Share reorganization of a CRIC will preclude subsequent PUC reinstatement

The reinstatement rule in the foreign affiliate dumping rules generally provides for the restoration of paid-up capital of a class of shares of a corporation resident in Canada (or a qualifying substitute corporation) when it distributes the foreign affiliate shares (or proceeds thereof) the investment in which gave rise to the previous grind in that PUC.

This reinstatement rule only applies to the same class of CRIC or QSC shares to which there was a previous grind.  Accordingly, access to reinstatement will be lost if such shares are exchanged for shares of another class or for shares of a related corporation.  See Example 9-C.

Neal Armstrong.  Summary of Henry Chong, "Section 212.3:  Missing PUC Adjustments", Canadian Tax Highlights, Vol. 21, No. 5, May 2013, p. 12 under s. 212.3(9).