Cross-border PUC/stated capital differences should be maintained on an amalgamation

Where the cross-border paid-up capital of a CRIC (a Canadian corporation controlled by a non-resident parent) has been suppressed under the foreign affiliate dumping rules as a result of making a direct or indirect investment in a non-resident "subject corporation," so that such PUC is now lower than the stated capital of those shares, and the CRIC then amalgamates with a Canadian subsidiary, it generally will be a mistake to set the PUC of the shares of Amalco at an amount equal to the PUC of the CRIC’s shares going into the amalgamation.  The likely effect of this will be to preclude Amalco from subsequently fully accessing the PUC-reinstatement rule in s. 212.3(9).  See Example 9-E.

Neal Armstrong.  Discussion of need for stated capital  to effect a PUC reinstatement under s. 212.3(9) under Maintenance of stated capital/PUC discrepancy.