Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.
Principal Issues: Acquisition of control of Target Amalco by Bidco. Amalgamation of Target Amalco with subsidiaries followed by the amalgamation of Target Amalco 2 with Bidco. Bump of the capital property held by Target Amalco 2 before the amalgamation.
Position: Favourable rulings provided.
Reasons: In compliance with the law.
XXXXXXXXXX
2012-045142
XXXXXXXXXX, 2012
Sir,
RE: Advance Income Tax Ruling
XXXXXXXXXX
This is in reply to your letters of XXXXXXXXXX in which you requested an advance income tax ruling on behalf of XXXXXXXXXX ("Bidco"). We also acknowledge the information provided in your emails of XXXXXXXXXX.
We understand that to the best of your knowledge and that of Bidco and the taxpayers involved, none of the issues described herein:
i) is in an earlier return of Bidco or a related person;
ii) is being considered by a tax services office or taxation centre in connection with a previously filed tax return of Bidco or a related person;
iii) is under objection by Bidco or a related person;
iv) is before the courts or, if a judgement has been issued, the time limit for the appeal to a higher court has expired; and
v) is the subject of a ruling previously considered by the Income Tax Rulings Directorate.
Unless otherwise noted, all references herein to sections or components thereof are references to the Income Tax Act, R.S.C. 1985, c.1 (5th Supp.), as amended, or the Income Tax Regulations, C.R.C., c. 945, as appropriate.
Unless otherwise noted, all references to monetary amounts are in Canadian dollars and all references to Paragraphs are references to the numbered paragraphs in this Ruling.
DEFINITIONS
Unless otherwise noted, the following terms have the meanings ascribed to them below:
XXXXXXXXXX.
"Act" means the Income Tax Act, R.S.C. 1985 (5th Supp.), c. C.1, as amended to the date hereof and, unless otherwise stated, every reference herein to a part, section, subsection, paragraph, subparagraph or clause refers to the relevant provision of the Act.
"Amalco" means the corporation created on the Amalgamation.
"Amalgamation" means the amalgamation of Bidco and Target Amalco 2.
"arm's length" has the meaning assigned by section 251.
"Arrangement" means an arrangement under XXXXXXXXXX on the terms and subject to the conditions set out in the Arrangement Agreement and the Plan of Arrangement, the transactions of which are described below.
"Arrangement Agreement" means the Arrangement Agreement between Parent, Bidco and Target dated XXXXXXXXXX.
"XXXXXXXXXX Holdco" means XXXXXXXXXX.
"Bidco" means XXXXXXXXXX.
"Bidco Shares" means the XXXXXXXXXX issued and outstanding common shares of the capital stock of Bidco.
"Bid Holdco" means XXXXXXXXXX.
"Bid Holdco Shares" means the XXXXXXXXXX issued and outstanding common shares of the capital stock of Bid Holdco.
"Buyer XXXXXXXXXX" means XXXXXXXXXX.
"Buyer XXXXXXXXXX Agreement" means the XXXXXXXXXX Agreement dated XXXXXXXXXX between Parent, Bidco, XXXXXXXXXX and Buyer XXXXXXXXXX.
"Buyer XXXXXXXXXX Common Shares" means the issued and outstanding common shares of the capital stock of Buyer XXXXXXXXXX.
"Buyer XXXXXXXXXX Group" means Buyer XXXXXXXXXX, together with its current and future direct or indirect wholly-owned subsidiaries.
XXXXXXXXXX.
"Buyer XXXXXXXXXX" means XXXXXXXXXX.
"Buyer XXXXXXXXXX Agreement" means the XXXXXXXXXX Agreement dated XXXXXXXXXX between Parent, XXXXXXXXXX, Bidco and Buyer XXXXXXXXXX.
XXXXXXXXXX.
"Buyer XXXXXXXXXX Parent" means XXXXXXXXXX.
"Buyer XXXXXXXXXX Shares" means the issued and outstanding shares of the capital stock of Buyer XXXXXXXXXX.
"Buyer XXXXXXXXXX" means XXXXXXXXXX.
"Buyer XXXXXXXXXX Agreement" means the XXXXXXXXXX Agreement dated XXXXXXXXXX between Parent and Buyer XXXXXXXXXX.
"capital property" has the meaning assigned by section 54.
XXXXXXXXXX.
"Certificate" means the certificate or other confirmation of filing giving effect to the Arrangement to be issued by XXXXXXXXXX pursuant to XXXXXXXXXX after the Articles of Arrangement have been filed.
XXXXXXXXXX.
"Court" means the XXXXXXXXXX.
"CRA" means the Canada Revenue Agency.
"Dissent Rights" means rights of dissent exercised pursuant to and in the manner set forth in XXXXXXXXXX, as modified by the interim order issued by the Court with respect to the Arrangement.
"Effective Date" means the date shown on the Certificate.
"Effective Time" means the effective time for purposes of the Plan of Arrangement.
"Existing Subcos" has the meaning given in paragraph 22.
"Finco" means XXXXXXXXXX.
"Incentive Rights" means Target management stock options, restricted share units, XXXXXXXXXX, and deferred share units.
"Investor" means XXXXXXXXXX, a corporation incorporated under the XXXXXXXXXX. XXXXXXXXXX.
"New Holdco" means XXXXXXXXXX.
"New Subco" means a subsidiary of Target referred to in paragraph 53.
"New Target" means a New Subco created to acquire certain assets of Target Amalco that will be retained within the Parent Group following the sales pursuant to the Buyer XXXXXXXXXX Agreement, Buyer XXXXXXXXXX Agreement and Buyer XXXXXXXXXX Agreement.
"XXXXXXXXXX Agreement" means the XXXXXXXXXX Agreement dated XXXXXXXXXX between Subco 5 and XXXXXXXXXX, as amended, pursuant to which Target agrees to acquire XXXXXXXXXX at a price determined in accordance with that agreement.
"non-resident" has the meaning assigned by subsection 248(1).
"Parent" means XXXXXXXXXX.
"Parent Common Shares" means common shares of the capital stock of Parent.
"Parent Group" means Parent, together with its current and future direct and indirect subsidiaries.
"Parent Subco" means XXXXXXXXXX.
"Plan of Arrangement" means the plan of arrangement in the form attached as a schedule to the Arrangement Agreement, as amended.
"public corporation" has the meaning assigned by subsection 89(1).
"Redenomination Date" means the first business day following the amalgamation of Bidco and Target Amalco 2.
"Redenomination Time" means XXXXXXXXXX on the Redenomination Date.
"Series" means the series of transactions that includes the acquisition of control of Target Amalco by Bidco and the Amalgamation.
"Subco 1" means XXXXXXXXXX, a corporation incorporated under the XXXXXXXXXX.
"Subco 2" means XXXXXXXXXX, a corporation incorporated under the XXXXXXXXXX.
"Subco 3" means XXXXXXXXXX, a corporation incorporated under the XXXXXXXXXX.
