Canada: Shareholders

The Tax on Split Income (TOSI) rules remain among the most complex and misunderstood areas of Canadian private corporation tax planning.

When a business is sold, whether through a share sale or an asset sale, the purchaser almost invariably demands restrictive covenants—such as a non-competition or non-solicitation agreement—from the selling shareholders or key principals.

In Malek v The King (2026 TCC 84), the Tax Court of Canada examined the Canada Revenue Agency’s (CRA) use of the net worth assessment method against a trucking corporation and its shareholder-managers.

When a business is sold, whether through a share sale or an asset sale, the purchaser almost invariably demands restrictive covenants—such as a non-competition or non-solicitation agreement—from the selling shareholders or key principals.

In Malek v The King (2026 TCC 84), the Tax Court of Canada examined the Canada Revenue Agency’s (CRA) use of the net worth assessment method against a trucking corporation and its shareholder-managers.

Prior to Golden Spigot, the Court emphasized that section 324 “must be exercised judicially, on a principled basis, and in recognition of the reluctance of the Court to interfere lightly in the internal affairs of a company”, requiring more than a shareholder’s desire to monetize an investment in cases where partners were unable to negotiate a share purchase. By contrast, the Court in Golden Spigot accepted that the very nature of partners operating a closely-held business means that they would reasonably expect that dissolution of the company would result in circumstances of deadlock.

On May 14, 2026, the Canadian Securities Administrators (the “CSA”) published proposed amendments and changes to the rules and policies governing the early warning system (the “EWS”), issuer bids (including a new selective repurchase exemption), and take-over bids (collectively, the “Proposed Amendments”)...

In a broad set of proposals announced last week, the Canadian Securities Administrators (CSA) is considering wide-ranging amendments to Canadian securities law.

The concept has been tested. The brand is established. The Canadian market appears attractive. The decision to move forward is often driven by a combination of opportunity and momentum.