Sir John A. Macdonald and other high-ranking…

Sir John A. Macdonald and other high-ranking politicians, bribed in the Pacific Scandal, had granted federal contracts to Hugh Allan's "Canada Pacific Railway Company" (which is unrelated to the current company) and to the Inter-Ocean Railway Company in 1873 

Because of this scandal, the Conservative party had been removed from office in the same year.

The new Liberal prime minister, Alexander Mackenzie, had begun construction of segments of the railway as a public enterprise under the supervision of the Department of Public Works.

The Thunder Bay branch, linking Lake Superior to Winnipeg, had commenced in 1875.

Progress had been discouragingly slow because of the lack of public money.

With Macdonald's return to power on October 16, 1878, a more aggressive construction policy had been adopted.

Macdonald had confirmed that Port Moody would be the terminus of the transcontinental railway, and had announced that the railway would follow the Fraser and Thompson rivers between Port Moody and Kamloops.

In 1879, the federal government had floated bonds in London and called for tenders to construct the 206 km (128 mi) section of the railway from Yale, British Columbia, to Savona's Ferry, on Kamloops Lake.

The contract had been awarded to Andrew Onderdonk, whose men had started work on May 15, 1880.

After the completion of that section, Onderdonk had received contracts to build between Yale and Port Moody, and between Savona's Ferry and Eagle Pass.

On October 21, 1880, a new syndicate, unrelated to Hugh Allan's, had signed a contract with the Macdonald government, agreeing to build the railway in exchange for twenty-five million dollars (approximately six hundred and twenty-five million in modern Canadian dollars) in credit from the Canadian government and a grant of twenty-five million acres (one hundred thousand square kilometers) of land.

The government had transferred to the new company those sections of the railway it had constructed under government ownership.

The government has also defrayed surveying costs and exempted the railway from property taxes for twenty years.

The Montreal-based syndicate officially comprises five men: George Stephen, James J. Hill, Duncan McIntyre, Richard B. Angus and John Stewart Kennedy.

Donald A. Smith and Norman Kittson, who reinvest their profits from the St. Paul, Minneapolis and Manitoba Railway ,are unofficial silent partners with a significant financial interest.

On February 15, 1881, legislation confirming the contract receives royal assent, and the Canadian Pacific Railway Company is formally incorporated.

George Stephen becomes its first president.