Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.
Principal Issues: Whether the Proposed Transactions are exempt from the application of subsection 55(2) by virtue of paragraph 55(3)(b).
Position: Yes.
Reasons: Wording of the provision.
XXXXXXXXXX
2010-036665
XXXXXXXXXX
XXXXXXXXXX , 2010
Dear XXXXXXXXXX :
Re: XXXXXXXXXX
Advance Income Tax Ruling Request
This is in reply to your letter dated XXXXXXXXXX , in which you requested an advance income tax ruling on behalf of the taxpayer referred to above. We also acknowledge the information provided during our telephone conversations (XXXXXXXXXX ) and correspondence concerning your request. The information or documents submitted with your request are part of this letter only to the extent described herein.
To the best of your knowledge, and that of the taxpayer involved, none of the issues involved in this ruling request is:
(i) in a return of the taxpayer or a related person;
(ii) being considered by a tax services office or taxation centre in connection with a previously filed tax return of the taxpayer or a related person;
(iii) under objection by the taxpayer or a related person;
(iv) before the courts or, if a judgment has been issued, the time limit for appeal to a higher court has expired; or
(v) the subject of a ruling previously issued by the Income Tax Rulings Directorate of the CRA.
To the best of the knowledge of the taxpayer, the Proposed Transactions will not have any impact on outstanding tax liabilities, if any, of the taxpayer.
Definitions
In this letter, the following terms have the meanings specified and, where the circumstances so require, words importing the singular include the plural and vice versa and words importing any gender or the neuter include all genders and the neuter.
XXXXXXXXXX
XXXXXXXXXX
"acquiror" has the meaning assigned in the definition of specified corporation;
"Act" means the Income Tax Act, R.S.C. 1985, c. 1(5th Supp.), as amended and, unless otherwise stated, every reference in this letter to a part, section, subsection, paragraph, subparagraph or clause is a reference to the relevant provision of the Act;
"adjusted cost base" has the meaning assigned by section 54;
"agreed amount" in respect of an eligible property means the amount that the transferor and transferee of the property will have agreed upon in a joint election to be made by them under subsection 85(1) or subsection 85(2), as applicable;
"approximate that proportion" means, in the context of a distribution, that the discrepancy from the proportion, if any, does not exceed XXXXXXXXXX %, determined as a percentage of the fair market value of the property which is transferred to a transferee corporation or retained by a distributing corporation had it received (or retained) its pro rata share of the fair market value of the property;
"arm's length" has the meaning assigned by subsection 251(1);
"Arrangement" means the arrangement under the XXXXXXXXXX on the terms and conditions set forth in the Plan of Arrangement;
"Articles" means, in relation to a particular corporation, the constating documents of the corporation;
XXXXXXXXXX ;
XXXXXXXXXX ;
"business" has the meaning assigned by subsection 248(1);
"capital property" has the meaning assigned by section 54;
"common share" has the meaning assigned by subsection 248(1);
"Company A" means XXXXXXXXXX described in Paragraph 40;
"Company B" means XXXXXXXXXX described in Paragraph 41;
"Company C" means XXXXXXXXXX described in Paragraph 42;
"Company D" means of XXXXXXXXXX as described in Paragraph 43;
"Company E" means XXXXXXXXXX as described in
Paragraph 44;
"Company F" means XXXXXXXXXX as described in Paragraph 47;
"Company G" means XXXXXXXXXX as described in Paragraph 110;
"Convertible Bonds" means debt obligations of DC which are convertible into DC Common Shares and described in Paragraphs 32 and 33;
"cost amount" has the meaning assigned by subsection 248(1);
"CRA" means the Canada Revenue Agency;
"DC" means XXXXXXXXXX ;
"DC Common Shares" means the outstanding common shares in the capital of DC;
"DC Group" means DC and all of those corporations, partnerships and entities over which DC has the ability to exercise Significant Influence;
"DC Meeting" means the meeting of DC Shareholders to be held to consider, among other things, the Plan of Arrangement and any adjournment or postponement thereof;
"DC Redemption Note" means the promissory note to be issued by DC as described in Paragraph 81;
"DC Share Exchange" means the share exchange described in Paragraph 72;
"DC Shareholder" means a holder of DC Common Shares;
"DC Special Shareholder" means a holder of DC Special Shares;
"DC Special Shares" means the preferred shares in the capital of DC described in Paragraph 71;
"DC Stock Option" means a right to acquire one DC Common Share granted by DC under the DC Stock Option Plan;
"DC Stock Option Holder" means a person who holds a DC Stock Option;
"DC Stock Option Plan" means the current stock option plan of DC as described in Paragraphs 21 to 23;
"DC SubCo2 Debt" means the debt owing by DC to SubCo2 in the principal amount of $XXXXXXXXXX ;
"designated stock exchange" has the meaning assigned by subsection 248(1);
"disposition" has the meaning assigned by subsection 248(1);
"Dissenting Shareholder" means a DC Shareholder who dissents from the Plan of Arrangement or a FA1 Shareholder who dissents from the FA1 Scheme of Arrangement, if such rights are provided for, as the case may be;
"distributing corporation" has the meaning assigned in the definition of distribution;
"distribution" has the meaning assigned by subsection 55(1);
"Dividend" means the dividend to be paid by SubCo2 to DC in an amount equal to $XXXXXXXXXX ;
"Effective Date" means the date on which the Plan of Arrangement will take effect or in the case of the FA1 Scheme of Arrangement, the date on which the FA1 Scheme of Arrangement will take effect;
"Effective Time" means, in the case of the Arrangement, XXXXXXXXXX on the Effective Date, and in the case of the FA1 Scheme of Arrangement, the first moment of time following the Effective Time of the Arrangement;
"Eligible Holder" means a Participant:
(a) who is resident in Canada for the purposes of the Act and not exempt from tax under Part I of the Act;
(b) who is a non-resident and whose DC Common Shares constitute taxable Canadian property to the holder, provided that any gain realized by the holder upon a disposition at fair market value of such shares would not be exempt from tax under the Act by virtue of any applicable Tax Convention; or
(c) which is a partnership that owns DC Common Shares if one or more partners thereof would be described in any of (a) or (b) above if such partner directly held such DC Common Shares;
"eligible property" has the meaning assigned by subsection 85(1.1) as modified by subsection 85(1.11);
"Encumbrances" means mortgages, charges, pledges, liens, hypothecs, security interests, encumbrances, adverse claims and rights of third parties to acquire or restrict the use of property;
"FA1" means XXXXXXXXXX , a Subsidiary and a non-resident that exists under the XXXXXXXXXX , XXXXXXXXXX % of the shares of which are owned by SubCo2 and the remainder of which are owned by members of the public;
"FA1 Common Shares" means the outstanding common shares in the capital of FA1;
"FA1 Meeting" means the meeting of FA1 Shareholders to consider among other things, the FA1 Scheme of Arrangement and any adjournment or postponement thereof;
"FA1 Scheme of Arrangement" means the proposed scheme of arrangement under the XXXXXXXXXX to effect the acquisition by SpinCo of the FA1 Common Shares not owned by SubCo2 as described in Paragraphs 86 through and including 92;
"FA1 Share Exchange" means the share exchange described in Paragraph 92;
"FA1 Shareholder" means a shareholder of FA1;
"FA1 Stock Option" means a right to acquire one FA1 Common Share granted by FA1 under the FA1 Stock Option Plan;
"FA1 Stock Option Holder" means a person who holds an FA1 Stock Option;
"FA1 Stock Option Plan" means the current employee stock option plan of FA1 and described in Paragraphs 26 through and including 29;
"FA2" means XXXXXXXXXX , a Subsidiary and a non-resident of Canada and a resident of XXXXXXXXXX , all of the shares of which are owned by SubCo2;
"FA2 Common Shares" means the outstanding common shares in the capital of FA2;
"FA3" means XXXXXXXXXX , a Subsidiary and a non-resident all of the shares of which are owned by FA1.
