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.
Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.
Principal Issues:
Change of Control as a listed "event of default" in the trust Indenture for purposes of 212(1)(b)(vii)(C)
Position:
OK as for purposes of 212(1)(b)(vii)
Reasons:
Well established position and the change of control position as a listed event of default meets our criteria of commercial reality, is beyond the control of the lender, and is not contrived
XXXXXXXXXX 972356
XXXXXXXXXX
Attention: XXXXXXXXXX
XXXXXXXXXX, 1997
Dear Sirs:
Re: XXXXXXXXXX
This is in reply to your letters of XXXXXXXXXX in which you request an advance income tax ruling on behalf of the above noted taxpayer.
To the best of your knowledge none of the issues involved in the present ruling request have been or are being considered by a District Tax Services office and/or Taxation Centre in connection with a tax return already filed by XXXXXXXXXX ( the "Company") or a related person. Furthermore, none of the issues raised in the present request are under objection by the Company or a related person, or in discussion with an official of Revenue Canada.
Our understanding of the facts and proposed transactions is as follows:
Statement of Facts
1. The Company is a taxable Canadian corporation within the meaning of subsection 89(1) of the Income Tax Act (the "Act").
2. The Company's federal corporate tax account number is XXXXXXXXXX and its district tax services office and taxation centre where its return is filed is XXXXXXXXXX.
3. The Company carries on the business of XXXXXXXXXX directly as well as through a number of wholly and partly owned subsidiaries.
4. The Company is a public corporation within the meaning of subsection 89(1) of the Act, whose shares are listed on the XXXXXXXXXX stock exchanges. Approximately XXXXXXXXXX of its issued and outstanding common shares are held by the public, and the balance XXXXXXXXXX are held by XXXXXXXXXX.
5. XXXXXXXXXX is a public corporation within the meaning of subsection 89(1) of the Act, whose shares are listed on the XXXXXXXXXX stock exchanges. Approximately XXXXXXXXXX of its issued and outstanding common shares are held by the public, and the balance XXXXXXXXXX are held directly or indirectly by certain members of the XXXXXXXXXX (the "Permitted Holders") which you have told us provides the XXXXXXXXXX with defacto control of XXXXXXXXXX.
Proposed Transaction
6. As part of a series of transactions that the Company is undertaking to refinance substantially all of its outstanding long-term debt, the Company will offer U.S. $XXXXXXXXXX in aggregate principal amount of its interest bearing XXXXXXXXXX (the "Notes"). The interest rate of the Notes will be established on or around the date of their issuance.
7. The Notes are to be issued under an indenture (the "Indenture").
8. The primary market for the Notes will be the United States.
9. Under the terms of the Indenture, the occurrence of a Change of Control (as defined in the Offering Circular and summarized in 11 below) will constitute an "Event of Default" (as defined in the Offering Circular) which the Company may cure by making an offer to purchase all outstanding Notes at XXXXXXXXXX% of the principal amount thereof plus accrued and unpaid interest, if any, to the date of purchase and by purchasing all Notes properly tendered pursuant to such offer.
10. If an "Event of Default" occurs and is continuing the holders of at least XXXXXXXXXX% in principal amount of the outstanding Notes may declare the principal of and accrued but unpaid interest on all the Notes to be due and payable immediately.
11. A Change of Control, as defined in the Offering Circular, will occur if any one of the following events occurs:
(i) any "person" (as such term is used in Sections 13(d) and 14(d) of the Exchange Act), other than one or more Permitted Holders, is or becomes the "beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the Exchange Act, except that for purposes of this clause (i) such person shall be deemed to have "beneficial ownership" of all shares that any such person has the right to acquire, whether such right is exercisable immediately or only after the passage of time), directly or indirectly, of more than XXXXXXXXXX% of the total voting power of the Voting Stock of the Issuer and the Permitted Holders "beneficially own" (as defined in Rules 13d-3 and 13d-5 under the Exchange Act), directly or indirectly, in the aggregate a lesser percentage of the total voting power of the Voting Stock of the Issuer than such other person and do not have the right or ability by voting power, contract or otherwise to elect or designate for election a majority of the Board of Directors (for the purposes of this clause (i), such other person shall be deemed to beneficially own any Voting Stock of a specified person held by another person (a "parent entity"), if such other person is the beneficial owner (as defined in this clause (i)), directly or indirectly, of more than XXXXXXXXXX% of the voting power of the Voting Stock of such parent entity and the Permitted Holders beneficially own (as defined in Rules 13d-3 and 13d-5 under the Exchange Act), directly or indirectly, in the aggregate a lesser percentage of the voting power of the Voting Stock of such parent entity and do not have the right or ability by voting power, contract or otherwise to elect or designate for election a majority of the board of directors of such parent entity);
(ii) during any period of XXXXXXXXXX years, individuals who at the beginning of such period constituted the Board of Directors (together with any new directors whose election by such Board of Directors or whose nomination for election by the shareholders of the Issuer was approved by a vote of XXXXXXXXXX% of the directors of the Issuer then still in office who were either directors at the beginning of such period or whose election or nomination for election was previously so approved) cease for any reason to constitute a majority of the Board of Directors then in office; or
(iii) the merger or consolidation of the Issuer with or into another Person or the merger of another Person with or into the Issuer, or the sale of all or substantially all the assets of the Issuer to another Person (other than a Person that is controlled by the Permitted Holders), and, in the case of any such merger or consolidation, either (x) immediately after such transaction any person (as defined in clause (i) above) other than a Permitted Holder shall have become the beneficial owner (as determined in accordance with clause (i) above) of securities of the surviving corporation of such merger or consolidation representing a majority of the combined voting power of the Voting Stock of the surviving corporation or (y) the securities of the Issuer that are outstanding immediately prior to such transaction and which represent XXXXXXXXXX% of the Voting Stock of the Issuer are changed into or exchanged for cash, securities or property, unless pursuant to such transaction such securities are changed into or exchanged for, in addition to any other consideration, securities of the surviving corporation that represent immediately after such transaction, at least a majority of the Voting Stock of the surviving corporation.
Purpose of the Proposed Transaction
12. The Company intends to use the net proceeds of such Notes to refinance a portion of its outstanding long-term debt.
Ruling Given
Provided that the foregoing statements constitute complete and accurate disclosure of all the relevant facts and proposed transactions, we confirm that the inclusion of the "Change of Control" provision as described above as an "event of default" in the Indenture will not, in and of itself, preclude the application of the exemption from Canadian withholding tax in subparagraph 212(1)(b)(vii) of the Act, to interest paid or credited by the Company to holders of Notes who are non-residents of Canada dealing at arm's length with the Company.
This ruling is given subject to the general limitations and qualifications set forth in Information Circular 70-6R3 issued by Revenue Canada, Taxation on December 30, 1996 and is binding provided that the proposed transaction is completed by XXXXXXXXXX. This ruling is based on the Act in its present form and does not take into account the effect of any proposed amendments.
Except as expressly stated, our ruling does not imply acceptance, approval or confirmation of any income tax implications of the facts or proposed transaction. In particular, we have not commented on the availability of the exemption from Canadian withholding tax under subparagraph 212(1)(b)(vii) of the Act on the interest paid by the Company to holders of the Notes, who, for purposes of the Act, are non-residents of Canada and deal at arm's length with the Company.
Yours truly,
for Director
Financial Industries Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch
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