Tax Court of Canada


Investor was shareholder only and not de facto director

Investor was shareholder of taxpayer company that operated pub. Investor signed some documents that indicated he was director of company. Investor signed disclaimer letter to Canada Revenue to unfreeze company’s bank account, after minister issued requirement to pay in respect of unremitted source and GST deductions. Company ceased operations. Minister assessed investor as director for company’s unremitted deductions. Investor appealed. Appeal allowed. Investor did not know he could be considered director and did not execute proper documentation to become director. Proper steps were not taken by company to appoint investor and so under Business Corporations Act (N.B.), investor was not de jure director. Facts established that investor was shareholder only and not de facto director. All major decisions relating to business were made by other persons. Investor was co-signer for business cheques only because two signatures were required and obtained loan to keep company afloat because he was told that otherwise shareholders would lose their investments. Investor signed letter to CRA as owner without even reviewing it. Investor did not even know where account books were located or how to turn lights on when he sought new management. Investor was naive individual whose conduct only demonstrated that he was trying to protect his investment. Investor relied entirely upon preparers of documents that he signed who did not explain nature of documents or financial situation of company.

MacDonald v. R. (Oct. 20, 2014, T.C.C. [Informal Procedure], Eugene P. Rossiter A.C.J., File No. 2013-2568(IT)I, 2013-2569(GST)I) 245 A.C.W.S. (3d) 332.

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