"Subco 3 XXXXXXXXXX" means all of the issued and outstanding XXXXXXXXXX Shares of Subco 3. The Subco 3 XXXXXXXXXX are redeemable on their maturity date, defined as the earlier of the XXXXXXXXXX anniversary of the issue date (or the next business day following such date, if such date is not a business day) and the date agreed to in writing by Subco 3 and the holder of such shares, for their issue price of $XXXXXXXXXX per share plus any unpaid XXXXXXXXXX dividends minus any capital returned on the Subco 3 XXXXXXXXXX. The Subco 3 XXXXXXXXXX holders are entitled to XXXXXXXXXX dividends at a rate of XXXXXXXXXX% per annum of the issue price subject to reduction to reflect capital returned on the Subco 3 XXXXXXXXXX prior to declaration of the dividend, and pro-ration where a dividend reflects a period of less than a year.
"Subco 3 XXXXXXXXXX" means all of the issued and outstanding XXXXXXXXXX Shares of Subco 3. The Subco 3 XXXXXXXXXX are redeemable for their issue price of $XXXXXXXXXX per share and their holders are entitled to XXXXXXXXXX dividends at a rate of XXXXXXXXXX% per annum of the issue price.
"Subco 4" means XXXXXXXXXX formed under the XXXXXXXXXX.
"Subco 5" means XXXXXXXXXX, a corporation incorporated under the XXXXXXXXXX.
"Subco 6" means XXXXXXXXXX, a corporation continued under the XXXXXXXXXX.
"Subco 7" means XXXXXXXXXX, a corporation continued under the XXXXXXXXXX.
"Subco 8" means XXXXXXXXXX, a corporation incorporated under the XXXXXXXXXX.
"Subco 9" means XXXXXXXXXX, a corporation incorporated under the XXXXXXXXXX.
"Subco 10" means XXXXXXXXXX, a corporation incorporated under the XXXXXXXXXX.
"Subco 11" means XXXXXXXXXX, a corporation incorporated under the XXXXXXXXXX.
"Subco 12" means XXXXXXXXXX, a corporation incorporated under the XXXXXXXXXX.
"Subco 13" means XXXXXXXXXX, a corporation incorporated under the XXXXXXXXXX.
"Subco 14" means XXXXXXXXXX, a corporation incorporated under the XXXXXXXXXX.
"Subco 15" means XXXXXXXXXX, a corporation incorporated under the XXXXXXXXXX.
"Subco 16" means XXXXXXXXXX, a corporation incorporated under the XXXXXXXXXX.
"Target" means XXXXXXXXXX.
"Target Amalco" means the amalgamated corporation resulting from the Target Amalgamation.
"Target Amalco 2" means the amalgamated corporation resulting from the Target Amalco Amalgamation.
"Target Amalco Amalgamation" means the amalgamation of Target Amalco, Subco 2 and New Target.
"Target Amalgamation" means the amalgamation of Target and Subco 1.
"Target Common Shares" means common shares of the capital stock of Target.
"Target Employees" means individuals who are employed by Target or members of the Target Group.
"Target Group" means Target, together with its current and future direct and indirect subsidiaries.
"taxable Canadian corporation" has the meaning assigned by subsection 89(1).
"Transfer Effective Time" has the meaning given in paragraph 37(c).
XXXXXXXXXX.
"UCC" means undepreciated capital cost and has the meaning assigned by subsection 248(1).
FACTS
Parent
1. Parent is a corporation incorporated under the laws of XXXXXXXXXX and is a non-resident. Parent is a resident of XXXXXXXXXX for XXXXXXXXXX tax purposes. The issued and outstanding share capital of Parent consists of the Parent Common Shares, which are listed on the XXXXXXXXXX and are widely-held by members of the public.
2. Parent's public disclosure indicates that XXXXXXXXXX, owns approximately XXXXXXXXXX% of the Parent Common Shares. In addition, XXXXXXXXXX each own more than XXXXXXXXXX% of the Parent Common Shares. Aside from XXXXXXXXXX, management of Parent is not aware of any other holders of XXXXXXXXXX% or more of the Parent Common Shares.
3. Parent Subco is a corporation incorporated under the laws of XXXXXXXXXX and is a non-resident. At all relevant times, all of the issued and outstanding shares of the capital stock of Parent Subco are owned by Parent.
4. XXXXXXXXXX Holdco is a corporation incorporated under the laws of XXXXXXXXXX and is a non-resident. At all relevant times the shares of XXXXXXXXXX Holdco will be owned by Parent Subco or affiliates of Parent.
5. Bid Holdco is a corporation incorporated under the XXXXXXXXXX on XXXXXXXXXX on behalf of Parent Subco. Bid Holdco is a taxable Canadian corporation and is not a public corporation. The issued and outstanding shares of the capital stock of Bid Holdco consist of the Bid Holdco Shares, all of which were issued to Parent Subco on XXXXXXXXXX in consideration for an aggregate subscription price of $XXXXXXXXXX.
6. Bidco is a corporation incorporated under the XXXXXXXXXX on XXXXXXXXXX on behalf of Bid Holdco. Bidco is a taxable Canadian corporation and is not a public corporation. The issued and outstanding shares of the capital stock of Bidco consist of the Bidco Shares, all of which were issued to Bid Holdco on XXXXXXXXXX in consideration for an aggregate subscription price of $XXXXXXXXXX.
7. New Holdco is a corporation incorporated under the XXXXXXXXXX on XXXXXXXXXX and is a taxable Canadian corporation and not a public corporation. Parent Subco was issued XXXXXXXXXX of the capital stock of New Holdco upon its incorporation.
8. Finco is a corporation incorporated under the laws of XXXXXXXXXX on XXXXXXXXXX and an indirect subsidiary of Parent Subco. Finco is a resident of XXXXXXXXXX for XXXXXXXXXX tax purposes.
9. Parent, together with persons who do not deal at arm's length with Parent, does not currently and will not, at any time prior to the Transfer Effective Time, hold any Target Common Shares.
Buyer XXXXXXXXXX
10. Buyer XXXXXXXXXX is a corporation incorporated under the XXXXXXXXXX, which is XXXXXXXXXX. The issued and outstanding share capital of Buyer XXXXXXXXXX consists of the Buyer XXXXXXXXXX Common Shares, which are listed on the XXXXXXXXXX and are widely-held by members of the public.
11. Buyer XXXXXXXXXX's public disclosure indicates that, to its knowledge, there are no shareholders who beneficially own, directly or indirectly, or control or direct XXXXXXXXXX% or more of the Buyer XXXXXXXXXX Common Shares. Public disclosure of Target indicates that Investor owns XXXXXXXXXX% of the Buyer XXXXXXXXXX Common Shares.
12. To the knowledge of Bidco, Buyer XXXXXXXXXX, together with persons who do not deal at arm's length with Buyer XXXXXXXXXX, does not currently and will not, at any time in the Series, hold any Target Common Shares. Buyer XXXXXXXXXX has represented to Bidco that it does not hold and will not acquire any Target Common Shares.
Buyer XXXXXXXXXX
13. Buyer XXXXXXXXXX is a corporation incorporated under the XXXXXXXXXX, which is XXXXXXXXXX. Buyer XXXXXXXXXX is a wholly-owned subsidiary of Buyer XXXXXXXXXX Parent, which is XXXXXXXXXX. To the knowledge of Bidco, the issued and outstanding shares of the capital stock of Buyer XXXXXXXXXX Parent are owned by XXXXXXXXXX.
