CRA rules that the Amalco resulting from the amalgamation of a public target and the Canadian bidco can elect to cease to be a public corporation when the shares of the target are delisted following the amalgamation

Under a Plan of Arrangement, the Canadian public target ("Pubco") was to be amalgamated with Bidco. The applicable rules did not permit the shares of Pubco to be delisted until three days after the effective date of the Plan of Arrangement. Although not mentioned in the ruling letter, s. 87(2)(ii) deemed Amalco to be a public corporation because a predecessor (Pubco) was a public corporation.

CRA ruled that Amalco will cease to be a public corporation when it files an election, following the delisting, to cease to be a public corporation. The particular technical difficulty addressed by CRA is that, at the time of the election, insiders of the electing corporation are required to hold more than 90% of the shares which previously had been listed. CRA stated:

Since as a matter of tax policy, a corporation in this situation should not be precluded from electing not to be a public corporation, the condition in Regulation 4800(2)(a) can be read as applying where previously listed shares no longer exist.

Neal Armstrong. Summary of 2015 Ruling 2015-0577141R3 under s. 89(1) – public corporation.