Bryan Walters has drawn my attention to an interesting CRA technical interpretation (2011-0404641C6 or CCH Window ¶10,832) in which the CRA states that the provisions of a shareholder agreement might reduce the value of freeze shares that otherwise have the “right” attributes for the purposes of a freeze (see “Freeze Shares“).
The CRA says that the following types of restrictions in a shareholder agreement could reduce the value of freeze shares:
1. The agreement restricts the ability of the freeze shareholder to redeem all of his or her shares at the same time.
2. A clause requires the freeze shareholder to obtain the the concurrence of all shareholders of the company before redeeming his or her shares.
3. The agreement forces a freeze shareholder to accept as payment upon a redemption of freeze shares a promissory note that pays interest at a rate below a reasonable commercial rate.