CCPC (Canadian-Controlled Private Corporation)

A Canadian-Controlled Private Corporation (CCPC) is a private corporation that is resident in Canada and is not controlled — directly or indirectly, in any manner — by one or more non-resident persons or public corporations. CCPC status is determined under the Income Tax Act and is foundational to several significant tax advantages available to Canadian business owners on a sale.

The most important advantage for business owners is eligibility for the Lifetime Capital Gains Exemption (LCGE) on a share sale. To claim the LCGE, the shares being sold must qualify as shares of a Qualified Small Business Corporation (QSBC), and a QSBC must be a CCPC. CCPC status also enables the Capital Dividend Account (CDA) mechanism, access to the small business deduction on active business income, and eligibility for certain refundable tax credits.

A change in control — for example, a sale of shares to a non-resident or to a public corporation — can strip CCPC status, potentially disqualifying any shares not yet disposed of from LCGE eligibility going forward. Where the acquirer is a non-Canadian entity, the transaction structure (share sale vs. asset sale, and any rollover mechanics) will be influenced in part by this consideration.

See also: QSBC, LCGE, Capital Dividend Account, Purification, Share Sale.