Simultaneous exchanges of consideration on a Canadian Buyco indirect acquisition of a subject corporation generally are a bad idea

When a Canadian corporation controlled by a non-resident parent (a CRIC) makes a direct or indirect investment in a foreign "subject corporation," a corresponding deemed dividend to the parent generally can be avoided only to the extent of the cross-border paid-up capital immediately before the investment time.  Accordingly, if the non-resident parent accomplishes an acquisition of a Canco holding the subject corporation by using a Canadian Buyco and – in order to avoid extra cash movements – structures the acquisition so that there are simultaneous (i) transfers of the shares of Canco to Buyco, (ii) payments of the cash purchase price to the Canco shareholders by it on behalf of Buyco, and (iii) issuance of shares by Buyco to it in consideration for such cash payment, there generally will be a deemed dividend to it rather than a suppression of the PUC of the shares it holds in Buyco.  See Example 7-F.

Neal Armstrong.  Discussion of s. 212.3(7) timing requirements under s. 212.3(7) - Need for timely cross-border PUC.