"Facilitator" means XXXXXXXXXX and incorporator SpinCo as described in Paragraph 55;
"fair market value" means the highest price available in an open and unrestricted market between informed prudent parties acting at arm's length and under no compulsion to act, expressed in terms of cash;
"foreign affiliate" has the meaning assigned by subsection 95(1);
XXXXXXXXXX ;
XXXXXXXXXX ;
"In the Money Amount" means, in relation to a particular stock option in respect of which the fair market value of the shares that are the subject of the option exceeds the exercise price of the option, the amount of such excess;
XXXXXXXXXX ;
XXXXXXXXXX ;
XXXXXXXXXX ;
"New DC Common Shares" means the new common shares in the capital of DC described in Paragraph 71;
"non-resident" has the meaning assigned by subsection 248(1);
"Operations" means all of the activities of the DC Group;
"owner" or other word importing the owner or holder of property includes a partnership that owns property and a trust that owns property;
"paid-up capital" has the meaning assigned by subsection 89(1);
"Paragraph" means a numbered paragraph in this letter;
"Participant" means a DC Shareholder, other than a Dissenting Shareholder or in the case of the FA1 Scheme of Arrangement, a FA1 Shareholder, other than a Dissenting Shareholder;
"Partnership A" means XXXXXXXXXX , a general partnership formed under the XXXXXXXXXX ;
"permitted exchange" has the meaning assigned by subsection 55(1);
"Plan of Arrangement" means the proposed plan of arrangement under the XXXXXXXXXX to effect the divisive reorganization as described in Paragraphs 65 through and including Paragraph 85;
"preferred share" has the meaning assigned by subsection 248(1);
"principal amount" has the meaning assigned by subsection 248(1);
"Prior Transactions" means transactions, actions and events that the DC Group has undertaken and that are set out in Paragraphs 32 through and including Paragraph 47;
"proceeds of disposition" has the meaning assigned by section 54;
"Project A" means the XXXXXXXXXX project described in Paragraph 46;
"Project B" means the XXXXXXXXXX project described in Paragraph 46;
"Proposed Transactions" means those transactions and events described in Paragraphs 59 to 93;
"public corporation" has the meaning assigned by subsection 89(1);
"Regulations" means the Income Tax Regulations, C.R.C. 1978, c. 945, as amended;
"related person" means, in relation to a particular person, another person who is related to the particular person by subsection 251(2), as modified for the purposes of section 55 by paragraph 55(5)(e);
"ROC" means the reduction by SubCo2 of its Stated Capital by an amount equal to $XXXXXXXXXX and the distribution of property in respect thereof described in Paragraph 60;
"series of transactions or events" has the meaning assigned by subsection 248(10);
"Significant Influence" has the meaning assigned by Section 3050 of the Canadian Institute of Chartered Accountants Handbook and, for the purposes of the Ruling Request, a corporation will be considered to have significant influence over another corporation if it has significant influence over that corporation or over any other corporation that has significant influence over that corporation. In addition, a corporation in the DC Group will be deemed to have significant influence over another corporation in the DC Group;
"specified corporation" has the meaning assigned by subsection 55(1);
"specified shareholder" has the meaning assigned by subsection 248(1) as modified by subsections 55(3.2) and (3.3);
"SpinCo" means the corporation described in Paragraph 55;
"SpinCo Common Shares" means the common shares in the capital of SpinCo described in Paragraph 56;
"SpinCo Distribution Property" means the SubCo2 Common Shares owned by DC immediately prior to the distribution;
"SpinCo Redemption Note" means the promissory note to be issued by SpinCo as described in Paragraph 80;
"SpinCo Share Exchange" means the share exchange described in Paragraph 74;
"SpinCo Special Shares" means the preferred shares in the capital of SpinCo described in Paragraph 56;
"SpinCo Stock Options" has the meaning assigned by Paragraph 93;
"SpinCo Stock Option Plan" means the stock option plan adopted by SpinCo in Paragraph 62;
"Stated Capital" has, in relation to a corporation that exists under the XXXXXXXXXX , the meaning assigned by the XXXXXXXXXX ;
"Stock Exchange" means the XXXXXXXXXX Stock Exchange;
"SubCo1" means XXXXXXXXXX , a Subsidiary and a resident of Canada that exists under the XXXXXXXXXX , a public corporation of which XXXXXXXXXX % of the SubCo1 Class A Common Shares (the remaining SubCo1 Class A Common Shares are owned by the public) and XXXXXXXXXX % of the SubCo1 Class B common shares XXXXXXXXXX are owned by DC;
"SubCo1 Class A Common Shares" means the Class A common shares in the capital of SubCo1, which are listed and traded on the Stock Exchange;
"SubCo2" means XXXXXXXXXX , a Subsidiary and a non-resident that exists under XXXXXXXXXX all the shares of which are owned by DC;
"SubCo2 Shares" means the issued and outstanding shares of SubCo2;
"SubCo3" means XXXXXXXXXX , a Subsidiary and a resident of Canada that exists under the XXXXXXXXXX , all of the shares of which are owned by DC;
"SubCo4" means XXXXXXXXXX , a Subsidiary and a resident of Canada that exists under the XXXXXXXXXX , all of the shares of which are owned by DC;
"Subsidiary" means a corporation that is controlled directly or indirectly by DC;
"Tax Convention" means any bilateral tax convention to which Canada is a party that is in force as of the Effective Date;
"taxable Canadian corporation" has the meaning assigned by subsection 89(1);
"taxable Canadian property" has the meaning assigned by subsection 248(1);
"taxable dividend" has the meaning assigned by subsection 89(1);
"taxable preferred share" has the meaning assigned by subsection 248(1);
"taxation year-end" has the meaning assigned by subsection 249(1) and also includes the end of a fiscal period of a partnership;
"Trading Day" means a day, other than a Saturday or a Sunday, when the Stock Exchange is open for trading;
"Trading Price" means the weighted average trading price of a SpinCo Common Share on the Stock Exchange for the first 10 Trading Days on which such shares trade on the Stock Exchange after the Effective Date; and
"transferee corporation" has the meaning assigned in the definition of distribution.
Our understanding of the Facts, Subject Transactions, Proposed Transactions and purposes of the Subject Transactions and Proposed Transactions are as follows:
Facts
1. DC is a taxable Canadian corporation and a public corporation that exists under the XXXXXXXXXX . DC files its federal returns at the XXXXXXXXXX Tax Centre. DC is audited by the XXXXXXXXXX Tax Services Office.
2. DC is the parent corporation of the DC Group which carries on diverse businesses relating to XXXXXXXXXX.
3. DC is a XXXXXXXXXX company that, directly or indirectly has operations in XXXXXXXXXX . DC carries on its business indirectly through SubCo1, FA1, Partnership A and a XXXXXXXXXX subsidiary (SubCo3).
4. SubCo1 is a public company that XXXXXXXXXX . The fair market value of DC's shareholdings in SubCo1 is approximately $XXXXXXXXXX.
5. FA1 is a public company that operates the XXXXXXXXXX (indirectly through FA3) XXXXXXXXXX . The fair market value of DC's indirect interest in FA1 is approximately $XXXXXXXXXX.
6. Partnership A operates the XXXXXXXXXX and together with DC owns XXXXXXXXXX.
7. The market capitalization of the DC Common Shares is approximately $XXXXXXXXXX . The DC Group employs over XXXXXXXXXX employees.
8. DC was incorporated under the XXXXXXXXXX on XXXXXXXXXX as "XXXXXXXXXX " On XXXXXXXXXX , articles of amendment were filed to change DC's name to "XXXXXXXXXX " On XXXXXXXXXX , DC filed articles of amendment to delete its private company restrictions. On XXXXXXXXXX , DC filed articles of amalgamation to amalgamate with its wholly-owned subsidiary, XXXXXXXXXX.
9. Effective XXXXXXXXXX , DC and SubCo4 formed Partnership A. Effective XXXXXXXXXX , DC amalgamated with its wholly-owned subsidiaries XXXXXXXXXX . Effective XXXXXXXXXX , DC amalgamated with its wholly-owned subsidiary XXXXXXXXXX . Effective XXXXXXXXXX , DC amalgamated with its wholly-owned subsidiaries XXXXXXXXXX.
10. The senior officers of DC have indicated in the past that, unless the value of the XXXXXXXXXX is appropriately reflected in the share price of the DC Common Shares, the DC Group would consider some form of value-enhancing transaction.
11. The DC Group's management is of the view that, while the market capitalization and performance of the DC Common Shares is impressive, it still reflects an undervaluation of the DC Group, relative to the fair market value of its net assets and that this has occurred in part because of the degree of diversification of the Operations of the DC Group. This diversity has led to complexity when analysts and the market attempt to value the DC Common Shares, which complexity then results in a valuation discount. In particular, the market price of the DC Common Shares does not appear to reflect the full value of the XXXXXXXXXX . The DC Group's management intends to reduce the degree of diversity, thus reducing any valuation complexity and resulting valuation discount, by separating the operations of the DC Group between two separate public corporations: SubCo1 and DC will continue to operate the XXXXXXXXXX and the XXXXXXXXXX , respectively, and SpinCo will operate the XXXXXXXXXX.
12. The separation of the XXXXXXXXXX and XXXXXXXXXX and the XXXXXXXXXX into two separate public corporations should result in SpinCo having a significant focus on XXXXXXXXXX.
13. The intention of DC is that, after the completion of the Proposed Transactions SpinCo will exist and operate as a separate public corporation.
14. After the completion of the Arrangement, each of DC and SpinCo may from time to time raise capital to finance its ongoing activities through the issuance of equity. However, it is not expected that any person or group of persons will acquire control of either DC or SpinCo as a consequence of any potential financing activities. The Arrangement is not being undertaken to facilitate any proposed or contemplated acquisition of control of any of DC or SpinCo.
15. DC is authorized to issue an unlimited number of DC Common Shares. As of XXXXXXXXXX , there are approximately XXXXXXXXXX DC Common Shares issued and outstanding.
16. The authorized share capital of DC includes one class of preferred shares, although none are issued as of the date of this letter.
17. The holders of the DC Common Shares are entitled to receive dividends if, as and when declared by the board of directors of DC. The holders of the DC Common Shares are entitled to receive notice of and to attend all meetings of shareholders of DC and are entitled to one vote per DC Common Share held at all such meetings. In the event of the liquidation, dissolution or winding-up of DC or other distribution of assets of DC among its shareholders for the purpose of winding-up its affairs, the holders of the DC Common Shares are entitled to participate rateably in any distribution of the assets of DC.
18. DC does not have a stated dividend policy in respect of the DC Common Shares. The declaration of dividends is at the discretion of the Board of Directors of DC. To date, DC has not paid dividends. It is not expected that dividends will be paid by DC in the near term following the Proposed Transactions.
19. DC has granted DC Stock Options to officers and employees of DC pursuant to the DC Stock Option Plan. The exercise prices in the DC Stock Options granted under the DC Stock Option Plan were not less than the market value of a DC Common Share (for this purpose market value means the volume weighted average trading price of the DC Common Shares on the Stock Exchange for the five trading days prior to the date on which the DC Stock Option was issued). In the event that the DC Common Shares are not listed and posted for trading on any stock exchange in Canada, the market price shall be determined by the board of directors of DC in its sole discretion on the date on which the DC Stock Option was issued. DC Stock Options granted under the DC Stock Option Plan are generally fully exerciseable after XXXXXXXXXX years and expire XXXXXXXXXX years after the grant date.
20. Each DC Stock Option consists of an option to purchase one DC Common Share.
21. Certain officers and employees of DC have previously exercised DC Stock Options relating to DC Common Shares in respect of which an election under subsection 7(8) has been made.
22. The DC Stock Option Holders have always dealt with DC at arm's length and will continue to do so during and after the Proposed Transactions have been implemented.
23. Under the DC Stock Option Plan, in the event of any change in the outstanding DC Common Shares by reason of any subdivisions, consolidations or reclassifications of the Common Shares of DC, the payment of stock dividends by DC (other than dividends in the ordinary course) or other relevant changes in the capital stock of DC, appropriate adjustments in the number of Common Shares,
and as regards to options granted or to be granted, in the number of Common Shares optioned and in the exercise price per Common Share.
24. DC has acquired DC Common Shares in the open market pursuant to a normal course issuer bid program, approved by the Stock Exchange. Under DC's normal course issuer bid program, DC Common Shares were purchased in the open market through the facilities of the Stock Exchange at the prevailing market price at the time of the purchase. All DC Common Shares acquired under the normal course issuer bid program were cancelled. DC's normal course issuer bid program ended on XXXXXXXXXX.
25. The holders of FA1 Common Shares are entitled to one vote per share at meetings of shareholders of FA1 Common Shares, to receive dividends if, as and when declared by the Board of Directors of FA1 with respect to FA1 Common Shares and to receive pro rata the remaining property and assets of FA1 upon its liquidation, dissolution or winding-up, subject to the rights of shares having priority over the FA1 Common Shares.
26. FA1 has granted FA1 Stock Options to officers and employees of FA1 pursuant to the FA1 Stock Option Plan. The exercise prices in the FA1 Stock Options granted under the FA1 Stock Option Plan were not less than the market value of a FA1 Common Share (for this purpose market value means the volume weighted average trading price of the FA1 Common Shares on the Stock Exchange for the five trading days prior to the date on which the FA1 Stock Option was issued). In the event that the FA1 Common Shares are not listed and posted for trading on any stock exchange in Canada, the market price shall be determined by the board of directors of FA1 in its sole discretion on the date on which the FA1 Stock Option was issued. FA1 Stock Options granted under the FA1 Stock Option Plan are generally fully exerciseable after XXXXXXXXXX years and expire XXXXXXXXXX years after the grant date.
27. Each FA1 Stock Option consists of an option to purchase one FA1 Common Share.
28. The FA1 Stock Option Holders have always dealt with FA1 at arm's length and will continue to do so during and after the Proposed Transactions have been implemented.
29. Under the FA1 Stock Option Plan, in the event of any change in the outstanding FA1 Common Shares by reason of any subdivisions, consolidations or reclassifications of the Common Shares of FA1, the payment of stock dividends by FA1 (other than dividends in the ordinary course) or other relevant changes in the capital stock of FA1, appropriate adjustments in the number of FA1 Common Shares, and as regards to options granted or to be granted, in the number of FA1 Common Shares optioned and in the exercise price per FA1 Common Share.
30. The DC Common Shares, the SubCo1 Class A Common Shares and the FA1 Common Shares are listed on a designated stock exchange in Canada (being the Stock Exchange).
31. Based upon a review of DC's shareholders' register by, and to the best of the knowledge of, the senior officers of DC, as of the date hereof, there is only one possible group of persons that beneficially owns, directly or indirectly, XXXXXXXXXX % or more of the DC Common Shares, those persons being XXXXXXXXXX entities of XXXXXXXXXX.
32. On XXXXXXXXXX , DC issued US$XXXXXXXXXX of Convertible Bonds with an interest rate of XXXXXXXXXX % and a maturity date in XXXXXXXXXX . The Convertible Bonds were convertible into DC Common Shares at a conversion price of US$XXXXXXXXXX.
33. On XXXXXXXXXX , DC issued US$XXXXXXXXXX of Convertible Bonds with an interest rate of XXXXXXXXXX % and a maturity date in XXXXXXXXXX . The Convertible Bonds issued on XXXXXXXXXX are convertible into DC Common Shares at a conversion price of US$XXXXXXXXXX.
34. On XXXXXXXXXX , DC announced that holders of Convertible Bonds issued on XXXXXXXXXX had agreed to convert US$XXXXXXXXXX of the principal amount of such Convertible Bonds, representing XXXXXXXXXX % of the outstanding Convertible Bonds issued on XXXXXXXXXX.
35. As of XXXXXXXXXX , there were no longer any of the Convertible Bonds issued on XXXXXXXXXX , outstanding.
36. As of XXXXXXXXXX , there were no longer any of the Convertible Bonds issued on XXXXXXXXXX , outstanding.
37. On XXXXXXXXXX , SubCo1 issued US$XXXXXXXXXX of bonds which are convertible into SubCo1 Class A Common Shares. These bonds have an interest rate of XXXXXXXXXX %, a conversion price of US$XXXXXXXXXX and a maturity date in XXXXXXXXXX . These bonds are convertible at any time at the holder's request. The proceeds received by SubCo1 on the issuance of these bonds were used to repay existing debt, make acquisitions as described in Paragraphs 40 through to and including 42 and fund XXXXXXXXXX.
38. On XXXXXXXXXX , FA1 issued US$XXXXXXXXXX of bonds which were convertible into FA1 Common Shares. These bonds had an interest rate of XXXXXXXXXX %, a conversion price of US$XXXXXXXXXX and a maturity date in XXXXXXXXXX.
39. On XXXXXXXXXX , FA1 issued US$XXXXXXXXXX of bonds which are convertible into FA1 Common Shares. These bonds have an interest rate of XXXXXXXXXX % and a conversion price of US$XXXXXXXXXX and a maturity date in XXXXXXXXXX . Early in XXXXXXXXXX FA1 was looking to strengthen its balance sheet through a convertible bond offering and applied for XXXXXXXXXX exemption application in XXXXXXXXXX . Ultimately, FA1 decided to postpone the bond offering as the terms available at that time were less than acceptable and it expected better terms would be available later in the year, which proved to be true. These bonds are convertible at any time at the holder's request.
40. On XXXXXXXXXX , SubCo1 announced that it had agreed to acquire all of the shares of XXXXXXXXXX ("Company A"). On XXXXXXXXXX , a newly incorporated and wholly owned subsidiary of SubCo1 amalgamated with Company A. Following the amalgamation and the cash redemption of the amalgamated corporation's preferred shares issued to former Company A shareholders, SubCo1 owned XXXXXXXXXX % of the shares of the amalgamated corporation. At the time of the acquisition, Company A was engaged in active business operations in XXXXXXXXXX and offers SubCo1 additional exposure to the XXXXXXXXXX . The purpose of this acquisition was to expand SubCo1'sXXXXXXXXXX.
41. On XXXXXXXXXX , SubCo1 announced that it had agreed to acquire all of the shares of XXXXXXXXXX ("Company B"). On XXXXXXXXXX , SubCo1 acquired all of the issued and outstanding shares of Company B for $XXXXXXXXXX which consisted of $XXXXXXXXXX and the issuance of XXXXXXXXXX SubCo1 Class A Common Shares. Company B is engaged in XXXXXXXXXX in the XXXXXXXXXX . The purpose of this acquisition was to further expand SubCo1's XXXXXXXXXX.
42. On XXXXXXXXXX , SubCo1 announced that it had agreed to acquire all of the shares of XXXXXXXXXX ("Company C"). On XXXXXXXXXX , SubCo1 acquired all of the issued and outstanding shares of Company C for $XXXXXXXXXX which consisted of $XXXXXXXXXX and the issuance of XXXXXXXXXX SubCo1 Class A Common Shares. Company C is engaged in XXXXXXXXXX in XXXXXXXXXX and offers SubCo1 additional exposure to the XXXXXXXXXX . The purpose of this acquisition was to further expand SubCo1's XXXXXXXXXX.
43. On XXXXXXXXXX FA1 announced that it had agreed to acquire all of the shares of XXXXXXXXXX ("Company D"), a XXXXXXXXXX company for cash consideration. On XXXXXXXXXX , FA1 acquired all of the issued and outstanding shares of Company D. As a result of this acquisition FA1 indirectly acquiredXXXXXXXXXX additional XXXXXXXXXX , which FA1 believed were under valued. These assets, combined with FA1's other assets, resulted in FA1 having XXXXXXXXXX . The purpose of this acquisition was to expand FA1's XXXXXXXXXX.
44. XXXXXXXXXX
45. On XXXXXXXXXX , FA1 acquired an additional XXXXXXXXXX % interest in XXXXXXXXXX . FA1 acquired its original XXXXXXXXXX % interest in the XXXXXXXXXX in XXXXXXXXXX . XXXXXXXXXX.
46. On XXXXXXXXXX , Partnership A acquired XXXXXXXXXX 's and XXXXXXXXXX 's XXXXXXXXXX % interest in the XXXXXXXXXX ("Project A") and XXXXXXXXXX ("Project B") projects, respectively, for approximately $XXXXXXXXXX . Partnership A acquired its original interests in the Project A and Project B in XXXXXXXXXX and XXXXXXXXXX , respectively. XXXXXXXXXX.
