In an October 7, 2016 French Technical Interpretation (2016-0652971C6, Gladu, Guylaine), CRA addressed the impact of clauses in shareholders’ agreements (SA) in a franchise arrangement. Each franchise is held in a corporation owned equally by the franchisor and the manager of the franchise. Where the manager ceases employment, the SA would provide for the franchisor to arrange a sale of the manager’s shares to a third party, who cannot be the franchisor or an associate of the franchisor.
CRA confirmed that the proposed right to locate a purchaser for the manager’s shares would not be considered a right for the franchisor to acquire the shares. Similarly, an automatic redemption would not be considered a right of the franchisor to force a redemption provided that the franchisor cannot control the event that would cause the redemption. As such, the proposed clauses would not cause the corporations to become associated or related.