Canada Revenue Agency · Freeze & reorganisation mechanics
The freeze shares do not meet the "specified class" conditions
What the rule requires
Fixed-value preferred shares should be non-voting, with a dividend rate capped at the prescribed rate and a redemption entitlement capped at the value the shares were issued for plus any unpaid dividends, so holding them cannot associate the corporation with another and force it to share one small-business limit. (Nothing in s. 256(1.1) requires the dividend itself to be non-cumulative, paragraph (e) expressly allows unpaid dividends into the redemption cap.)
Authority: ITA s. 256(1.1) ("specified class"); s. 256 (association)
What goes wrong
CLASS B NON-VOTING SPECIAL SHARES are fixed-value classes but are not drafted to the "specified class" carve-out, so holding them can cause association and force the corporation to share a single small-business limit.
Check your own articles, free
The PREC Articles Health Check reads your articles of incorporation in your own browser and rates them Red, Yellow or Green against this criterion and 28 others. Your document is never uploaded to us.
An automated drafting scan, not legal or tax advice. It reads how the articles are drafted; it does not advise on your circumstances, and Capital Toolkit does not file articles with the Province.
Run the free Health Check