47. On XXXXXXXXXX , FA3 entered into an investment agreement pursuant to which it agreed to invest in and acquire a XXXXXXXXXX % interest in a XXXXXXXXXX company, XXXXXXXXXX ("Company F"). Company F's objective is to XXXXXXXXXX . The other shareholders of Company F are XXXXXXXXXX.
48. On XXXXXXXXXX , FA1 received a conversion notice indirectly from the holders thereof and the remaining convertible bonds issued by FA1 in XXXXXXXXXX were converted into XXXXXXXXXX FA1 Common Shares on XXXXXXXXXX.
DC Group Structure
49. The organizational history of the DC Group is complex, largely as a result of efforts made to integrate the related businesses, activities and corporate structures of prior acquisitions.
50. DC is a specified corporation.
51. DC owns XXXXXXXXXX % of the outstanding SubCo1 Class A Common Shares and XXXXXXXXXX % of the SubCo1 Class B Common Shares, all of the outstanding shares in the capital of SubCo2, SubCo3 and SubCo4 and a XXXXXXXXXX % interest in Partnership A. SubCo4 owns a XXXXXXXXXX % interest in Partnership A. SubCo2 owns XXXXXXXXXX % of the outstanding FA1 Common Shares and all of the outstanding shares of FA2. FA1 owns all of the shares of FA3.
52. The taxation year-end of DC is XXXXXXXXXX , the taxation year-end of SubCo1 is XXXXXXXXXX , the taxation year-end of each of SubCo2, SubCo3 and SubCo4 is XXXXXXXXXX and the taxation year-end of Partnership A is XXXXXXXXXX .
53. Each issued and outstanding share of SubCo2 owned by DC is capital property of DC.
Subject Transactions
The following preliminary transactions or events have been implemented or undertaken to effect the spin-off divisive reorganization of DC.
The FA1 Continuation
54. On XXXXXXXXXX , FA1 was continued under the XXXXXXXXXX to facilitate the FA1 Scheme of Arrangement.
55. On XXXXXXXXXX , the Facilitator caused SpinCo to be incorporated under the XXXXXXXXXX . No shares of SpinCo were issued on incorporation and no property will be acquired by SpinCo prior to the implementation of the transactions in the Plan of Arrangement, except as described in this letter.
56. The authorized share capital of SpinCo consists of:
(a) SpinCo Common Shares, each of which is fully participating voting common share with the holder thereof entitled to one vote at meetings of shareholders of SpinCo; and
(b) SpinCo Special Shares, each of which has the following attributes:
(i) each such share is redeemable, subject to applicable law, at any time at the option of the issuer at a redemption amount equal to the aggregate fair market value of the SpinCo Distribution Property transferred by DC to SpinCo, determined at the time of the transfer and described in Paragraph 78, divided by the number of such shares issued as consideration therefor (plus any declared but unpaid dividends);
(ii) each such share is retractable, subject to applicable law, at any time at the option of the holder at a retraction amount equal to the redemption amount described above;
(iii) the holder of each such share is entitled to a non-cumulative cash dividend as and when declared by the board of directors from time to time, which dividend need not also be declared on any other class of shares of the issuer;
(iv) there is a provision restricting the payment of dividends on, or the purchase for cancellation or redemption of shares of, other classes of shares of the issuer so that no such dividends may be paid on, or purchase or redemption of shares be made of, any other class of shares of the issuer if the resulting realizable value of the assets of the issuer after payment of such dividends, or the purchase or redemption of such shares would be less than the aggregate of the redemption amounts of all SpinCo Special Shares issued by the issuer then outstanding;
(v) for the purpose of subsection 191(4), the terms and conditions of such shares will, at the time of their issuance, specify an amount in respect of each such share, for which the share is to be redeemed, acquired or cancelled and the amount to be specified in respect of each of such shares will be pursuant to a resolution of the Board of Directors of SpinCo, will be expressed as a dollar amount, will not be determined by a formula and will not exceed the fair market value of the property received by the issuer as consideration for the issuance of such share;
(vi) the holder of each such share will be entitled, upon the liquidation, dissolution or winding-up of the issuer, to a payment in priority to all other classes of shares of the issuer of an amount equal to the redemption amount therefor to the extent of the amount or value of property available under applicable law for payment to shareholders upon dissolution, but will be entitled to no more than the amount of that payment; and
(vii) the holder of each such share will not be entitled to vote at meetings of shareholders of the issuer, other than as provided under the XXXXXXXXXX .
Arrangement Agreement
57. DC, SpinCo and FA1 entered into an agreement on XXXXXXXXXX , pursuant to which each of the parties, among other things, agreed to implement the transactions in the Plan of Arrangement (subject to applicable approvals) and the FA1 Scheme of Arrangement (subject to applicable approvals). This agreement also provides that each party will indemnify each other party for losses occasioned by misrepresentations made by, or actions taken by, the particular party that adversely affect the application of the rulings granted pursuant to the Ruling Request and opinions issued by counsel.
58. A joint management information circular was mailed to all DC Shareholders and all FA1 Shareholders on XXXXXXXXXX , in contemplation of the DC Meeting and the FA1 Meeting. This document was filed with applicable securities regulators including the XXXXXXXXXX and contains prospectus-level disclosure regarding DC, the New DC Common Shares, the DC Special Shares, SpinCo and the SpinCo Common Shares. There is no legal requirement for this document to be accepted by any public authority in Canada.
Proposed Transactions
Dividend and Return of Capital from SubCo2
59. SubCo2 will pay the Dividend. The Dividend will be satisfied by the distribution to DC of an equal amount of the DC SubCo2 Debt.
60. SubCo2 will undertake the ROC. The ROC will be satisfied by the distribution of the balance of the DC SubCo2 Debt and the FA2 Common Shares.
SpinCo
61. SpinCo will, on or before its filing due date for its first taxation year, and pursuant to the post-amble of the definition of public corporation in subsection 89(1), elect in its federal return of income for that taxation year to be a public corporation from the beginning of the year until the time it will become a public corporation.
62. SpinCo will adopt a stock option plan (the "SpinCo Stock Option Plan") which will be substantially similar to the FA1 Stock Option Plan.
63. SpinCo will register for the purposes of the goods and services tax levied under the Excise Tax Act (Canada) and will acquire a nominal amount of office supplies for consumption, use or supply exclusively in its commercial activities as determined for the purposes of that tax and may make elections under that statute.
64. SpinCo will establish bank accounts, books of account and other indicia that support its existence.
Plan of Arrangement
General
65. Subject to, among other things, the appropriate shareholder and court approvals, the Arrangement will be undertaken pursuant to the Plan of Arrangement.
66. All amounts of Stated Capital for purposes of the XXXXXXXXXX to be determined under the Plan of Arrangement will be determined by the Board of Directors of the applicable corporation, subject to the limitations specified in the Plan of Arrangement and prescribed in the Act.
67. Pursuant to the Plan of Arrangement, commencing at the Effective Time the following events and transactions will occur and will be deemed to occur in the
order set forth below or as indicated in the text below, without any further act or formality unless specified below, and with each event or transaction occurring and being deemed to occur immediately after the occurrence of the immediately preceding event or transaction.
68. For greater certainty, the Effective Date will be a date subsequent to the date of this letter.
Dissenting Shareholders
69. Dissenting Shareholders who:
(a) are ultimately entitled to be paid fair value for their DC Common Shares (plus any interest awarded by the Court of Queen's Bench of XXXXXXXXXX ) will be deemed to have transferred such shares to DC for cancellation immediately prior to the Effective Time; or
(b) are ultimately not entitled to be paid fair value for their DC Common Shares will be deemed to have participated in the Arrangement on the same basis as a Participant, as at and from the Effective Time, and will be treated in the same manner as such a Participant on the basis set out in the Plan of Arrangement.
Suspension of Entitlements
70. No stock options may be exercised after the Effective Time until all of the transactions in the Plan of Arrangement have been completed.
Amendment to Articles of DC
71. DC's Articles will be amended to increase the voting rights of the DC Common Shares to XXXXXXXXXX votes per share and to create and authorize the issuance of (in addition to the shares that DC is authorized to issue immediately before this amendment) two new classes of shares as follows:
(a) an unlimited number of New DC Common Shares, each of which will be a fully participating common share with the holder thereof entitled to vote at meetings of shareholders of DC, the terms of which will be identical to the terms of the DC Common Shares prior to the increase in the voting rights applicable to the DC Common Shares resulting from this amendment to the Articles of DC; and
(b) an unlimited number of DC Special Shares with the following attributes:
(i) each DC Special Share will be redeemable, subject to applicable law, at any time at the option of DC at a per share redemption amount equal to the aggregate redemption amount (described below) divided by the number of DC Special Shares issued (plus any declared but unpaid dividends), where the aggregate redemption amount equals the proportion of the aggregate fair market value of all outstanding DC Common Shares immediately before the DC Share Exchange in Paragraph 72 that (1) the aggregate fair market value of the SpinCo Distribution Property to be transferred by DC to SpinCo, determined immediately prior to the transfer described in Paragraph 78, is of (2) the fair market value of all property owned by DC, determined immediately prior to the transfer described in Paragraph 78;
(ii) each DC Special Share will be retractable, subject to applicable law, at any time at the option of the holder at a retraction amount equal to the redemption amount described above;
(iii) the holder of each DC Special Share will be entitled to a non-cumulative cash dividend as and when declared by the board of directors from time to time, which dividend need not also be declared on any other class of shares of DC;
(iv) there will be a provision restricting the payment of dividends on, or purchase for cancellation or redemption of, other classes of shares so that no such dividends may be paid on, or purchase or redemption be made of, any other class of shares of DC if the resulting realizable value of the net assets of DC after payment of such dividends, or purchase or redemption of such shares, would be less than the aggregate of the redemption amounts of all of the DC Special Shares then outstanding;
(v) for the purpose of subsection 191(4), the terms and conditions of the DC Special Shares will, at the time of their issuance, specify an amount in respect of each DC Special Share for which the share is to be redeemed, acquired or cancelled and the amount to be specified in respect of each of the DC Special Share will be pursuant to a resolution of the Board of Directors of DC, will be expressed as a dollar amount, will not be determined by a formula and will not exceed the fair market value of the property received by DC as consideration for the issuance of such shares;
(vi) the holder of each DC Special Share will be entitled, upon the liquidation, dissolution or winding-up of DC, to a payment in priority to all other classes of shares of DC of an amount equal to the redemption amount therefor to the extent of the amount or value of property available under applicable law for payment to shareholders upon dissolution, but will be entitled to no more than the amount of that payment; and
(vii) the holder of each DC Special Share will not be entitled to vote at meetings of shareholders of DC, other than as provided under the XXXXXXXXXX .
