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: Public butterfly - spin-off
Position: Favourable rulings given
Reasons: Meets the requirements of the provisions.
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XXXXXXXXXX 2000-000840
XXXXXXXXXX
Attention: XXXXXXXXXX
XXXXXXXXXX, 2000
Dear Sirs:
Re: Advance Income Tax Ruling in respect of the Proposed Reorganization of XXXXXXXXXX
This is in reply to your letters of XXXXXXXXXX, wherein you requested an advance income tax ruling on behalf of the above-noted taxpayers.
To the best of your knowledge and that of the taxpayers involved, none of the issues contained in this ruling request:
i) is in an earlier income tax return of the taxpayers or a related person;
ii) is being considered by a Tax Services Office or Taxation Centre in connection with a previously filed income tax return of the taxpayers or a related person;
iii) is under objection by the taxpayers or a related person; and
iv) is before the Courts or, if a judgement has been issued, the time limit for appeal to a higher Court has not expired.
Definitions
In this letter, the following terms have the meanings specified:
(a) "Act" means the Income Tax Act, R.S.C. 1985 c.1 (5th Supp.), as amended to the date hereof. Unless otherwise stated, statutory references in this letter are to the Act;
(b) "adjusted cost base" (also "ACB") has the meaning assigned by section 54;
(c) "affiliated person" has the meaning assigned by subsection 251.1(1);
(d) "arm's-length" has the meaning assigned by section 251;
(e) "Canadian corporation" has the meaning assigned by subsection 89(1);
(f) "capital loss" has the meaning assigned by paragraph 39(1)(b);
(g) "capital property" has the meaning assigned by section 54;
(h) "CBCA" means the Canada Business Corporations Act;
(i) "cost amount" has the meaning assigned by subsection 248(1);
(j) "distribution" has the meaning assigned by subsection 55(1);
(k) "Draft Amendments" means the amendments as contained in the Draft Technical Income Tax Amendments released by the Minister of Finance on November 30, 1999;
(1) "eligible property" has the meaning assigned by subsection 85(1.1);
(m) "FMV" means fair market value;
(n) "financial intermediary corporation" has the meaning assigned by subsection 191(1);
(o) "identical properties" or "properties identical thereto" includes a property described in subsections 40(3.5) and 248(12);
(p) XXXXXXXXXX;
(q) "paid-up capital" (also referred to as "PUC") has the meaning assigned by subsection 89(1);
(r) "Proposed Transactions" (also "Reorganization") means the transactions described in that section of this ruling request;
(s) "public corporation" has the meaning assigned by subsection 89(1);
(t) "prescribed stock exchange" has the meaning assigned by section 3200 of the Regulations;
(u) "private holding corporation" has the meaning assigned by subsection 191(1);
(v) "proceeds of disposition" has the meaning assigned by section 54;
(v.1) "Regulations" means the Income Tax Regulations;
(w) "related persons" has the meaning assigned by subsection 251(2);
(x) "series of transactions or events" includes the transactions or events referred to in subsection 248(10);
(y) "specified class" has the meaning assigned by subsection 55(1);
(z) "specified financial institution" (also referred to as "SF1") has the meaning assigned by subsection 248(1);
(aa) "specified shareholder" has the meaning assigned by subsection 248(1) and paragraph 55(5)(e);
(bb) "stated capital" has the meaning assigned by the OBCA;
(cc) "taxable Canadian corporation" has the meaning assigned by subsection 89(1);
(dd) "taxable dividend" has the meaning assigned by subsection 89(1);
(ee) "taxable preferred share" has the meaning assigned by subsection 248(1); and
(ff) "Transaction Date" means the date on which the Proposed Transactions will occur, which will be the date on which the Reorganization is effective.
Our understanding of the statements of facts, purposes of the proposed transactions and proposed transactions is as follows:
Facts
1. XXXXXXXXXX/ACO is a public corporation and a taxable Canadian corporation. XXXXXXXXXX/ACO is a corporation formed on the amalgamation of XXXXXXXXXX ("Old XXXXXXXXXX/ACO" and formerly XXXXXXXXXX), its XXXXXXXXXX%-owned subsidiary, XXXXXXXXXX and its XXXXXXXXXX%-owned subsidiary, XXXXXXXXXX, on XXXXXXXXXX under the provisions of the XXXXXXXXXX/ACO's fiscal year end is XXXXXXXXXX.
The authorized share capital of XXXXXXXXXX/ACO consists of:
(i) an unlimited number of voting common shares ("XXXXXXXXXX/ACO common shares"); and
(ii) an unlimited number of XXXXXXXXXX non-voting shares ("XXXXXXXXXX/ACO XXXXXXXXXX shares"). XXXXXXXXXX/ACO XXXXXXXXXX shares have the same rights as the XXXXXXXXXX/ACO common shares except that the XXXXXXXXXX/ACO XXXXXXXXXX shares are non-voting.