14. To the knowledge of Bidco, Buyer XXXXXXXXXX, together with persons who do not deal at arm's length with Buyer XXXXXXXXXX, currently owns approximately XXXXXXXXXX% of the Target Common Shares. Buyer XXXXXXXXXX, together with persons who do not deal at arm's length with Buyer XXXXXXXXXX, will not acquire, at any time in the Series, any additional Target Common Shares. Buyer XXXXXXXXXX has represented to Bidco the number of Target shares it owns and agreed not to acquire further Target Common Shares.
Buyer XXXXXXXXXX
15. Buyer XXXXXXXXXX is a corporation incorporated under the XXXXXXXXXX. Buyer XXXXXXXXXX's shares are listed on the XXXXXXXXXX and widely-held by members of the public. XXXXXXXXXX.
16. Buyer XXXXXXXXXX's public disclosure indicates that, to its knowledge, there are no shareholders who beneficially own XXXXXXXXXX% or more of the Buyer XXXXXXXXXX shares. Public disclosure also indicates that Investor owns or exercises investment discretion over XXXXXXXXXX% of the Buyer XXXXXXXXXX shares.
17. To the knowledge of Bidco, Buyer XXXXXXXXXX, together with persons who do not deal at arm's length with Buyer XXXXXXXXXX, does not and will not, at any time in the Series, hold any Target Common Shares.
Target
18. Target is a corporation incorporated under the XXXXXXXXXX, and is a taxable Canadian corporation and a public corporation. The issued and outstanding share capital of Target consists of the Target Common Shares, which are listed on the XXXXXXXXXX, and are widely-held by members of the public.
19. Public disclosure documents indicate that Investor owns approximately XXXXXXXXXX% of the Target Common Shares. Other than Investor, Bidco is not aware of any person, alone or together with other persons not dealing at arm's length with such person, who beneficially owned, directly or indirectly, or exercised control over XXXXXXXXXX% or more of the shares of any class of the capital stock of Target or Target Amalco, at the time of the acquisition of control of Target Amalco by Bidco (as provided in Paragraph 61), or at any time during the preceding 12-month period.
20. Public disclosure documents indicate that the directors and executive officers of Target as a group beneficially own or exercise control or direction over approximately XXXXXXXXXX% of the Target Common Shares.
21. With the exception of XXXXXXXXXX, Target currently directly holds all of its Canadian operating assets.
22. Target directly owns the shares of the capital stock of several subsidiaries (the "Existing Subcos"), including Subco 1, Subco 2, Subco 5, Subco 6, Subco 7, Subco 8, Subco 9 and Subco 10.
23. Subco 1, Subco 2 and Subco 8 are wholly owned by Target. Subco 1 and Subco 2 are XXXXXXXXXX. Subco 8 is XXXXXXXXXX which directly and indirectly holds Target's XXXXXXXXXX operations. Subco 1 owns all the shares of Subco 3, XXXXXXXXXX which indirectly holds Target's XXXXXXXXXX operations.
24. Subco 1 and Subco 2 hold all of the issued and outstanding interests in Subco 4, XXXXXXXXXX.
25. Subco 2 holds all of the issued and outstanding shares of the capital stock of Subco 11, XXXXXXXXXX.
26. Subco 4 owns all of the shares of the capital stock of Subco 12 and Subco 13, XXXXXXXXXX.
27. Subco 13 owns all the shares of the capital stock of Subco 14, XXXXXXXXXX.
28. Subco 15 is XXXXXXXXXX and an indirect wholly-owned subsidiary of Subco 3. Subco 15 owns all the shares of the capital stock of Subco 16, XXXXXXXXXX.
29. Target owns XXXXXXXXXX% of the issued and outstanding shares of the capital stock of Subco 5, XXXXXXXXXX. Target deals at arm's length with Subco 5 at all relevant times. There are no shareholder agreements or similar agreements providing for buy-sell rights with respect to the Subco 5 shares. Target does not have any right to acquire any additional shares of Subco 5 and will not, at any time in the Series, own, or have rights to acquire, greater than XXXXXXXXXX% of the issued and outstanding shares of Subco 5.
30. Target owns approximately a XXXXXXXXXX% interest in Subco 6, a XXXXXXXXXX. The unanimous shareholders' agreement of Subco 6 does not confer on Target the ability to control Subco 6.
31. Target owns XXXXXXXXXX% of the issued and outstanding shares of the capital stock of Subco 7, XXXXXXXXXX. Target deals at arm's length with Subco 7 at all relevant times. Pursuant to the Subco 7 unanimous shareholders' agreement, Target is entitled to appoint (or jointly appoint) XXXXXXXXXX Subco 7 directors and Target has a right of first refusal with respect to certain issued and outstanding Subco 7 shares. Target does not have any other right to acquire any additional shares of Subco 7 and will not, at any time in the Series, own, or have any other right to acquire, greater than XXXXXXXXXX% of the issued and outstanding shares of the capital stock of Subco 7.
32. Target owns a XXXXXXXXXX% interest in XXXXXXXXXX Subco 9 and Subco 10 and a XXXXXXXXXX% undivided interest in the assets comprising the XXXXXXXXXX. Subco 9 and Subco 10 are XXXXXXXXXX.
33. Target has issued and outstanding XXXXXXXXXX notes with an aggregate principal amount of approximately $XXXXXXXXXX, issued pursuant to various note indentures and in various series. None of the notes confer a right on holders to obtain Target shares.
OTHER FACTS
Background to the Proposed Transactions
34. On XXXXXXXXXX, Target entered into the Arrangement Agreement whereby Bidco agreed to acquire, pursuant to the Plan of Arrangement, all of the Target Common Shares at a price of $XXXXXXXXXX per share in cash. The directors and senior officers of Target who hold shares or options to acquire shares in Target entered into voting and support agreements providing that they would vote in favour of the Arrangement and for the sale of their shares in Target to Bidco. Pursuant to each of these agreements, no party to such agreement is excused from its obligations under the agreement as a result of amendments to the Act. The total value of this transaction is estimated at $XXXXXXXXXX. The transaction was unanimously approved by Target's Board of Directors and has been approved by the Target shareholders at a special meeting of shareholders held XXXXXXXXXX and by the Court on XXXXXXXXXX.
35. The transaction is to be carried out by way of a plan of arrangement under the XXXXXXXXXX. The closing is subject to certain other customary conditions, including regulatory approvals. The transaction is expected to close in XXXXXXXXXX following the receipt of regulatory approvals.