Reorganization of the Capital of DC
72. Each Participant will transfer to DC, with good and marketable title free from any Encumbrances, all of its DC Common Shares. As consideration for each DC Common Share so transferred, DC will issue to that Participant, as the sole consideration therefor, one New DC Common Share and one DC Special Share ("DC Share Exchange"). In connection with this exchange:
(a) DC will not make a joint election under the provisions of subsection 85(1) or 85(2) with any Participant;
(b) the amount in the Stated Capital account maintained by DC for the DC Common Shares will be deducted from that account and an amount equal to the paid-up capital of the DC Common Shares at the time of the DC Share Exchange will be added to the Stated Capital account maintained by DC for each of the New DC Common Shares and the DC Special Shares, based on the proportion thereof that the fair market value of each of such two classes of shares immediately after the DC Share Exchange is of the fair market value of the DC Common Shares so exchanged immediately before the DC Share Exchange; and
(c) the DC Common Shares so exchanged will be cancelled.
73. Immediately after the issuance of the New DC Common Shares in Paragraph 72, the New DC Common Shares will be unconditionally listed for trading on the Stock Exchange, with such listing occurring outside the Plan of Arrangement.
Transfer of DC Special Shares to SpinCo
74. Each Participant will transfer to SpinCo, with good and marketable title free from any Encumbrances, all of its DC Special Shares. As consideration for each DC Special Share so transferred, SpinCo will issue to that Participant, as the sole consideration therefor, approximately XXXXXXXXXX of a SpinCo Common Share ("SpinCo Share Exchange"). In connection with this exchange:
(a) if requested by an Eligible Holder before a specific date after the Effective Date, SpinCo will jointly elect with that Eligible Holder to have the provisions of subsection 85(1) (or, in the case of an Eligible Holder that is a partnership, subsection 85(2)) apply to this exchange with the agreed amount to be specified by the Eligible Holder (subject to the limitations set out in subsection 85(1));
(b) SpinCo will add to the Stated Capital account maintained by SpinCo for the SpinCo Common Shares an amount that will not exceed the aggregate paid-up capital of the DC Special Shares so transferred to SpinCo at the time of the SpinCo Share Exchange less the amount, if any, by which the aggregate paid-up capital of the DC Special Shares that are the subject of elections under section 85 exceeds the aggregate agreed amounts in such elections; and
(c) no certificates or script or book entry interests representing fractional interests of less than one whole SpinCo Common Share will be issued. Instead, any fractional interests will be rounded down to the nearest whole number.
75. Immediately after the issuance of the SpinCo Common Shares in Paragraph 74, the SpinCo Common Shares will be unconditionally listed on the Stock Exchange, with such listing occurring outside the Plan of Arrangement.
76. The fair market value, immediately before the transfer of the SpinCo Distribution Property by DC to SpinCo in Paragraph 78, of each Participant's SpinCo Common Shares, will be equal to the amount determined by the formula:
(A x B/C) + D
as set out in subparagraph (b)(iii) of the definition of permitted exchange, on the assumption that each Participant is a participant, DC is the distributing corporation and SpinCo is the acquiror.
77. Immediately before the transfer of the SpinCo Distribution Property described in Paragraph 78, the fair market value of the property of DC will be determined as though there was only one type of property, as contemplated by subsection 55(3.02).
Transfer of SpinCo Distribution Property to SpinCo
78. DC will transfer to SpinCo, with good and marketable title free from any Encumbrances, the SpinCo Distribution Property at a price equal to its fair market value, determined as at the time of the transfer. As the sole consideration for this transfer to it, SpinCo will issue to DC XXXXXXXXXX SpinCo Special Shares that have an aggregate redemption amount (as determined pursuant to the Articles of SpinCo) equal to the fair market value of the SpinCo Distribution Property. In addition, SpinCo will agree to jointly elect with DC to have the provisions of subsection 85(1) apply to this transfer with the agreed amount in the election being equal to the lesser of the cost amount to DC of the SpinCo Distribution Property at the time of the transfer and the fair market value of the SpinCo Distribution Property at that time. The addition to the Stated Capital account maintained by SpinCo for the SpinCo Special Shares will be the agreed amount in the election.
79. Immediately after the transfer of property in Paragraph 78, the fair market value of the SpinCo Distribution Property transferred to and received by SpinCo at that time will be equal to or approximate that proportion of the fair market value of all of the property of DC immediately before the transfer, that:
(a) the aggregate fair market value of the DC Special Shares owned by SpinCo immediately before the transfer
is of
(b) the aggregate fair market value of all of the issued shares of DC immediately before the transfer.
Redemption of SpinCo Special Shares
80. SpinCo will redeem and cancel all the outstanding SpinCo Special Shares issued to DC for an amount equal to the aggregate redemption amount (as determined pursuant to the Articles of SpinCo) of such SpinCo Special Shares and will issue to DC, as the sole consideration therefor, a demand promissory note (the "SpinCo Redemption Note"), in a principal amount equal to such aggregate redemption amount and bearing interest at a rate equal to the Canadian dollar commercial loan prime rate of a specified Canadian chartered bank from the date of demand for payment to the date of payment, in full and absolute payment, satisfaction and discharge of such aggregate redemption amount, with the risk of the SpinCo Redemption Note being dishonoured.
Redemption of DC Special Shares
81. DC will redeem and cancel all the outstanding DC Special Shares issued to SpinCo for an amount equal to the aggregate redemption amount (as determined pursuant to the Articles of DC) of such DC Special Shares and will issue to SpinCo, as the sole consideration therefor, a demand promissory note (the "DC Redemption Note"), in a principal amount equal to such aggregate redemption amount and bearing interest at a rate equal to the Canadian dollar commercial loan prime rate of a specified Canadian chartered bank from the date of demand for payment to the date of payment, in full and absolute payment, satisfaction and discharge of such aggregate redemption amount, with the risk of the DC Redemption Note being dishonoured.
Set-Off
82. DC will pay the principal amount of the DC Redemption Note by transferring to SpinCo the SpinCo Redemption Note, which SpinCo Redemption Note will be accepted by SpinCo in full and absolute payment, satisfaction and discharge of DC's obligations under such DC Redemption Note. Contemporaneously with DC's transfer of the SpinCo Redemption Note to SpinCo, SpinCo will pay the principal amount of the SpinCo Redemption Note by transferring to DC the DC Redemption Note, which DC Redemption Note will be accepted by DC in full and absolutely payment, satisfaction and discharge of SpinCo's obligations under the SpinCo Redemption Note. The DC Redemption Note and the SpinCo Redemption Note thereupon will be cancelled.
Amendment to Articles of DC and SpinCo
83. The Articles of DC will be amended to remove the DC Special Shares from the authorized capital of DC. The Articles of SpinCo will be amended to remove the SpinCo Special Shares from the authorized capital of SpinCo. The Articles of DC and SpinCo will then be restated to reflect the removal of the DC Special Shares and SpinCo Special Shares, as the case may be, and the restated Articles will be filed in accordance with the XXXXXXXXXX .
Share Certificates
84. From and after the Effective Time, certificates or book-entry interests formerly representing DC Common Shares will cease to represent such shares and will represent the right to receive certificates or book-entry interests representing New DC Common Shares and SpinCo Common Shares in accordance with the Plan of Arrangement. No certificates will be issued for shares that are issued and subsequently cancelled under the Plan of Arrangement.
Subsequent Transactions
85. DC will provide, by press release or otherwise after the Effective Date:
(a) to Dissenting Shareholders, the estimated paid-up capital of the DC Common Shares immediately prior to the Effective Time; and
(b) to Participants, the manner in which to calculate the adjusted cost base of their New DC Common Shares, DC Special Shares and SpinCo Common Shares.
FA1 Scheme of Arrangement
General
86. Subject to, among other things, the appropriate shareholder and Court approvals, the following will be undertaken pursuant to the FA1 Scheme of Arrangement.
87. All amounts of Stated Capital for purposes of the XXXXXXXXXX to be determined under the FA1 Scheme of Arrangement will be determined by the Board of Directors of SpinCo, subject to the limitations specified in the FA1 Scheme of Arrangement and the Act.
88. Pursuant to the FA1 Scheme of Arrangement, commencing at the Effective Time, the following events and transactions will occur and will be deemed to occur in the order set forth below or as indicated in the text below, without any further act or formality unless specified below, and with each event or transaction occurring and being deemed to occur immediately after the occurrence of the immediately preceding event or transaction.
