ARTICLE · 29 MAY 2015

Mac's: Quebec CA Affirms Denial Of Rectification

Dentons Canada LLP

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Mac's, an Ontario corporation, was a wholly-owned subsidiary of Couche-Tard Inc. ("CTI"). In April 2005, Mac's borrowed $185 million from Sidel Corporation, a related Delaware corporation.

CanadaTax

Timothy Fitzsimmons

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In Mac's Convenience Stores Inc. v. Canada (2015 QCCA 837), the Quebec Court of Appeal affirmed a lower court decision (2012 QCCS 2745) denying rectification of corporate resolutions that had declared a dividend that unintentionally put the company offside the "thin-cap" rules in subsections 18(4)-(8) of the Income Tax Act.

Facts

Mac's, an Ontario corporation, was a wholly-owned subsidiary of Couche-Tard Inc. ("CTI"). In April 2005, Mac's borrowed $185 million from Sidel Corporation, a related Delaware corporation.

In April 2006, Mac's participated in several transactions with various related entities, including the declaration of a $136 million dividend on the common shares held by CTI. A similar series of transactions had been undertaken in 2001. However, in 2006, Mac's professional advisors failed or forgot to take proper account of the $185 million owed by Mac's to Sidel.

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