XXXXXXXXXX
The Transaction Documents
Arrangement Agreement
36. Pursuant to the Arrangement Agreement, among other things, and subject to certain conditions:
(a) Target agreed to apply to the Court pursuant to XXXXXXXXXX for an interim order of the Court providing for the calling and holding of a meeting of shareholders for the purpose of considering and voting to approve, among other things, a special resolution approving the Plan of Arrangement;
(b) Target agreed to prepare and mail to Target shareholders a management information circular in connection with the Arrangement;
(c) Target agreed, if the requisite shareholder approval is obtained at the Target shareholders meeting with respect to the Arrangement, to seek the final order of the Court approving the Arrangement and to file articles of arrangement to effect the Arrangement;
(d) Target agreed to implement such pre-acquisition reorganizations of Target and the entities in the Target Group as Bidco may reasonably request subject to numerous conditions, including conditions as to the commercial reasonableness of the pre-acquisition reorganization transactions; and
(e) no party to the Arrangement Agreement may be excused from its obligations under the Arrangement Agreement as a result of amendments to the Act.
37. The Plan of Arrangement provides for a series of transactions which occur commencing at the Effective Time in sequential order at XXXXXXXXXX intervals. The following steps are contemplated:
(a) at the Effective Time all outstanding Incentive Rights will be disposed of to Target in exchange for the right to a cash payment;
(b) at the Effective Time plus XXXXXXXXXX the Incentive Rights will be cancelled; and
(c) at the Effective Time plus XXXXXXXXXX (the "Transfer Effective Time") all Target Common Shares in respect of which Dissent Rights have been validly exercised and not withdrawn will be transferred to Bidco in consideration for the right to be paid the fair value of such Target Common Shares and all other Target Common Shares will be transferred to Bidco in consideration for the right to receive a cash payment of $XXXXXXXXXX per share.
Buyer XXXXXXXXXX Agreement
38. The Buyer XXXXXXXXXX Agreement provides, among other things, that:
(a) Buyer XXXXXXXXXX or a wholly-owned subsidiary of Buyer XXXXXXXXXX will buy the transferred assets under the Agreement, consisting of Target's XXXXXXXXXX.
(b) Certain assets are excluded as transferred assets under the Agreement, including XXXXXXXXXX.
(c) At Bidco's option, the sale can be completed by selling the transferred assets directly or by selling the shares of the capital stock of a corporation that owns the transferred assets. XXXXXXXXXX.
(d) The purchase price is $XXXXXXXXXX, subject to adjustment (i) to reflect XXXXXXXXXX.
(e) Buyer XXXXXXXXXX is to undertake responsibility for past, present and future obligations relating to the transferred assets, obligations with respect to transferred employees and XXXXXXXXXX transfer taxes with respect to the transfer of the transferred assets. The transferred assets are to be sold on a cash-free, debt-free basis.
(f) XXXXXXXXXX.
(g) XXXXXXXXXX.
(h) The Agreement contemplates a series of closings to sell the transferred assets to Buyer XXXXXXXXXX or its wholly-owned subsidiaries.
(i) Buyer XXXXXXXXXX has agreed, for itself and all related and affiliated persons (within the meaning of the Act), for XXXXXXXXXX years following the acquisition of the transferred assets, not to acquire any shares of the capital stock of Target, not to knowingly allow a "Restricted Person" to acquire directly or indirectly any transferred asset or any property substituted (for purposes of subparagraph 88(1)(c)(vi)) for a transferred asset, other than securities listed or conditionally listed on a stock exchange, and to instruct each underwriter engaged by it not to solicit to or accept a purchase order or subscription agreement from a "Restricted Person" in respect of a security that is property substituted for a transferred asset (for purposes of subparagraph 88(1)(c)(vi)) and listed or conditionally listed on a stock exchange. XXXXXXXXXX.
(j) If holders of pre-emptive rights with respect to Target assets exercise those pre-emptive rights, if Buyer XXXXXXXXXX is unable to obtain required third party consents, or if Buyer XXXXXXXXXX is unable to obtain required regulatory approvals to purchase a particular transferred asset that transferred asset may be retained by Target or sold to a third party.
Buyer XXXXXXXXXX Agreement
39. The Buyer XXXXXXXXXX Agreement provides, among other things, that:
(a) Buyer XXXXXXXXXX will purchase the transferred assets under the agreement, consisting of: XXXXXXXXXX plus associated working capital. XXXXXXXXXX.
(b) At Bidco's option, the sale can be completed by selling the transferred assets directly or by selling the shares of the capital stock of a corporation that owns the transferred assets.
(c) The purchase price is $XXXXXXXXXX, subject to adjustment (i) XXXXXXXXXX.
(d) Buyer XXXXXXXXXX is to undertake responsibility for past, present and future obligations relating to the transferred assets, obligations with respect to transferred employees and transfer taxes with respect to the transfer of the transferred assets. The transferred assets are to be sold on a cash-free, debt-free basis.
(e) XXXXXXXXXX.
(f) XXXXXXXXXX.
(g) XXXXXXXXXX.
(h) XXXXXXXXXX.
(i) XXXXXXXXXX.
(j) The Agreement contemplates a series of closings to sell the transferred assets to Buyer XXXXXXXXXX.
(k) Buyer XXXXXXXXXX has agreed, for itself and all related and affiliated persons (within the meaning of the Act), for XXXXXXXXXX years following the acquisition of the transferred assets, not to acquire any shares of the capital stock of Target, not to knowingly allow a "Restricted Person" to acquire directly or indirectly any transferred asset or any property substituted (for purposes of subparagraph 88(1)(c)(vi)) for a transferred asset. XXXXXXXXXX.
(l) If holders of pre-emptive rights with respect to Target assets exercise those pre-emptive rights, if Buyer XXXXXXXXXX is unable to obtain required third party consents, or if Buyer XXXXXXXXXX is unable to obtain required regulatory approvals to purchase a particular transferred asset that transferred asset may be retained by Target or sold to a third party.
Buyer XXXXXXXXXX Agreement
40. XXXXXXXXXX, Parent entered into the Buyer XXXXXXXXXX Agreement XXXXXXXXXX.
Investor Lock-Up Agreement
41. Pursuant to the Lock-Up Agreement, Investor has agreed to vote in favour of the Plan of Arrangement and sell its Target Common Shares to Bidco. Pursuant to the Lock-Up Agreement, no party to that agreement is excused from its obligations under that agreement as a result of amendments to the Act.
42. Pursuant to the Lock-Up Agreement, Investor has agreed, for itself and all related and affiliated persons (within the meaning of the Act) XXXXXXXXXX for XXXXXXXXXX years following the acquisition of the Target Common Shares by Bidco, not to acquire any shares of the capital stock of Target, Buyer XXXXXXXXX, Parent, or Buyer XXXXXXXXXX or to acquire any "Restricted Asset". XXXXXXXXXX.
Employee Incentive Rights
43. Target Employees may receive incentive rights pursuant to Parent employee incentive plans following the acquisition of Target by Bidco, which may include the right to obtain Parent Common Shares. Some Target Employees are expected to become employees of Buyer XXXXXXXXXX or Buyer XXXXXXXXXX and potentially could become participants in employee incentive programs of Buyer XXXXXXXXXX or Buyer XXXXXXXXXX, including share purchase programs.
PROPOSED TRANSACTIONS
The following transactions have occurred or are proposed to implement the transactions contemplated by the Arrangement Agreement, the Buyer XXXXXXXXXX Agreement, the Buyer XXXXXXXXXX Agreement, the Buyer XXXXXXXXXX Agreement, the cost base bump and the integration of Target and its subsidiaries into Parent's corporate structure.