89. For greater certainty, the FA1 Scheme of Arrangement will be effected on a date subsequent to the date of this letter.
Dissenting Shareholders
90. Dissenting Shareholders who:
(a) are ultimately entitled to be paid fair value for their FA1 Common Shares (plus any interested awarded by the Supreme Court of XXXXXXXXXX ) will not participate in the transaction described in Paragraph 92 and their FA1 Common Shares will be cancelled immediately prior to the Effective Time; or
(b) are ultimately not entitled to be paid fair value for their FA1 Common Shares will be entitled to SpinCo Common Shares on the same basis as a Participant, as at and from the Effective Time, and will be treated in the same manner as such a Participant on the basis set out in the FA1 Scheme of Arrangement.
Suspension of Entitlements
91. No FA1 Stock Options may be exercised after the Effective Time until all of the transactions in the FA1 Scheme of Arrangement are completed.
Exchange of FA1 Common Shares for SpinCo Common Shares
92. SpinCo and FA1 will enter into the FA1 Scheme of Arrangement pursuant to which SpinCo will purchase all of the outstanding FA1 Common Shares not owned by SubCo2. As consideration for each FA1 Common Share so acquired, SpinCo will issue to that FA1 Shareholder, as the sole consideration therefor, one SpinCo Common Share ("FA1 Share Exchange"). In connection with this exchange:
(a) if requested by an Eligible Holder before a specific date after the acquisition, SpinCo will jointly elect with that Eligible Holder to have the provisions of subsection 85(1) (or in the case of an Eligible Holder that is a
partnership, subsection 85(2)) apply to this exchange with the agreed amount to be specified by the Eligible Holder (subject to the limitations set out in subsection 85(1)); and
(b) SpinCo will add to the Stated Capital account maintained by SpinCo for the SpinCo Common Shares, in the case where an election is made under section 85 with respect to the FA1 Share Exchange, an amount that will not exceed the agreed amount in such election, and in any other case, an amount that will not exceed the fair market value of the FA1 Common Shares so transferred to SpinCo, determined at the time of such transfer.
Exchange of FA1 Stock Options
93. Immediately following and outside of the FA1 Scheme of Arrangement, each FA1 Stock Option Holder will dispose of such holder's respective rights under the FA1 Stock Options to SpinCo in consideration for the issuance to the particular holder of new SpinCo stock options (the "SpinCo Stock Options") granted by SpinCo to acquire SpinCo Common Shares in such a manner that:
(a) the particular holder will receive no consideration for the exchange of such FA1 Stock Options other than SpinCo Stock Options;
(b) the number of SpinCo Common Shares to be issued will be such that, for each FA1 Common Share that the holder would have been entitled to acquire under the FA1 Stock Option, the holder will become entitled to acquire one SpinCo Common Share under the corresponding SpinCo Stock Option;
(c) the SpinCo Stock Options will be issued pursuant to the SpinCo Stock Option Plan;
(d) the amount by which the total value of the SpinCo Common Shares that may be acquired pursuant to the SpinCo Stock Options exceeds the amount payable to acquire SpinCo Common Shares pursuant to the SpinCo Stock Options will be equal to the amount by which the total value of the FA1 Common Shares that could have been acquired pursuant to the FA1 Stock Options exceeds the amount that was payable to acquire the FA1 Common Shares pursuant to the FA1 Stock Options; and
(e) the FA1 Stock Options will be cancelled upon the foregoing exchanges.
Following the Proposed Transactions DC will conduct its activities as a separate public corporation and SpinCo will conduct its activities as a separate public corporation.
94. No property has or will become property of any entity in the DC Group in contemplation of and before any distribution in the Proposed Transactions, except as described in this letter or in a transaction described in subparagraphs 55(3.1)(a)(i) through and including (iv).
95. No liabilities have been, or will be, incurred or discharged by any entity in the DC Group with third parties in contemplation of and before any distribution in the Proposed Transactions, except as described in this letter.
96. None of the Prior Transactions has been completed, was implemented or undertaken, as the case may be, in contemplation of and were made irrespective of any of the Proposed Transactions. The Proposed Transactions will be undertaken irrespective of whether any of the Prior Transactions had been completed.
97. The implementation of the Plan of Arrangement is conditional upon the receipt of certain approvals, including the approval of the DC Shareholders and the approval of the Court XXXXXXXXXX .
98. There are not, and will not be, at any time prior to the completion of the Proposed Transactions, any agreements or undertakings which constitute or include a guarantee agreement in respect of any shares which are redeemed, acquired or cancelled in the course of the Proposed Transactions.
99. None of the entities in the DC Group or SpinCo has, or will have, entered into a dividend rental arrangement in respect of any of the shares which are redeemed, acquired or cancelled in the course of the Proposed Transactions.
100. None of the shares issued by any corporation in the DC Group or SpinCo in the course of the Proposed Transactions will be issued or acquired as part of a series of transactions or events of the type described in subsection 112(2.5).
101. None of the corporations in the DC Group or SpinCo is, or will be before the completion of the Proposed Transactions, a specified financial institution (as defined in subsection 248(1)) or a restricted financial institution (as defined in subsection 248(1)) or a corporation described in any of paragraphs (a) to (f) of the definition of financial intermediary corporation in subsection 191(1).
102. There will not be any agreement in respect of the DC Special Shares or the SpinCo Special Shares in respect of any matters referred to in any of subparagraphs (b)(i) to (iv) of the definition of taxable preferred share or in any of paragraphs (a), (b), (f) or (h) of the definition of short-term preferred share.
103. Each corporation that issues a promissory note in the Proposed Transactions will have the financial capacity to honour, upon presentation for payment, the amount payable under such promissory note.
104. The ROC should be a reduction of the paid-up capital of the SubCo2 Shares for Canadian tax purposes as well as under the XXXXXXXXXX.
105. The convertible bonds described in Paragraphs 37 through and including 39 are generally held by foreign investment funds, gave SubCo1 and FA1 access to long-term capital at very attractive rates, are not listed on any stock exchange and were issued prior to the public announcement of the Proposed Transactions, which was on XXXXXXXXXX.
106. Following the Proposed Transactions DC intends to increase its existing credit facility from $XXXXXXXXXX to up to $XXXXXXXXXX.
107. DC expected the holders of the convertible bonds issued by FA1 in XXXXXXXXXX to convert these bonds into FA1 Common Shares based solely on the current trading price of the FA1 Common Shares and the conversion price of these bonds set on their issue date in XXXXXXXXXX . The FA1 Common Shares as of the date of the conversion notice were trading at approximately $XXXXXXXXXX per share and the conversion price was approximately US$XXXXXXXXXX , representing a premium of approximately XXXXXXXXXX %.
FA1 issued XXXXXXXXXX FA1 Common Shares pursuant to this conversion, which represents approximately XXXXXXXXXX % of the fair market value of FA1 and what is expected to be approximately XXXXXXXXXX % of the value of SpinCo (immediately prior to the FA1 Scheme of Arrangement) and the SpinCo Distribution Property.
108. Based solely on the current trading price of the SubCo1 Class A Common Shares, DC presently does not expect the holders of convertible bonds issued by SubCo1 on XXXXXXXXXX , to convert those bonds in the near term. The SubCo1 Class A Common Shares as of the date hereof are trading at approximately $XXXXXXXXXX per share and the conversion price is US$XXXXXXXXXX , representing a discount of approximately XXXXXXXXXX %.
109. Based solely on the current trading price of the FA1 Common Shares, DC presently does not expect the holders of convertible bonds issued by FA1 on XXXXXXXXXX , to convert those bonds in the near term. The FA1 Common Shares as of the date hereof are trading at approximately $XXXXXXXXXX per share and the conversion price is approximately US$XXXXXXXXXX , representing a discount of approximately XXXXXXXXXX %.
110. SubCo1 is focused on XXXXXXXXXX . SubCo1 was incorporated on XXXXXXXXXX for the purpose of acquiring DC's interest in its XXXXXXXXXX consisting of rights in respect of the XXXXXXXXXX and to acquire the issued and outstanding shares of XXXXXXXXXX ("Company G"), a corporation with significant XXXXXXXXXX . On XXXXXXXXXX , DC announced its plan to form SubCo1 and acquire the shares of Company G. On XXXXXXXXXX , SubCo1 acquired all of the issued and outstanding shares of XXXXXXXXXX . DC's interest in the XXXXXXXXXX was originally acquired in XXXXXXXXXX . With the acquisitions set out in Paragraphs 40 through to and including 42 , SubCo1 has access to over XXXXXXXXXX . Those acquisitions were pursuant to a strategic initiative formed in XXXXXXXXXX to expand SubCo1's XXXXXXXXXX . The XXXXXXXXXX was targeted by SubCo1 due to its similarities to the XXXXXXXXXX . Lastly, at the time of those acquisitions SubCo1 believed the assets of each of those companies were under valued and as such their value was expected to increase thus increasing the anticipated price on a later acquisition.
111. DC is not aware of any intention by any person or group of persons to acquire control of any of DC, SubCo1, FA1 and SpinCo as part of a series of transactions or events that includes the Proposed Transactions.
112. Each of DC and SpinCo is not, and will not be, a mortgage investment corporation as defined in subsection 130.1(6).
113. Under XXXXXXXXXX law, the FA1 continuation described in Paragraph 54 will not result in the creation of a new legal entity, the property of FA1 will continue to be the property of FA1 and FA1 will continue to be liable for its obligations.
