Income Tax Regulations — 6202.1
6202.1 (1) For the purposes of the definition flow-through share in subsection 66(15) of the Act, a new share of the capital stock of a corporation is a prescribed share if, at the time it is issued, (a) under the terms or conditions of the share or any agreement in respect of the share or its issue, (i) the amount of the dividends that may be declared or paid on the share (in this section referred to as the “dividend entitlement”) may reasonably be considered to be, by way of a formula or otherwise, (A) fixed, (B) limited to a maximum, or (C) established to be not less than a minimum (including any amount determined on a cumulative basis), where with respect to the dividends that may be declared or paid on the share there is a preference over any other dividends that may be declared or paid on any other share of the capital stock of the corporation, (ii) the amount that the holder of the share is entitled to receive in respect of the share on the dissolution, liquidation or winding-up of the corporation, on a reduction of the paid-up capital of the share or on the redemption, acquisition or cancellation of the share by the corporation or by specified persons in relation to the corporation (in this section referred to as the “liquidation entitlement”) may reasonably be considered to be, by way of a formula or otherwise, fixed, limited to a maximum or established to be not less than a minimum, (iii) the share is convertible or exchangeable into another security issued by the corporation unless (A) it is convertible or exchangeable only into (I) another share of the corporation that, if issued, would not be a prescribed share, (II) a right (including a right conferred by a warrant) that 1 if it were issued, would not be a prescribed right, and 2 if it were exercised, would allow the person exercising it to acquire only a share of the corporation that, if the share were issued, would not be a prescribed share, or (III) both a share described in subclause (I) and a right described in subclause (II), and (B) all the consideration receivable by the holder on the conversion or exchange of the share is the share described in subclause (A)(I) or the right described in subclause (A)(II), or both, as the case may be, or (iv) the corporation has, either absolutely or contingently, an obligation to reduce, or any person or partnership has, either absolutely or contingently, an obligation to cause the corporation to reduce, the paid-up capital in respect of the share (other than pursuant to a conversion or exchange of the share, where the right to so convert or exchange does not cause the share to be a prescribed share under subparagraph (iii)); (b) any person or partnership has, either absolutely or contingently, an obligation (other than an excluded obligation in relation to the share) (i) to provide assistance, (ii) to make a loan or payment, (iii) to transfer property, or (iv) otherwise to confer a benefit by any means whatever, including the payment of a dividend, either immediately or in the future, that may reasonably be considered to be, directly or indirectly, a repayment or return by the corporation or a specified person in relation to the corporation of all or part of the consideration for which the share was issued or for which a partnership interest was issued in a partnership that acquires the share; (c) any person or partnership has, either absolutely or contingently, an obligation (other than an excluded obligation in relation to the share) to effect any undertaking, either immediately or in the future, with respect to the share or the agreement under which the share is issued (including any guarantee, security, indemnity, covenant or agreement and including the lending of funds to or the placing of amounts on deposit with, or on behalf of, the holder of the share or, where the holder is a partnership, the members thereof or specified persons in relation to the holder or the members of the partnership, as the case may be) th