A vertical merger between a US corporation with a Canadian branch business ("Absorbco") and its US parent ("Subco 3") under which Absorbco survives the merger, the US parent of Subco 3 exchanges its shares of Subco 3 for shares of Absorbco, and the shares of Subco 3 are cancelled, would qualify as a foreign merger. Subco 3, as the non-surviving corporation in this merger, will be considered to have disposed of all its assets and liabilities to Absorbco for their fair market value except that the shares of Absorbco instead will be disposed of by the non-resident parent of Subco 3 at fair market value. However, as the merger is described in Article XIII(8) of the US-Canada Convention, it is a transaction with reference to which the competent authority of Canada may enter into an agreement under s. 115.1.
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