Purposes of the Subject Transactions and the Proposed Transactions
114. DC believes that it is in the best interests of the DC Shareholders that DC separate its Operations into two separate public corporations for the following reasons:
(a) the separation of the Operations into two separate public corporations will enhance the ability of each such public corporation to pursue its independent objectives and strategies, including operating relationships with third parties and financing arrangements (equity and debt), with its own public shareholders and lenders;
(b) the separation of the Operations into two separate public corporations should increase overall shareholder value because the separate public corporations should, in the aggregate, achieve a higher valuation compared with the current valuation of DC;
(c) the separation of the Operations into two separate public corporations will provide shareholders with increased flexibility by enabling them to make an independent investment decision whether to retain, reduce or increase their investment in the XXXXXXXXXX ; and
(d) increase the trading volume of DC and increase the trading volume of SpinCo, as compared to the current trading volume of FA1.
115. The Proposed Transactions seek to achieve the above commercial objectives in a manner that is tax-efficient with respect to the Canadian federal income tax consequences to the DC Group and the DC Shareholders.
116. The FA1 continuation described in Paragraph 54 became necessary based on XXXXXXXXXX.
117. The purpose of the ROC and the Dividend described in Paragraph 59 and 60 is to repay the DC SubCo2 Debt, which will ensure that there are no ongoing obligations between DC and SubCo2 following the Proposed Transactions.
118. The purpose of increasing the DC Common Shares' voting rights described in Paragraph 71 is to create a distinction between the DC Common Shares and the New DC Common Shares in order to support their being treated as separate classes of shares under the XXXXXXXXXX.
119. The purpose of the exchange of the FA1 Stock Options described in Paragraph 93 is to provide employees of the SpinCo group with stock options in a publicly listed and freely trading corporation.
Rulings
Provided that the preceding statements constitute a complete and accurate disclosure of all of the relevant facts, transactions, and the purposes of the Subject Transactions and the Proposed Transactions, and provided that the Proposed Transactions are undertaken in the manner described above, our rulings are set forth below:
A. With regard to the payment by DC in respect of DC Common Shares held by a Dissenting Shareholder as described in Paragraph 69:
(a) subject to the application of subsection 55(2), DC will be deemed by paragraph 84(3)(a) to have paid, and the Dissenting Shareholder will be deemed by paragraph 84(3)(b) to have received a dividend equal to the amount, if any, by which any payment from DC to the Dissenting Shareholder (exclusive of any interest awarded by a court) in respect of the purchase by DC of such Dissenting Shareholder's DC Common Shares exceeds the amount of paid-up capital attributable to such shares immediately prior to their purchase;
(b) the amount of any such dividend will be included in computing such Dissenting Shareholder's income under subsection 82(1) and paragraph 12(1)(j);
(c) subsections 212(2) and 215(1) will apply (subject to the provisions of any applicable Tax Convention) to require DC to withhold and remit 25% (subject to reduction under an applicable Tax Convention) of the amount of each such dividend deemed to have been paid as described in (a) to a Dissenting Shareholder who is a non-resident of Canada;
(d) the amount of any interest awarded by a court will be included in the income of a Dissenting Shareholder in accordance with paragraph 12(1)(c) and subsections 12(3) and (4);
(e) DC will not be required to withhold any amount on account of tax under Part XIII on the payment by DC of any court-awarded interest to any Dissenting Shareholder provided the payee is a person with whom DC is dealing at arm's length at the time of payment; and
(f) paragraph (j) of the definition of "proceeds of disposition" in section 54 will apply to exclude the amount of the deemed dividend described in (a) above from the proceeds of disposition of the DC Common Shares recognized by the Dissenting Shareholder as a result of such purchase of the DC Common Shares by DC, provided that the shares were held as capital property by the Dissenting Shareholder.
B. The amendment to the terms of the DC Common Shares to increase the voting rights, as described in Paragraph 71, will not result in a disposition of the DC Common Shares, in and of itself.
C. On the exchange of DC Common Shares by a Participant, as described in Paragraph 72, the provisions of subsection 86(1) will apply, and the provisions of subsections 86(2) and (2.1) will not apply, to the disposition of each DC Common Share by a Participant for one New DC Common Share and one DC Special Share provided that:
(a) the Participant holds the DC Common Shares as capital property; and
(b) the Participant and DC do not file an election under subsection 85(1) or (2) in respect of the exchange,
such that
(c) the Participant will be deemed by paragraph 86(1)(b) to have acquired the New DC Common Shares and the DC Special Shares at a cost equal to the proportion of the adjusted cost base to the Participant of such DC Common Shares immediately before the exchange that
(i) the fair market value, immediately after the exchange, of the New DC Common Shares, or of the DC Special Shares, as the case may be, received by the particular Participant
is of
(ii) the fair market value, immediately after the exchange, of all the shares of DC acquired by the Participant on the exchange;
(d) pursuant to paragraph 86(1)(c), such Participant will be deemed to have disposed of the Participant's DC Common Shares for aggregate proceeds of disposition equal to the aggregate cost to the Participant of the New DC Common Shares and DC Special Shares received by the Participant as determined in (c) above; and
(e) for the purposes of section 116, the DC Common Shares owned by a Participant who is a non-resident of Canada at the time of the exchange of the DC Common Shares described in Paragraph 72 will be excluded property by virtue of paragraph 116(6)(b).
D. Provided that a Participant who, immediately before the exchange of DC Special Shares for SpinCo Common Shares as described in Paragraph 74,
(a) holds such DC Special Shares as capital property;
(b) does not receive any consideration other than the SpinCo Common Shares in exchange for the DC Special Shares;
(c) deals at arm's length with SpinCo immediately before the exchange;
(d) does not, jointly with SpinCo, file an election under subsection 85(1) or subsection 85(2) with respect to the exchange;
(e) does not include any portion of the gain or loss otherwise determined in computing his income for that year; and
(f) is not a person described in paragraph 85.1(2)(e) who has included any portion of the gain or loss in computing its foreign accrual property income (as defined in subsection 95(1)) for that year,
and further provided that immediately after such exchange;
(g) such Participant or persons with whom such Participant does not deal at arm's length, or such Participant together with any other person or persons with whom such Participant does not deal at arm's length, will not control SpinCo or beneficially own shares of SpinCo having an aggregate fair market value representing more than 50% of the aggregate fair market value of all of the outstanding shares of SpinCo,
then, pursuant to paragraph 85.1(1)(a):
(h) such Participant will be deemed to have disposed of such DC Special Shares for proceeds of disposition equal to the aggregate adjusted cost base of such DC Special Shares to the Participant immediately before the exchange; and
(i) such Participant will be deemed to have acquired such SpinCo Common Shares at an aggregate cost equal to the aggregate adjusted cost base of such Participant's DC Special Shares immediately before the exchange;
and, pursuant to paragraph 85.1(1)(b):
(j) the cost to SpinCo of each DC Special Share acquired from each such Participant will be deemed to be the lesser of its fair market value immediately before the exchange and the paid-up capital of such DC Special Share immediately before the exchange.
E. For the purposes of subparagraph (b)(iii) of the definition of paid-up capital in subsection 89(1), the paid-up capital of:
(a) the New DC Common Shares and DC Special Shares issued to the Participants as described in Paragraph 72;
(b) the SpinCo Common Shares issued to holders of DC Special Shares exchanged therefor as described in Paragraph 74, and
(c) the SpinCo Special Shares issued to DC as described in Paragraph 78,
computed without reference to the Act will be equal to their Stated Capital as determined for purposes of the XXXXXXXXXX .
F. Subject to the application of subsection 69(11) and provided the transferor and transferee jointly elect in prescribed form and within the time determined under subsection 85(6), the provisions of subsection 85(1) (and, where the transferor is a partnership, subsection 85(2)) will apply to the transfer of eligible property by:
(a) DC of SpinCo Distribution Property to SpinCo described in Paragraph 78;
(b) Participants who are Eligible Holders of DC Special Shares to SpinCo described in Paragraph 74; and
(c) FA1 Shareholders who are Eligible Holders of FA1 Common Shares to SpinCo described in Paragraph 92,
such that:
(d) the agreed amount in respect of each property so transferred will be deemed to be the proceeds of disposition to the transferor for such property and the cost to the transferee of such property; and
for greater certainty,
(e) paragraph 85(1)(e.2) will not apply to the transfers described above in this Ruling F; and
(f) subsection 85(2.1) will not apply to reduce the paid-up capital of any class of shares issued as consideration in respect of any such transfers.
G. None of the DC Share Exchange, the SpinCo Share Exchange and the FA1 Share Exchange will result in an income inclusion to the transferor under paragraph 12(1)(j) or will result in taxation under subsection 212(2).
H. Provided that:
(a) a Participant is a holder of DC Common Shares that were acquired through the exercise of the Participant's stock options granted under the DC Stock Option Plan;
(b) the Participant made a valid election under subsection 7(8) with respect to such DC Common Shares in accordance with subsection 7(10) and the election was not revoked under subsection 7(13); and
(c) the conditions of paragraph 7(1.5)(c) are satisfied with respect to the particular share exchange referred to in (d) and (e) below;
the provisions of paragraphs 7(1.5)(d), (e), (f) and (g) will apply for the purposes of section 7 and paragraph 110(1)(d) to the exchange of:
(d) the Participant's DC Common Shares for New DC Common Shares and DC Special Shares as described in Paragraph 72, and
(e) the Participant's DC Special Shares for SpinCo Common Shares as described in Paragraph 74.
