30 November 1995 Ruling 9629853 - CHANGE OF CONTROL TRIGGERING EVENT

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.

Principal Issues:

Change of Control triggering event for 212(1)(b)(vii) default purposes

Position:

OK for 212(1)(b)(vii)

Reasons:

Previous rulings granted- see #961647, #952940

XXXXXXXXXX							3-962985
XXXXXXXXXX

Attention: XXXXXXXXXX

XXXXXXXXXX, 1996

Dear Sirs:

Re: XXXXXXXXXX

This is in reply to your letters of XXXXXXXXXX and your facsimile of XXXXXXXXXX in which you request an advance income tax ruling on behalf of the above noted taxpayer.

To the best of your knowledge, none of the issues raised in the present request have been or are being considered by a District Tax Services Office and/or a Taxation Centre in connection with a tax return already filed. Furthermore, none of the issues raised in the present request are under objection or in discussion with an official of Revenue Canada, Taxation.

Our understanding of the facts and proposed transaction is as follows:

STATEMENT OF FACTS

1. XXXXXXXXXX

2.XXXXXXXXXX is a public corporation and a taxable Canadian corporation within the meaning of subsection 89(1) of the Income Tax Act (the "Act").

XXXXXXXXXX Revenue Canada tax account number is XXXXXXXXXX and is served by the XXXXXXXXXX Tax Services Office and the XXXXXXXXXX Taxation Centre.

3.XXXXXXXXXX authorized share capital consists of an unlimited number of preferred shares issuable in one or more series, an unlimited number of Class XXXXXXXXXX Shares and an unlimited number of Class XXXXXXXXXX Shares, all without nominal or par value, of which XXXXXXXXXX Class XXXXXXXXXX Shares and XXXXXXXXXX Class XXXXXXXXXX Shares were issued and outstanding as of XXXXXXXXXX

The Class XXXXXXXXXX Shares and the Class XXXXXXXXXX Shares have the same rights, rank pari passu in all respects, save that the holders of the Class XXXXXXXXXX Shares are entitled to one (1) vote per share and the holders of Class XXXXXXXXXX Shares are entitled to XXXXXXXXXX votes per share.

XXXXXXXXXX

XXXXXXXXXX are the beneficial owners through a holding corporation of respectively XXXXXXXXXX% and XXXXXXXXXX% of all Class XXXXXXXXXX Shares, and XXXXXXXXXX% and XXXXXXXXXX% of all Class XXXXXXXXXX Shares. Therefore, XXXXXXXXXX control respectively XXXXXXXXXX% and XXXXXXXXXX% of the voting rights of all issued and outstanding shares of XXXXXXXXXX

PROPOSED TRANSACTION

4.XXXXXXXXXX intends to issue US$XXXXXXXXXX principal amount XXXXXXXXXX Notes, at a rate to be established on or around the date of their issuance and due on the XXXXXXXXXX anniversary of their issuance (the "Notes"). The primary market for the Notes will be the United States.

5.Under the terms of the Trust Indenture, in the event of the occurrence of a Change of Control (as summarized in 7 below), XXXXXXXXXX shall make an offer to purchase the outstanding Notes ("Change of Control Offer") at a purchase price equal to XXXXXXXXXX% of the principal amount thereof plus any accrued and unpaid interest thereon to the date of purchase.

6.A Change of Control will only give rise to XXXXXXXXXX obligation to repurchase such holder's Notes if XXXXXXXXXX is required to do so by the holder in accordance with the Change of Control Offer. As a result, a Change of Control will not, in and of itself, constitute an event of default for purposes of other indentures or instruments with respect to money borrowed by XXXXXXXXXX or any of its subsidiaries. The failure of XXXXXXXXXX to make the Change of Control Offer will constitute an event of default under the Indenture and will give rise to all the remedies generally available under the Indenture in the event of default of an occurrence of an event of default.

7.A Change of Control, as defined in the Offering Memorandum, will occur if any one of the following events occurs:

(a)any Person (including a Person's Affiliates and associates), other than a Permitted Holder, becomes the beneficial owner (as defined under XXXXXXXXXX or any successor rule or regulation promulgated under the Exchange Act) of XXXXXXXXXX% or more of the total voting power of XXXXXXXXXX capital stock, taking into account any option, warrant or other security convertible into capital stock ( the "Common Stock");

(b) any Person (including a Person's Affiliates and associates), other than a Permitted Holder, becomes the beneficial owner of more than XXXXXXXXXX% of the total voting power of XXXXXXXXXX Common Stock, and the Permitted Holders beneficially own, in the aggregate, a lesser percentage of the total voting power of the Common Stock of the Company than such other Person and do not have the right or ability by voting power, contract or otherwise to elect or designate for election a majority of the Board of Directors of XXXXXXXXXX

(c) the consolidation or merger of XXXXXXXXXX in which XXXXXXXXXX is not the continuing or surviving corporation or pursuant to which the Common Stock of XXXXXXXXXX would be converted into cash, securities or other property, other than a merger or consolidation of XXXXXXXXXX in which the holders of the Common Stock of XXXXXXXXXX outstanding immediately prior to the consolidation or merger hold, directly or indirectly, at least a majority of the Common Stock of the surviving corporation immediately after such consolidation or merger; or

(d) during any period of XXXXXXXXXX years, individuals who at the beginning of such period constituted the Board of Directors of XXXXXXXXXX (together with any new directors whose election by such Board of Directors or whose nomination for election by the shareholders of XXXXXXXXXX has been approved by XXXXXXXXXX% of the directors then still in office who either were directors at the beginning of such period or whose election or recommendation for election was previously so approved) cease to constitute a majority of the Board of Directors of XXXXXXXXXX

8.Permitted Holders are defined as XXXXXXXXXX.

PURPOSE OF THE PROPOSED TRANSACTION

9.XXXXXXXXXX intends to use the net proceeds of such Notes to repay a portion of its outstanding long term indebtedness of XXXXXXXXXX, finance its capital expenditure program XXXXXXXXXX and improve working capital.

RULING GIVEN

Provided that the foregoing statements constitute complete and accurate disclosure of all of the relevant facts and proposed transaction, we confirm that neither the Change of Control Offer upon the occurrence of a Change of Control, nor the fact that upon a Change of Control, XXXXXXXXXX may be called upon to repay a holder's Notes, as described in paragraph 5 above, will, in and by itself, disqualify interest on the Notes from the withholding tax exemption contained in subparagraph 212(1)(b)(vii) of the Act, to the holders of the Notes, who, for the purposes of the Act, are non-residents of Canada and deal at arm's length with XXXXXXXXXX.

This ruling is given subject to the general limitations and qualifications set forth in Information Circular 70-6R2 issued by Revenue Canada on September 28, 1990 (as amended by Special Release dated September 30, 1992) and is given provided the Notes are issued before XXXXXXXXXX This ruling is based on the Act in its present form and does not take into account the effect of any proposed amendments.

Except as expressly stated, our ruling does not imply acceptance, approval or confirmation of any income tax implications of the facts or proposed transaction. In particular, we have not commented on the availability of the exemption from Canadian withholding tax under subparagraph 212(1)(b)(vii) of the Act on the interest paid by XXXXXXXXXX to holders of the Notes, who, for purposes of the Act, are non-residents of Canada and deal at arm's length with XXXXXXXXXX

Yours truly,

for Director
Financial Industries Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch