Summary Policy

Date
November 3, 2005

Reference Number
CSP - C28

Key Words
Control of corporation - Sanctions

Policy Statement

Charitable foundations cannot acquire control of any corporation.

Control usually means that the foundation owns, or the foundation plus persons not dealing with it at arm's length own, more than 50% of a corporation's issued share capital with full voting rights.

A charitable foundation that acquires control of a corporation is liable to a penalty equal to 5% of the total of all amounts, each of which is a dividend received by the foundation from the particular corporation in the taxation year and at a time when the foundation so controlled the particular corporation. This penalty increases to 100% for a repeat infraction within 5 years.

References

• Arm's Length, CSP-A07.
• Confidentiality, CSP-C12.
• Financial Penalties, CSP-F17.
• Revocation, CSP-R12.
• Sanctions, CSP-S17.
• Completing the Registered Charity Information Return, T4033A.
• Registered Charities and the Income Tax Act, RC4108.
• Income Tax Act, R.S.C. 1985 (5^th supp.) c. 1, paras. 149.1(3)(c), (4)(c), ss. 149.1(12) and 188.1(3).