Pre-Acquisition Reorganization
44. XXXXXXXXXX Holdco acquired the shares of the capital stock of Bid Holdco from Parent Subco on XXXXXXXXXX.
45. In XXXXXXXXXX, Target delivered notices of redemption for certain series of its outstanding notes and in XXXXXXXXXX, effected redemption of those notes by making a cash payment to noteholders using funds derived from Target's own sources, including under its XXXXXXXXXX credit facility.
46. XXXXXXXXXX. Parent will pay the consent fee to holders of XXXXXXXXXX notes in conjunction with closing of the Plan of Arrangement and Target will agree to reimburse Parent for such amount. Accordingly the terms of the XXXXXXXXXX notes will be amended. XXXXXXXXXX. The amendments will not change the identity of the borrower under the XXXXXXXXXX notes, the interest rate, principal amount or payment dates, including the maturity date of the notes and will provide that there is no intention to create a new debt or novation of the existing debt. Parent and Parent Subco will guarantee payment of the amended notes.
47. On XXXXXXXXXX Parent Subco subscribed for common shares and preferred shares of the capital stock of New Holdco in consideration for XXXXXXXXXX.
48. XXXXXXXXXX Holdco transferred its shares of the capital stock of Bid Holdco to New Holdco for cash consideration so that Bid Holdco became a wholly-owned subsidiary of New Holdco. The Bid Holdco Shares had nominal fair market value at the time of the transfer.
49. On XXXXXXXXXX Parent Subco transferred its preferred shares of the capital stock of New Holdco to XXXXXXXXXX Holdco.
50. Subco 1 will be continued under the XXXXXXXXXX.
51. The stated capital of the shares of the capital stock of Subco 1 for purposes of the XXXXXXXXXX will be reduced to $XXXXXXXXXX, without any payment being made.
52. Target and Subco 1 will amalgamate to form Target Amalco and continue as one corporation under the XXXXXXXXXX such that:
(a) all of the property (except amounts receivable from any predecessor corporation or shares of any predecessor corporation) of the predecessor corporations immediately before the amalgamation will become property of Target Amalco by virtue of the amalgamation;
(b) all of the liabilities (except any amounts payable to any predecessor corporation) of the predecessor corporations immediately before the amalgamation will become liabilities of Target Amalco by virtue of the amalgamation; and
(c) no securities or other property will be issued on the amalgamation, the issued and outstanding shares of the capital stock of Subco 1 will be cancelled and the Target Common Shares will remain outstanding following the amalgamation as Target Amalco common shares with a stated capital equal to the stated capital of the Target Common Shares.
53. Target Amalco will implement various "packaging transactions" so that the Target Amalco assets will be transferred to a number of newly-formed Canadian subsidiary corporations (each, a "New Subco") in consideration for shares of the capital stock of those corporations and, in some cases, the assumption of liabilities. Each New Subco has been incorporated in Canada. Each New Subco, including New Target, will be, at any relevant time a taxable Canadian corporation.
54. Target Amalco and each New Subco will elect, jointly and in prescribed form and within the time limits referred to in subsection 85(6) of the Act to have the rules in subsection 85(1) of the Act apply to each eligible property transferred by Target Amalco to a New Subco as described in paragraph 53. The agreed amount for purposes of each such election with respect to a New Subco will not be less than:
(a) in the case of inventory or capital property (other than depreciable property of a prescribed class), an amount equal to the lesser of the amounts described in subparagraphs 85(1)(c.1)(i) and (ii) of the Act,
(b) in the case of eligible capital property in respect of a business, an amount equal to the lesser of the amounts described in subparagraphs 85(1)(d)(i), (ii) and (iii), and
(c) in the case of a depreciable property of a prescribed class, an amount equal to the least of the amounts described in subparagraphs 85(1)(e)(i), (ii) and (iii) of the Act.
Funding of Purchase Price
55. XXXXXXXXXX.
56. The XXXXXXXXXX amounts owing for the acquisition under the Plan of Arrangement, and the funding of the loan to Target Amalco as described in paragraph 60, will be borrowed by Parent Subco from lenders who deal at arm's length with the Parent Group or provided from the financial resources of the Parent Group. A portion of those funds will then be transferred to New Holdco as repayment of XXXXXXXXXX. The remaining portion will be transferred, indirectly through the Finco ownership chain, to New Holdco in the form of loans to New Holdco by Finco.
57. New Holdco will subscribe for shares of the capital stock of Bid Holdco to fund the purchase of Target Amalco.
58. Bid Holdco will use the funds received from New Holdco to subscribe for shares of the capital stock of Bidco. For greater certainty, the purchase price for the Target Amalco common shares will be funded by third party lenders, Parent and its affiliates, XXXXXXXXXX and not from cash held by Target or any entity in the Target Group. The purchase price, together with amounts payable with respect to Incentive Rights, will be paid to the depositary under the Arrangement prior to the Effective Time. Bidco is not aware that the third-party lenders are or will be at any time during the course of the series and before the control of Target Amalco was last acquired by Bidco, persons described in clause 88(1)(c)(vi)(B). Bidco is not aware that the loans made by the third-party lenders will be acquired by persons described in clause 88(1)(c)(vi)(B) as part of the series of transactions or events that includes the Amalgamation.
59. New Holdco will make a loan to Bidco to provide funds so that Target Amalco can repay its XXXXXXXXXX credit facility and to XXXXXXXXXX.
60. Bidco will loan funds to Target Amalco to provide it with funds which Target Amalco will use to repay its XXXXXXXXXX credit facility and to XXXXXXXXXX.
Effective Time of Plan of Arrangement
61. The Plan of Arrangement will be effective at the Effective Time, and at the Transfer Effective Time Bidco will acquire all of the Target Amalco common shares. The depositary under the Arrangement will make payment to holders of Target Amalco common shares and to Target Employees with respect to their Incentive Rights subsequent to the Transfer Effective Time. Target Amalco will also be obligated to make payments to certain Target Employees pursuant to change of control provisions included in their employment agreements, which payments will be made subsequent to the Transfer Effective Time.
62. The common shares of the capital stock of Target Amalco will cease to be listed on the XXXXXXXXXX.
63. Target Amalco will elect pursuant to paragraph (c) of the definition of "public corporation" in subsection 89(1) not to be a public corporation.
Amalgamations of Target Amalco, Subco 2 and New Target and Target Amalco 2 and Bidco
64. Subco 4 will amend its articles to permit the transfer of an interest and Target Amalco will transfer a XXXXXXXXXX% interest in Subco 4 to Subco 3 for cash consideration.
65. Subco 2 will be continued under the XXXXXXXXXX.
66. The stated capital of the shares of the capital stock of Subco 2 and New Target for purposes of the XXXXXXXXXX will be reduced to $XXXXXXXXXX, without any payment being made.