I. As a result of the redemption by SpinCo of the SpinCo Special Shares described in Paragraph 80:
(a) SpinCo will be deemed by paragraph 84(3)(a) to have paid, and DC will be deemed by paragraph 84(3)(b) to have received, a dividend equal to the amount by which the fair market value of the SpinCo Redemption Note issued in satisfaction of such redemption exceeds the paid-up capital of the SpinCo Special Shares so redeemed;
(b) the amount of such deemed dividend will be included in DC's income pursuant to subsection 82(1) and paragraph 12(1)(j);
(c) the amount of such deemed dividend will be excluded, pursuant to paragraph (j) of the definition of "proceeds of disposition" in section 54, in determining DC's proceeds of disposition of the SpinCo Special Shares;
(d) DC will be entitled, pursuant to subsection 112(1), to deduct the amount of such deemed dividend in computing its taxable income for the taxation year in which such dividend is deemed to be received and, for greater certainty, the provisions of subsection 112(2.1), (2.2), (2.3) or (2.4) will not apply to deny the deduction of such deemed dividend;
(e) the deemed dividend referred to in (a) above will not be subject to tax under Part IV;
(f) to the extent that the amount paid by SpinCo to DC on the redemption of the SpinCo Special Shares does not exceed the amount specified in respect
of those shares for the purposes of subsection 191(4), the deemed dividend referred to in (a) above will not be subject to tax under Part IV. 1 or Part VI. 1; and
(g) the provisions of subsection 112(3) will apply to reduce any loss that would otherwise be incurred by DC as a result of the redemption of the SpinCo Special Shares.
J. As a result of the redemption by DC of the DC Special Shares held by SpinCo described in Paragraph 81:
(a) DC will be deemed by paragraph 84(3)(a) to have paid, and SpinCo will be deemed by paragraph 84(3)(b) to have received, a dividend equal to the amount by which the fair market value of the DC Redemption Note issued in satisfaction of such redemption exceeds the paid-up capital of the DC Special Shares so redeemed;
(b) the amount of such deemed dividend will be included in SpinCo's income pursuant to subsection 82(1) and paragraph 12(1)(j);
(c) the amount of such deemed dividend will be excluded, pursuant to paragraph (j) of the definition of "proceeds of disposition" in section 54, in determining SpinCo's proceeds of disposition of the DC Special Shares;
(d) SpinCo will be entitled, pursuant to subsection 112(1), to deduct the amount of such deemed dividend in computing its taxable income for the taxation year in which such dividend is deemed to be received and, for greater certainty, the provisions of subsections 112(2.1), (2.2), (2.3) or (2.4) will not apply to deny the deduction of such deemed dividend;
(e) Provided the election referred to in Paragraph 61 is made as described in that Paragraph, the deemed dividend referred to in (a) above will not be subject to tax under Part IV;
(f) to the extent that the amount paid by DC to SpinCo on the redemption of the DC Special Shares does not exceed the amount specified in respect of those shares for the purposes of subsection 191(4), the deemed dividend referred to in (a) will not be subject to tax under Part IV.1 or Part V1.1; and
(g) the provisions of subsection 112(3) will apply to reduce any loss that would otherwise be incurred by SpinCo as a result of the redemption of the DC Special Shares.
K. Provided that:
(a) there is not a distribution by DC to a corporation that is not an acquiror before the day that is three years after the Effective Date; and
(b) there is not a distribution by SpinCo before the date that is three years after the Effective Date;
and as part of a series of transactions or events that includes the taxable dividends referred to in Rulings I and J above, there is not:
(c) a disposition of property in the circumstances described in subparagraph 55(3.1)(b)(i);
(d) an acquisition of control in the circumstances described in subparagraph 55(3.1)(b)(ii);
(e) an acquisition of any shares of DC in contemplation of the distribution in the circumstances described in subparagraph 55(3.1)(b)(iii); or
(f) an acquisition of property in the circumstances described in paragraph 55(3.1)(c) or (d);
which has not been described herein, then by virtue of paragraph 55(3)(b), subsection 55(2) will not apply to the taxable dividends referred to in Rulings I and J above, and for greater certainty, subsection 55(3.1) will not apply to deny the exemption under paragraph 55(3)(b).
L. The cost to SpinCo of the DC Redemption Note issued to SpinCo as described in Paragraph 81 and the cost to DC of the SpinCo Redemption Note issued to DC as described in Paragraph 80 will in each case, upon the issuance thereof be equal to its principal amount and, as such, neither DC nor SpinCo will realize any gain or incur any loss therefrom, as a result of the set-off and repayment described in Paragraph 82.
M. The set-off and repayment of the SpinCo Redemption Note and the DC Redemption Note described in Paragraph 82 will not, in either case, give rise to a "forgiven amount" within the meaning thereof in subsection 80(1) or 80.01(1).
N. The DC Share Exchange, the Spinco Share Exchange and the FA1 Share Exchange will not, in and of themselves, cause the shares that a Participant received in exchange for shares that were, immediately before such exchange, capital property to that Participant, not to be capital property to that Participant immediately after such exchange.
O. Provided that:
(a) the Spinco Common Shares are listed on a designated stock exchange in Canada at any time prior to the filing-due date of Spinco's first taxation year; and
(b) SpinCo files the election as described in Paragraph 61 at any time after Spinco has become a public corporation but before the filing-due date of Spinco's first taxation year,
Spinco will be deemed to be a public corporation from the beginning of its first taxation year until the time when it so became a public corporation.
P. Provided that:
(a) DC is a public corporation at the time it issues the New DC Common Shares and DC Special Shares; and
(b) Spinco is a public corporation at the time it issues the Spinco Common Shares;
then,
(c) the New DC Common Shares, DC Special Shares and Spinco Common Shares will, when issued, be "qualified investments" pursuant to paragraph 4900(1)(b) of the Regulations for a:
(i) deferred profit sharing plan by virtue of paragraph (h) of the definition "qualified investment" in section 204;
(ii) registered retirement savings plan by virtue of paragraph (d) of the definition "qualified investment" in subsection 146(1);
(iii) registered retirement income fund by virtue of paragraph (c) of the definition "qualified investment" in subsection 146.3(1);
(iv) registered education savings plan by virtue of paragraph (e) of the definition "qualified investment" in subsection 146.1(1);
(v) registered disability savings plan by virtue of paragraph (d) of the definition of "qualified investment" in subsection 205(1); and
(vi) tax-free savings account by virtue of paragraph (c) of the definition "qualified investment" in subsection 207.01(1).
Q. The provisions of subsection 7(1.4) will apply with respect to each exchange by a particular FA1 Stock Option Holder of FA1 Stock Options for SpinCo Stock Options, as described in Paragraph 93, provided that the aggregate In the Money Amount of the SpinCo Stock Option received by the holder immediately after the exchange does not exceed the aggregate In the Money Amount of the FA1 Stock Options exchanged by the holder immediately before the exchange, with the result that for the purposes of section 7 and paragraph 110(1)(d):
(a) such holder will be deemed (other than for the purposes of subparagraph 7(9)(d)(ii)) not to have disposed of the FA1 Stock Options and not to have acquired the SpinCo Stock Options;
(b) the SpinCo Stock Options will be deemed to be the same options as, and a continuation of, the FA1 Stock Options; and
(c) SpinCo will be deemed in respect of such stock options to be the same person as, and a continuation of, FA1.
R. The provisions of subsections 15(1), 56(2), 56(4), 69(4) and 246(1) will not be applied as a result of the Proposed Transactions, in and by themselves.
S. The provisions of subsection 245(2) will not be applied as a result of the Proposed Transactions, in and by themselves, to re-determine the tax consequences confirmed in any of the rulings given above.
The above rulings are given subject to the limitations and qualifications set out in Information Circular 70-6R5 dated May 17, 2002 and are binding on the CRA provided that the Proposed Transactions are completed before XXXXXXXXXX .
The above rulings are based on the law as it presently reads and do not take into account any proposed amendments to the Act and the Regulations which, if enacted into law, could have an effect on the rulings provided above.
Opinions
A. Pursuant to subsection 55(6), the DC Special Shares will be deemed, for the purposes of subsection 116(6) and the definition "taxable Canadian property" in subsection 248(1), to be listed on a designated stock exchange if:
(a) the Income Tax Amendments Act, 2010 is enacted;
(b) the dividends received by DC and Spinco in the course of the reorganization described in Rulings I and J above are not subject to subsection 55(2) because of paragraph 55(3)(b); and
(c) immediately before the DC Share Exchange described in Paragraph 72, a DC Common Share is not taxable Canadian property to its holder.
B. Pursuant to clause 256(7)(a)(i)(E), control of SubCo2 and each corporation controlled by SubCo2 will be deemed not to have been acquired by a person or group of persons solely because of the transfer by DC of the SpinCo Distribution Property to Spinco described in Paragraph 78, provided the Income Tax Amendments Act, 2010 is enacted.
The foregoing opinions are not rulings and, as noted in Information Circular 70-6R5, are not binding on the CRA.
Nothing in this letter should be construed as implying that the CRA has confirmed, reviewed, made any determination, or accepted any method for the determination in respect of:
1. the paid-up capital of any share or the adjusted cost base or fair market value of any property referred to herein; or
2. any other tax consequence relating to the facts, Subject Transactions, Proposed Transactions or any transaction or event taking place either prior to the Proposed Transactions or subsequent to the Proposed Transactions, whether described in this letter or not, other than those specifically described in the rulings given above, including whether any of the Proposed Transactions would also be included in a series of transactions or events that includes other transactions or events that are not described in this letter. For greater certainty, we are not commenting on any tax consequences relating to the receipt of the Dividend and the ROC, and the settlement of the DC SubCo2 Debt.
Yours truly,
XXXXXXXXXX
for Division Director
Reorganizations and Resources Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch
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