Strategies for Executive Compensation: Design and Tax Issues for a ...

Stock Options – Rules for Canadian-Controlled
Private Corporations and Ordinary Stock
Option Rules (cont’d)
• The determination of whether the portfolio
company is a CCPC is not always
straightforward
• A CCPC is a Canadian corporation (generally a
corporation resident in Canada constituted
under the laws of Canada or a province) that is
not controlled by a publicly listed corporation or
by one or more non-residents
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Stock Options – Rules for Canadian-Controlled
Private Corporations and Ordinary Stock
Option Rules (cont’d)
• In determining CCPC status “control” in the
ordinary sense is not required – where the
shares of a corporation are widely held by nonresidents
and/or publicly listed corporations such
that none of those shareholders controls the
corporation, the corporation will not be a CCPC
if it would be controlled by one person if that
person owned all of the shares held by such
non-residents and publicly listed corporations
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Stock Options – Rules for Canadian-Controlled
Private Corporations and Ordinary Stock
Option Rules (cont’d)
• By “ordinary stock options,” we refer to an agreement by
a particular corporation that is not a CCPC (or mutual
fund trust) to sell or issue its shares (or trust units) to an
employee or an employee of a corporation (or mutual
fund trust) with which the particular company does not
deal at arm’s length
• General stock option tax treatment: (i) no tax on grant;
(ii) tax on benefit arising on exercise; (iii) benefit equals
excess of fair market value of shares acquired under the
option over the exercise price (i.e., the in-the-money
amount)
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