CRA response implies that pipeline transactions and the like should use an amalgamation rather than wind-up

A, who holds 50% of the (common) shares of Opco (having a nominal ACB and PUC), accomplishes a sale of a portion of his shares to the other 50% shareholder (B) by B rolling his shares into a wholly-owned Newco, Newco paying the cash purchase price with proceeds of a bank borrowing and then amalgamating with Opco.

CRA acknowledged that it was unlikely that s. 84(2) applied given that the amalgamation by itself would not produce a “winding-up, discontinuance or reorganization” of Opco’s business. However, it could not be clear on this point in the absence of more information, viz.:

information regarding the nature of the business carried on by Opco, the composition of the assets of Opco (for example, the level of liquidity), the magnitude of the surplus of the corporation or the time within which the loan from the financial institution and the note due to Mr. B would be repaid by Amalco.

CRA indicated, without much further comment, that whether s. 84.1 applied turned on the factual question whether there was arm’s-length dealing.

Neal Armstrong. Summary of 7 October 2016 APFF Roundtable, Q.12 under s. 84(2).