Share reorganizations of a CRIC continue to preclude subsequent PUC reinstatements

The reinstatement rule in the foreign affiliate dumping rules generally provides for the restoration of paid-up capital of a class of shares of a corporation resident in Canada (or a qualifying substitute corporation) when it distributes the foreign affiliate shares (or proceeds thereof) the investment in which gave rise to the previous grind in that PUC or, under the draft FAD amendments released on August 16, 2013, it distributes the proceeds of debt investments which gave rise to such a grind.

This reinstatement rule only applies to the same class of CRIC or QSC shares to which there was a previous grind.  Accordingly, access to reinstatement will be lost if such shares are exchanged for shares of another class or for shares of a related corporation.  See Example 9-D.

This problem has not been fixed in the August 16, 2013 draft amendments.

Neal Armstrong.  Discussion of PUC reinstatement rules under s. 212.3(9).