GWR Global Water Resources, a B.C. company, is proposing to merge under Delaware law into a Delaware corporation

The sole asset of GWR Global Water Resources Corp. (“GWRC”), a TSX-listed small-cap B.C. company, is a 48% equity interest in a Delaware water management company (“GWRI”), with the other 52% held by various private owners. In order to take advantage of a term of bonds previously issued by GWRI, which permits their refinancing if GWRI engages in a public offering, it is proposed that GWRC be merged into GWRI under the Delaware corporate law (but as authorized under a B.C. Plan of Arrangement), with GWRI as the survivor – following which a public offering by GWRI would be completed.

S. 128.2(2) appears to effectively deem such a merger to be the same thing as a continuance to Delaware (triggering asset dispositions under s. 128.1(4)(b) and potential emigration tax under s. 219.1), immediately followed by a s. 87(8.2) absorptive foreign merger of GWRC into GWRI. On the basis that GWRC will not became resident in the U.S. to avoid the emigration tax or Part XIII tax, the applicable rate of emigration tax is reduced under s. 219.3 from 25% to 5%. On the numbers, no significant Canadian tax is anticipated to be triggered. Canadian shareholders are expected to be eligible for rollover treatment given that the merger is believed to qualify as a s. 87(8) foreign merger.

GWRC will be treated for Code purposes as (i) transferring all of its assets and liabilities to GWRI, in exchange for common shares of GWRI, and (ii) distributing those GWRI shares to its shareholders. Although the GWRI shares are FIRPTA assets, this is not anticipated to trigger significant tax. In addition, GWRI is anticipated to have no significant "all earnings and profits amount," so that with the appropriate elections, Code s. 367(b) gain by U.S. shareholders should be avoided.

Neal Armstrong. Summary of Circular for merger of GWR Global Water Resources Corp. under Public Transactions – Other – Continuances/Migrations – Outbound – Outbound mergers.