Every PREC articles requirement, criterion by criterion
Two regimes reach into the same document. RECO decides whether the corporation may be registered at all; the CRA decides what it costs you in tax. Each criterion below is one thing the articles have to get right, with the authority it comes from.
An automated drafting scan, not legal or tax advice. Capital Toolkit does not file articles with the Province.
What RECO requires
Registration conditions under TRESA and O. Reg. 536/20. Miss one and the corporation cannot be registered as a PREC.
- The articles contemplate more than one holder of the voting shares
TRESA s. 1(1) ("equity share"); O. Reg. 536/20, s. 2 ¶2
- No agreement may restrict the sole director's powers
O. Reg. 536/20, s. 2 ¶6 (no restricting agreement)
- The articles contemplate share ownership the regulation does not permit
O. Reg. 536/20, s. 1 ("family member"), s. 2 ¶5
- Sole director must be the controlling shareholder
O. Reg. 536/20, s. 2 ¶3 (sole director)
- President, as sole officer, must be the controlling shareholder
O. Reg. 536/20, s. 2 ¶4 (president as sole officer)
- The restriction on business authorises trading in real estate or acting as a brokerage
O. Reg. 536/20, s. 3 ¶¶2 and 4 (business and brokerage)
- The articles permit more than one director
O. Reg. 536/20, s. 2 ¶3 (sole director)
- Three-party agreement before receiving remuneration
O. Reg. 536/20, s. 3 ¶¶8-11 (three-party agreement)
- The articles expressly permit the corporation to hold client money or property
O. Reg. 536/20, s. 3 ¶7 (client money)
- Non-voting shares carry a right to convert into voting shares
TRESA s. 1(1) ("equity share")
- The articles expressly permit the corporation to hold itself out as trading in real estate
O. Reg. 536/20, s. 3 ¶3 (public representation)
- The articles expressly permit remuneration from someone other than the employing brokerage
O. Reg. 536/20, s. 3 ¶¶5 and 6 (remuneration)
- The transfer restriction turns on director consent, not on preserving PREC status
O. Reg. 536/20, s. 2 ¶¶2 and 5
- A non-voting class gains a vote on a stated trigger
TRESA s. 1(1) ("equity share"); O. Reg. 536/20, s. 2 ¶2
- Right to redeem a share that has ceased to comply
O. Reg. 536/20, s. 2 ¶5
- Private-company restrictions carried
OBCA; Ontario securities law (private issuer)
- Compliance-interpretation and severability clause
Drafting practice
- Corporate name holds the corporation out as a brokerage
O. Reg. 536/20, s. 3 ¶3 (public representation)
- Corporate name does not follow the "Personal Real Estate Corporation" convention
Drafting practice (convention)
- Corporate name does not carry the controlling shareholder's name
Drafting practice (identification)
What the CRA requires
Tax consequences that follow from how the same document is drafted, including CCPC status and the small business deduction.
- The restriction on business authorises real estate investment inside the operating corporation
ITA s. 125(7) ("specified investment business"); s. 110.6 (QSBC)
- A non-voting dividend-sprinkling class that cannot meet the TOSI excluded-shares test
ITA s. 120.4 (tax on split income)
- The articles expressly permit a transfer that would end CCPC status
ITA s. 125(7) ("Canadian-controlled private corporation")
- Private-corporation restrictions
ITA s. 89(1) ("private corporation"); OBCA
- The business is framed as the corporation performing the regulated activity, not as providing the shareholder's services
ITA s. 125(7) ("personal services business")
- The price adjustment clause does not reach the amount actually payable
ITA s. 85; CRA Folio S4-F3-C1
- The freeze shares do not meet the "specified class" conditions
ITA s. 256(1.1) ("specified class"); s. 256 (association)
- Limitation on distributions
Drafting practice (freeze integrity)
- Redemption and retraction machinery
Drafting practice (freeze integrity)