with scientific research and experimental development (SR&ED) expenses that it incurred based on a research agreement with Pubco. The Canada Revenue Agency disallowed those credits on the basis that the Appellant did not qualify as a CCPC because it was directly or indirectly controlled by a public corporation (namely, Pubco).

Finding that Pubco had de facto control over the Appellant, the FCA noted that if a person ceased being a director of Pubco, they automatically ceased being a trustee of the trust. Consequently, Pubco had the power to terminate the trustees’ functions by revoking or not renewing their mandate as directors. The net result, according to the FCA, was that the “trustees’ freedom to decide was subject to the will of [Pubco]”.

Prepared by: Leonard Gilbert , Chris Marta

Leonard graduated from the University of Toronto, Faculty of Law (J.D. 2015) and is currently an associate practicing in the firm’s Toronto office. He previously performed extensively as a concert pianist and attended the Jacobs School of Music at Indiana… more »

Chris Marta is an associate practising in the firm’s Vancouver office. Chris Marta’s practice focuses on domestic and international tax planning for individuals, trusts and corporations. He also represents taxpayers in their disputes with the Canada Revenue Agency. Prior to… more »

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