67. Target Amalco, Subco 2 and New Target will amalgamate to form Target Amalco 2 and continue as one corporation under the XXXXXXXXXX such that:
(a) all of the property (except amounts receivable from any predecessor corporation or shares of any predecessor corporation) of the predecessor corporations immediately before the amalgamation will become property of Target Amalco 2 by virtue of the amalgamation;
(b) all of the liabilities (except any amounts payable to any predecessor corporation) of the predecessor corporations immediately before the amalgamation will become liabilities of Target Amalco 2 by virtue of the amalgamation; and
(c) no securities or other property will be issued on the amalgamation, the issued and outstanding shares of the capital stock of Subco 2 and New Target will be cancelled and the Target Amalco common shares will remain outstanding following the amalgamation as Target Amalco 2 common shares with a stated capital equal to the stated capital of the Target Amalco common shares.
68. Target Amalco 2 will assign to Bidco any remaining cash balances it has, in exchange for the issuance by Bidco of a non-interest bearing promissory note or in reduction of amounts lent by Bidco to Target Amalco to fund repayment of the XXXXXXXXXX credit facility. As a consequence, immediately prior to the Amalgamation Target Amalco 2 will have no cash on hand.
69. The stated capital of the shares of the capital stock of Target Amalco 2 for purposes of the XXXXXXXXXX will be reduced to $XXXXXXXXXX, without any payment being made.
70. Bidco and Target Amalco 2 will amalgamate to form Amalco and continue as one corporation under the XXXXXXXXXX such that:
(a) all of the property (except amounts receivable from any predecessor corporation or shares of any predecessor corporation) of the predecessor corporations immediately before the amalgamation will become property of Amalco by virtue of the amalgamation;
(b) all of the liabilities (except any amounts payable to any predecessor corporation) of the predecessor corporations immediately before the amalgamation will become liabilities of Amalco by virtue of the amalgamation; and
(c) no securities or other property will be issued on the amalgamation, the issued and outstanding shares of the capital stock of Target Amalco 2 will be cancelled and the Bidco Shares will remain outstanding following the amalgamation as Amalco common shares with a stated capital equal to the stated capital of the Bidco Shares.
71. Effective on the Redenomination Date, using the XXXXXXXXXX at the Redenomination Time:
(a) the terms of the Subco 3 XXXXXXXXXX will be amended to redenominate their redemption amount to the Canadian dollar equivalent of their $XXXXXXXXXX issue price as of the Redenomination Time;
(b) the terms of the Subco 3 XXXXXXXXXX will be amended to redenominate their redemption amount to the Canadian dollar equivalent of their $XXXXXXXXXX issue price as of the Redenomination Time, less the Canadian dollar equivalent of the amount of capital returned on such shares, determined as of the Redenomination Time for capital returned prior to the Redenomination Date, and as of the date of such return of capital in all other cases, and plus the Canadian dollar equivalent as of the Redenomination Time of the amount of any unpaid dividends with respect to any pre-Redenomination Date dividend entitlement and, in all other cases, the amount of any unpaid dividends; and
(c) after the Redenomination Date the dividend rate on the Subco 3 XXXXXXXXXX will be determined in Canadian dollars and may be altered as a consequence of the adjustment to their redemption amount in 71(b) and as required by XXXXXXXXXX transfer pricing considerations.
72. Amalco will assign certain loans owed to it by Subco 12 and Subco 14 to Finco and distribute the proceeds received on such assignment to Bid Holdco as a return of capital.
73. Bid Holdco will distribute the proceeds received on the return of capital from Amalco to New Holdco as a return of capital.
74. New Holdco will transfer the proceeds received on the return of capital from Bid Holdco to Finco in partial repayment of funds loaned by Finco to New Holdco.
75. New Holdco will borrow funds from an arm's length lender and loan those funds to Amalco, which will be used by Amalco to return capital to Bid Holdco and by Bid Holdco to return capital to New Holdco. New Holdco will then repay the arm's length lender. Bidco is not aware that the third-party lenders are or will be at any time during the course of the series and before the control of Target Amalco was last acquired by Bidco, persons described in clause 88(1)(c)(vi)(B). Bidco is not aware that the loans made by the third-party lenders will be acquired by persons described in clause 88(1)(c)(vi)(B) as part of the series of transactions or events that includes the Amalgamation.
76. Subco 12 will assign loans owing to it by Subco 8 to Finco in partial repayment of loans of Subco 12 acquired in the transaction described in paragraph 72.
77. Subco 15 will dispose of XXXXXXXXXX to a member of the Parent Group. Subco 16 will also dispose of assets to a member of the Parent Group. The consideration received by Subco 15 on such disposition will be distributed to an intermediary corporation as consideration for the repurchase of Subco 15 shares and will be received by Subco 3 as consideration for the repurchase of shares in the intermediary corporation. Subco 3 will distribute such consideration by redeeming a portion of its XXXXXXXXXX shares referred to in paragraph 71 and the proceeds of that redemption will be used by Amalco to return capital to Bid Holdco and by Bid Holdco to return capital to New Holdco.
78. New Holdco will use the funds received from Bid Holdco to repay a portion of its indebtedness to Finco.
Sales of Target Assets
79. When the conditions to closing under the Buyer XXXXXXXXXX Agreement and the Buyer XXXXXXXXXX Agreement have been met, XXXXXXXXXX, Amalco will sell shares of the capital stock of various of the New Subcos and shares of the capital stock of Subco 6 to Buyer XXXXXXXXXX and one or more of the New Subcos or Amalco may sell certain directly held assets to Buyer XXXXXXXXXX and Buyer XXXXXXXXXX pursuant to the terms and conditions of the Buyer XXXXXXXXXX Agreement and the Buyer XXXXXXXXXX Agreement, and the consideration received will consist of XXXXXXXXXX, and cash. Certain foreign subsidiaries of Amalco will also sell assets or shares to Buyer XXXXXXXXXX and Buyer XXXXXXXXXX in accordance with the Buyer XXXXXXXXXX Agreement and the Buyer XXXXXXXXXX Agreement.
80. When the conditions to closing under the Buyer XXXXXXXXXX Agreement have been met, XXXXXXXXXX, Amalco will sell the shares of the capital stock of Subco 5 and the XXXXXXXXXX Agreement to Buyer XXXXXXXXXX.
81. Each of Target Amalco and its corporate subsidiaries will elect not to have subsection 256(9) apply with respect to the acquisition of control by Bidco, so that Bidco will be considered to have acquired control of Target Amalco and each of its corporate subsidiaries at the Transfer Effective Time (and not earlier on the Effective Date).
82. In its tax return for its taxation year commencing on the Amalgamation, Amalco will designate in respect of each non-depreciable capital property acquired by it on the Amalgamation (and owned by Target Amalco, Subco 2 or New Target at the time Bidco acquired control of Target Amalco) an amount pursuant to subsection 87(11) and paragraph 88(1)(d) equal to the amount by which the fair market value of each such property at the time Bidco acquired control of Target Amalco exceeds the cost amount of such property to Target Amalco immediately before the amalgamation. The total of all amounts so designated by Amalco will not exceed (i) the total of the adjusted cost base of Bidco of the common shares of the capital stock of Target Amalco immediately before the Amalgamation, less (ii) the amount by which (A) the total of the cost amounts to Target Amalco of all property owned by it immediately before the Amalgamation plus any money of Target Amalco on hand immediately before the Amalgamation, exceeds the total of (B) the total of the debts owing by Target Amalco, or any other obligation of Target Amalco to pay an amount, that was outstanding immediately before the Amalgamation, and (C) the amounts of any reserve (other than those excepted in subclause 88(1)(d)(i)(C)) deducted in computing the income of Target Amalco for its taxation year ending immediately before the Amalgamation and (iii) the amount of any dividends received by Bidco from Target Amalco.
