Les Structures G.B. - Quebec Superior Court rectifies transaction documents because they did not implement the parties' intention to not trigger Part IV tax

The shareholders of a CCPC implemented a reorganization that was intended to crystallize the capital gains deduction without triggering any tax other than a small amount of AMT. However, the transactions for first "purifying" the CCPC of investment assets entailed the issuance of some preferred shares, which caused the shareholding in the CCPC of three of the holding companies to be diluted from 10% to below 10%, so that the CCPC was no longer connected to them and so that they were subject to significant Part IV tax on dividends received from the CCPC.

Before granting the requested order to rectify the implementing documents, Blanchard J stated:

The de-connection of the corporations prevented the accomplishment of the will of the parties in implementing the reorganization, which was to crystallize the CGD and not pay any tax, other than minimum tax, while benefiting from the CGD. ...

In the circumstances, it is appropriate to grant the request and to correct the documents in order to conform them to what the parties had conceived. This is not the Shareholders attempting to rewrite the tax history of the file.

See also Samson.

Neal Armstrong. Summary of Les Structures G.B. Inc. v. A.G. Canada, 100-17-002228-205 (5 June 2023, Quebec Superior Court) under General Concepts - Rectification.