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.
Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.
942631
XXXXXXXXXX T.B. Kuss
Attention: XXXXXXXXXX
November 3, 1994
Dear Sirs:
Re: Foreign Merger
We are writing in reply to your letter dated October 7, 1994 regarding the application of subsections 87(8) and 87(8.1) to the following hypothetical situation.
- Corporation A and Corporation B are corporations incorporated under the laws of Delaware;
- Each of Corporation A and Corporation B have Canadian shareholders;
- Corporation B will be merged into Corporation A pursuant to Delaware corporate law, such that Corporation A is the survivor corporation;
- Corporation A's shareholders will not receive any new shares upon the merger, but Corporation B's shareholders will receive new shares from Corporation A on the merger;
- Under the laws of Delaware, the corporate existence of Corporation B shall cease and all of the property of Corporation A and Corporation B (except amounts receivable from a "predecessor") and all of the liabilities of Corporation A and Corporation B (except amounts payable to a "predecessor") shall become the property and liabilities of the merged entity.
Analysis and Discussion
The broad question is whether the above fact pattern would meet the conditions set out in subsection 87(8.1). Paragraphs 87(8.1)(a) and (b) appear to be satisfied, as well as the preamble and postamble to the subsection. The crux of the issue is whether the conditions of paragraph 87(8.1)(c) have been satisfied.
In our view, the surviving corporation (Corporation A) would be considered the "new foreign corporation" referred to in paragraph 87(8.1)(c). It is also our opinion that the shares of Corporation A (the predecessor) have become the shares of Corporation A (the new foreign corporation). As well, the shares of Corporation B (a predecessor foreign corporation) have been exchanged for shares of Corporation A (the new foreign corporation). Therefore, in our view, the above merger would qualify as a "foreign merger" within the meaning of subsection 87(8.1). Subsection 87(8) would also apply to the merger.
We hope our comments are of assistance.
Yours truly,
for Director
Reorganizations and Foreign Division
Rulings Directorate
Policy and Legislation Branch
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