83. Some Target shareholders will increase their shareholdings in Parent, Buyer XXXXXXXXXX or Buyer XXXXXXXXXX after the announcement of the Proposed Transactions. Investor will increase its shareholdings in Buyer XXXXXXXXXX after the announcement of the Proposed Transactions. To the best of your knowledge, Target shareholders (other than Investor) who increased their shareholdings in Parent, Buyer XXXXXXXXXX and Buyer XXXXXXXXXX after the announcement of the Proposed Transactions with Parent, Buyer XXXXXXXXXX and Buyer XXXXXXXXXX hold less than 5% of the Target shares.
84. Target assets will form only a small part of each of Parent, Buyer XXXXXXXXXX and Buyer XXXXXXXXXX's business (approximately XXXXXXXXXX%).
85. Each of Parent, Buyer XXXXXXXXXX and Buyer XXXXXXXXXX has a significantly different business than does Target. XXXXXXXXXX.
86. XXXXXXXXXX.
87. Parent Group is considering further restructuring steps involving various of its XXXXXXXXXX entities. These steps would generally involve the acquisition of Subco 3 by XXXXXXXXXX Holdco and are not anticipated to occur within XXXXXXXXXX years from the Effective Date. The details of such transactions are not known with certainty at this time.
88. If regulatory approvals, third party consents or waivers of pre-emptive rights cannot be obtained, assets that would otherwise be sold to Buyer XXXXXXXXXX or Buyer XXXXXXXXXX may be sold to third-party buyers or retained by entities in the Target Group. In some cases, Amalco assets may be substituted for assets that Buyer XXXXXXXXXX or Buyer XXXXXXXXXX have agreed to buy.
89. Amalco may sell shares of the capital stock of various of the Existing Subcos or New Subcos, Amalco, the Existing Subcos or New Subcos may sell directly-held shares or assets and other Amalco subsidiaries may sell shares or assets to third party buyers. Neither Parent nor Bidco has entered into any agreements with any third-party buyers in respect of such sale transactions, other than the Buyer XXXXXXXXXX Agreement, the Buyer XXXXXXXXXX Agreement and the Buyer XXXXXXXXXX Agreement.
90. XXXXXXXXXX.
91. The Tax Services Office and the Taxation Centre where returns of Bidco are filed are respectively XXXXXXXXXX. The address of Bidco is
XXXXXXXXXX
PURPOSES OF THE PROPOSED TRANSACTIONS
92. XXXXXXXXXX.
93. The Proposed Transactions are intended to facilitate the acquisition by Parent of Target Amalco, the integration of the Target Amalco business into Parent's corporate structure, including the integration of Parent's existing XXXXXXXXXX business with Target Amalco's XXXXXXXXXX business, and the disposition of certain Target Amalco assets to Buyer XXXXXXXXXX, Buyer XXXXXXXXXX and Buyer XXXXXXXXXX and the potential disposition of certain surplus assets to third party buyers.
RULINGS GIVEN
Provided that the preceding statements constitute complete and accurate disclosure of all the relevant Facts, Proposed Transactions, Additional Information and Purposes of the Proposed Transactions, and provided that the Proposed Transactions are completed in the manner described above, our rulings are as follows:
A. The continuance of Subco 1 and Subco 2 from the XXXXXXXXXX to the XXXXXXXXXX will not, in and of itself, result in a disposition for purposes of the Act of the assets of Subco 1 or Subco 2, the settlement of the liabilities of Subco 1 or Subco 2, or the disposition of any share of the capital stock of Subco 1 held by Target or any share of the capital stock of Subco 2 held by Target or Target Amalco.
B. Subject to the application of subsection 69(11) and provided the requisite election is made by Target Amalco and each New Subco in the prescribed form and within the prescribed time, with respect to each transfer of assets by Target Amalco to such New Subco the provisions of subsection 85(1) will apply to the transfer by Target Amalco of the assets transferred by Target Amalco in consideration for New Subco shares and the assumption of assumed liabilities, if any, such that the aggregate agreed amount in respect of such transfer less the amount of any such assumed liabilities will be deemed to be the cost of the New Subco shares to Target Amalco.
C. The provisions of subsection 87(11) will apply in respect of the Target Amalgamation, the Target Amalco Amalgamation and the Amalgamation. For greater certainty, no income, gain or loss, for the purposes of the Act, will be recognized by Target in respect of the cancellation of the Subco 1 shares owned immediately before the Target Amalgamation, no income, gain or loss, for the purposes of the Act, will be recognized by Target Amalco in respect of the cancellation of the Subco 2 shares and New Target shares owned immediately before the Target Amalco Amalgamation and no income, gain or loss, for the purposes of the Act, will be recognized by Bidco in respect of the cancellation of the Target Amalco 2 shares owned immediately before the Amalgamation.
D. Provided that no property that became property of Amalco on the Amalgamation or "any other property acquired by any person in substitution therefor" (within the meaning of that phrase for the purpose of clause 88(1)(c)(vi)(B)) is acquired by any person described in subclauses 88(1)(c)(vi)(B)(I) to (III) as part of the series of transactions or events that includes the Amalgamation, the provisions of subsections 87(11) and 88(1) will apply to the Amalgamation such that the cost, pursuant to paragraphs 88(1)(c) and (d), to Amalco of the shares of the capital stock of the New Subcos, the shares of the capital stock of the Existing Subcos and any other capital property that will not constitute Ineligible Property that Target Amalco 2 owned without interruption from the Transfer Effective Time until the Amalgamation or that Target Amalco, Subco 2 or New Target owned without interruption from the Transfer Effective Time until the Target Amalgamation and that became property of Target Amalco 2 on the Target Amalgamation that becomes the property of Amalco on the Amalgamation, will be deemed to be the cost amount of such property to Target Amalco 2 immediately before such amalgamation, plus the amount designated by Amalco under paragraph 88(1)(d) in respect of the property.
For greater certainty, for the purpose of applying paragraph 88(1)(c) to determine the cost of capital property that will not constitute Ineligible Property that was owned by Subco 2 or New Target at the Transfer Effective Time, pursuant to subsection 88(4), Target Amalco 2 will be considered to be the same corporation as, and a continuation of each of Subco 2, New Target and Target Amalco, for the purposes of determining whether such property was capital property owned by Target Amalco 2 on the Effective Date and for the purpose of determining when Bidco last acquired control of Target Amalco 2.
