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ARTICLE · 07 JUNE 2005

Is The CRA Adverse To A Material Adverse Change Default?

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In determining whether an event of failure or default is acceptable for purposes of the 5/25 exemption, the Canada Revenue Agency (the CRA) has repeatedly stated that an acceptable event of failure or default must have commercial reality, must be beyond the control of the lender and must not be contrived. One type of event of failure or default on which the CRA has commented is the occurrence of a "material adverse change" in (sometimes referred to as an event which has a "material adverse effec

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Article by Paul Stepak, ©2005 Blake, Cassels & Graydon LLP

This article was originally published in Blakes Bulletin on Taxation - April 2005

In determining whether an event of failure or default is acceptable for purposes of the 5/25 exemption, the Canada Revenue Agency (the CRA) has repeatedly stated that an acceptable event of failure or default must have commercial reality, must be beyond the control of the lender and must not be contrived. One type of event of failure or default on which the CRA has commented is the occurrence of a "material adverse change" in (sometimes referred to as an event which has a "material adverse effect" on) the financial situation of the borrower, or in some cases, a party related to the borrower.

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