Income Tax Regulations — 6205
imited to a maximum amount or fixed at a minimum amount where it may reasonably be considered that all or substantially all of the liquidation entitlement is determinable by reference to the liquidation entitlement of another share of the capital stock of the corporation that meets the requirements of clause (1)(a)(i)(B); (c) where two or more corporations (each of which is referred to in this paragraph as a “predecessor corporation”) have merged or amalgamated, the corporation formed as a result of the merger or amalgamation (in this paragraph referred to as the “new corporation”) shall be deemed to be the same corporation as, and a continuation of, each of the predecessor corporations and a share of the capital stock of the new corporation issued on the merger or amalgamation as consideration for a share of the capital stock of a predecessor corporation shall be deemed to be the same share as the share of the predecessor corporation for which it was issued, but this paragraph does not apply if the share issued on the merger or amalgamation is not a prescribed share at the time of its issue and either (i) the terms and conditions of that share are not identical to those of the share of the predecessor corporation for which it was issued, or (ii) at the time of its issue the fair market value of that share is not the same as that of the share of the predecessor corporation for which it was issued; (d) a reference in clauses (1)(a)(i)(D) and (G) and subparagraph (1)(a)(ii) to a right or obligation of the corporation or a person or partnership does not include a right or obligation provided in a written agreement among shareholders of a private corporation owning more than 50% of its issued and outstanding share capital having full voting rights under all circumstances to which the corporation, person or partnership is a party unless it may reasonably be considered, having regard to all the circumstances, including the terms of the agreement and the number and relationship of the shareholders, that one of the main reasons for the existence of the agreement is to avoid or limit the application of subsection 110.6(8) or (9) of the Act; (e) where at any particular time after November 21, 1985, the terms or conditions of a share are changed or any existing agreement in respect thereof is changed or a new agreement in respect of the share is entered into, the share shall, for the purpose of determining whether it is a prescribed share, be deemed to have been issued at that particular time; and (f) the determination of whether a share of the capital stock of a corporation is a prescribed share for the purposes of subsection (1) shall be made without reference to a right or obligation to redeem, acquire or cancel the share or to cause the share to be redeemed, acquired or cancelled where (i) the share was issued pursuant to an employee share purchase agreement (in this paragraph referred to as “the agreement”) to an employee (in this paragraph referred to as “the holder”) of the corporation or of a corporation with which it did not deal at arm’s length, (ii) the holder was dealing at arm’s length with each corporation referred to in subparagraph (i) at the time the share was issued, and (iii) having regard to all the circumstances including the terms of the agreement, it may reasonably be considered that (A) the amount payable on the redemption, acquisition or cancellation (in this clause and in clause (B) referred to as the “acquisition”) of the share will not exceed (I) the adjusted cost base of the share to the holder immediately before the acquisition, where the acquisition was provided for in the agreement and the principal purpose for its provision was to protect the holder against any loss in respect of the share, or (II) the fair market value of the share immediately before the acquisition, where the acquisition was provided for in the agreement and the principal purpose for its provision was to provide the holder with a market