For greater certainty, the shares of the capital stock of the New Subcos and the shares of the capital stock of the Existing Subcos (and any other non-depreciable capital property that will not otherwise constitute Ineligible Property) that became property of Amalco on the Amalgamation will not be Ineligible Property for purposes of paragraph 88(1)(c) solely as a result of the Proposed Transactions described herein provided that Buyer XXXXXXXXXX, Buyer XXXXXXXXXX, Buyer XXXXXXXXXX and the third-party lenders (described in Paragraphs 58 and 75) are not persons described in clause 88(1)(c)(vi)(B). The facts described in Paragraphs 38, 39 and 40 and the Proposed Transactions, in and by themselves, do not result in Buyer XXXXXXXXXX, Buyer XXXXXXXXXX, Buyer XXXXXXXXXX or the third-party lenders (described in Paragraphs 58 and 75) being a person described in clause 88(1)(c)(vi)(B).
For greater certainty, the shares of the capital stock of the New Subcos and the shares of the capital stock of the Existing Subcos (and any other non-depreciable capital property that will not otherwise constitute Ineligible Property) that became property of Amalco on the Amalgamation will not be Ineligible Property for purposes of paragraph 88(1)(c) solely as a result of the Facts described in Paragraph 5.
E. No shareholder of Parent will be considered to be a specified shareholder of Target or Target Amalco at any time prior to the acquisition of control of Target Amalco by Bidco for the purposes of clause 88(1)(c)(vi)(B)(I) solely as a result of Bidco's conditional right under the Arrangement Agreement to acquire the shares of the capital stock of Target or Target Amalco.
F. The provisions of subsection 69(11) will not deem the proceeds of disposition on the pre-closing transfer of assets from Target Amalco to the New Subcos as described in Paragraph 53 to be fair market value or deem a disposition of the property acquired by Amalco on the Amalgamation or Target Amalco 2 on the Target Amalco Amalgamation for proceeds of disposition equal to fair market value of such property unless, as part of a series of transactions or events which includes any of such dispositions, it may reasonably be considered that one of the main purposes of the series was to obtain the benefit of any item described in paragraph 69(11)(a) which is available to a person (other than a person that would be affiliated with the vendors of the property immediately before the series began, if section 251.1 were read without reference to the definition of "controlled" in subsection 251.1(3)) or to obtain a benefit described in paragraph 69(11)(b). The Proposed Transactions will not, in and by themselves, result in the application of subsection 69(11).
G. Provided that under the relevant laws which govern the XXXXXXXXXX notes, there will not be, as a result of the amendments to the XXXXXXXXXX notes as described in Paragraph 46 above:
(a) a novation in respect of any portion of the XXXXXXXXXX notes;
(b) a substitution of all or any portion of the XXXXXXXXXX notes by a new debt; or
(c) a discharge, rescission or extinguishment of all or any portion of the XXXXXXXXXX notes,
the amendment of the terms of the XXXXXXXXXX notes and the guarantee of the XXXXXXXXXX notes described in Paragraph 46 will not result in a disposition of such notes or the acquisition of any property by the holders thereof for purposes of the Act.
H. The Parent guarantees referred to in Paragraph 46 will not constitute substituted property as described in paragraph 88(1)(c.3).
I. The amendment of the terms of the Subco 3 XXXXXXXXXX and the Subco 3 XXXXXXXXXX described in paragraph 71 will not result in a disposition of such shares or the acquisition of any property by Amalco for purposes of the Act.
J. Section 212.3 will not apply to the acquisition of the shares of Target Amalco by Bidco as described in paragraph 61 above provided the acquisition occurs before 2013 and is completed in accordance with the terms of the Arrangement Agreement.
K. Subsection 212.3(2) will not apply to an investment made in a subject corporation by Target Amalco, Target Amalco 2 or Amalco as a result of the Target Amalgamation, the Target Amalco Amalgamation and the Amalgamation, respectively.
L. Subsection 212.3(2) will apply to Bidco and to Bid Holdco to the extent that their acquisition of Target Amalco 2 shares and Amalco shares, respectively, resulting from the application of subsection 87(4) of the Act to the Target Amalco Amalgamation and the Amalgamation, respectively, fall within the meaning of "investment" as described in paragraph 212.3(10)(f).
M. The provisions of subsection 245(2) will not be applied as a result of the Proposed Transactions, in and of themselves, to re-determine the tax consequences described herein.
The above rulings are given subject to the limitations and qualifications set out in Information Circular 70-6R5 dated May 17, 2002. Rulings A to I and Rulings K to M are binding on the CRA provided that the Proposed Transactions, other than those described in Paragraph 82, are completed before XXXXXXXXXX.
The above rulings are based on the law as it presently reads and do not take into account any proposed amendments to the Act and the Regulations which, if enacted, could have an effect on the rulings provided herein.
1. Unless otherwise confirmed, nothing in this letter should be construed as implying that CRA has confirmed, reviewed, made any determination, or accepted any method for the determination in respect of:
(a) the PUC of any share or the ACB or FMV of any property referred to herein; or
(b) any other tax consequence relating to the facts, Proposed Transactions or any transaction or event taking place either prior to the Proposed Transactions or subsequent to the Proposed Transactions, whether described in this letter or not, other than those specifically described in the rulings given above.
Nothing in this letter should be construed as confirmation, express or implied, that, for the purpose of any of the rulings given above, any adjustment to the FMV of the properties transferred or the redemption amount of the shares issued as consideration, whether pursuant to a price adjustment clause or otherwise, will be effective retroactively to the time of the transfer and issuance of shares. Furthermore, none of the rulings given in this letter are intended to apply to or in the event of the operation of a price adjustment clause, since such adjustment will be due to circumstances that do not constitute proposed transactions that are seriously contemplated. The general position of the CRA with respect to price adjustment clauses is stated in Interpretation Bulletin IT-169.
OPINIONS
A. For the purposes of subparagraph 88(1)(c)(vi), whether "substituted property" as described in paragraph 88(1)(c.3) is acquired by a person or persons described in subclauses 88(1)(c)(vi)(B)(I) to (III) as part of the series of transactions or events that includes the Amalgamation, is a question of fact that will depend on the circumstances. In general, an acquisition of debt or shares of the capital stock of Parent, Buyer XXXXXXXXXX or Buyer XXXXXXXXXX, or debt of Buyer XXXXXXXXXX or Target by shareholders of Target or Target Amalco, each of which would not be a person described in clause 88(1)(c)(vi)(B) if this clause were read without reference to subclause 88(1)(c)(vi)(B)(II), will not necessarily be considered to occur as part of a series of transactions or events that includes the Amalgamation.
B. For the purposes of subparagraph 88(1)(c)(v), whether property or property substituted therefor is acquired by the subsidiary from the parent or from any person or partnership that was not dealing at arm's length with the parent (otherwise than because of a right referred to in paragraph 251(5)(b)) as part of the series of transactions or events that includes the Amalgamation, is a question of fact that will depend on the circumstances. In general, an acquisition of inventory by Target or Target Amalco from Parent or one of its subsidiaries in the ordinary course of business will not necessarily be considered to occur as part of a series of transaction or events that includes the Amalgamation.
XXXXXXXXXX.
An invoice for our fees in connection with this ruling request will be forwarded to you under separate cover.
Yours truly,
XXXXXXXXXX
for Division Director
Reorganizations Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch
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