As of XXXXXXXXXX/ACO had XXXXXXXXXX common shares and XXXXXXXXXX shares issued and outstanding. The common shares of XXXXXXXXXX/ACO are listed for trading on the XXXXXXXXXX Stock Exchange.
2.
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3. To the best of the knowledge of the Board of Directors and senior officers of XXXXXXXXXX/ACO, as of the date hereof, no person or related group of persons beneficially owns, directly or indirectly, more than 10% of XXXXXXXXXX/ACO's issued and outstanding common shares. XXXXXXXXXX owns XXXXXXXXXX of XXXXXXXXXX/ACO's XXXXXXXXXX issued and outstanding XXXXXXXXXX shares and is a specified shareholder of XXXXXXXXXX/ACO. To the best of the knowledge of the senior officers of XXXXXXXXXX/ACO, XXXXXXXXXX does not own any XXXXXXXXXX/ACO common shares and deals at arm's length with the other shareholders of XXXXXXXXXX/ACO.
4. XXXXXXXXXX/ACO has granted certain rights under a stock option plan under which certain directors, management personnel and employees of XXXXXXXXXX/ACO are entitled to acquire common shares of XXXXXXXXXX/ACO at specified prices. During XXXXXXXXXX/ACO's XXXXXXXXXX fiscal year, XXXXXXXXXX options for common shares of XXXXXXXXXX/ACO were exercised under the stock option plan for total cash consideration of $XXXXXXXXXX. The options were not exercised in contemplation of the Proposed Transactions described below and would have been exercised regardless of whether or not the Proposed Transactions were to be implemented.
In addition, as at XXXXXXXXXX options on XXXXXXXXXX/ACO common shares were outstanding under XXXXXXXXXX/ACO's stock option plan, exercisable at prices varying from $XXXXXXXXXX to $XXXXXXXXXX per share for periods up to XXXXXXXXXX.
5. On XXXXXXXXXX/ACO's Board of Directors approved a Shareholders' Rights Plan to protect XXXXXXXXXX/ACO's shareholders from unfair, abusive or coercive take-over strategies. Under that plan, one right was issued in respect of each XXXXXXXXXX/ACO share outstanding. On the occurrence of certain triggering events, the rights entitle XXXXXXXXXX/ACO's shareholders to acquire a number of shares in the Company, of the appropriate class, that have a market value equal to twice the exercise price. The issuance of such rights was undertaken regardless of whether the Proposed Transactions are undertaken. Similarly, the Proposed Transactions would be undertaken regardless of the issuance of the rights. The implementation of the Shareholder Rights Plans was not undertaken in contemplation of the Proposed Transactions.
As of the date of this letter, no triggering events have occurred and, accordingly, none of the rights have been exercised.
6.
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7.
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At the XXXXXXXXXX Board of Directors meeting of XXXXXXXXXX/ACO, the Board approved the granting of up to XXXXXXXXXX% of the shares in the new XXXXXXXXXX initiative to "key employees" for nominal consideration, which at that time, was equal to the fair market value of the XXXXXXXXXX initiative. The Board identified XXXXXXXXXX individuals who were granted the right to subscribe for shares in the new XXXXXXXXXX initiative - XXXXXXXXXX (hereafter, the "Founders"). Furthermore, the Board approved a strategy to incorporate a wholly-owned U.S. subsidiary of XXXXXXXXXX/ACO, which, at that time, was to act as the vehicle for the XXXXXXXXXX initiative. To the date hereof no assets have been transferred to that U.S. company.
8. At the same time, XXXXXXXXXX/ACO's senior management commenced a review of the new XXXXXXXXXX initiatives with a view towards ensuring that each of those initiatives was appropriately positioned to pursue its own independent business strategies. Each of the new initiatives required significant capital resources in the immediate short-term to finance its ongoing operations and expansion plans.
At the XXXXXXXXXX Board of Directors meeting of XXXXXXXXXX/ACO, the Board appointed a restructuring committee to assist with establishing business strategies for the XXXXXXXXXX initiatives and granted the committee the power to seek independent financial advice relating to each of those strategies. During the week of XXXXXXXXXX, there were numerous meetings with the management of XXXXXXXXXX/ACO, XXXXXXXXXX and their professional advisors to discuss the XXXXXXXXXX business strategies. As noted earlier, each of those initiatives required significant capital resources. Accordingly, efforts were primarily focused on strategies to obtain the capital resources required by each initiative. The primary financing alternatives considered were an XXXXXXXXXX/ACO equity offering, a public equity offering of the XXXXXXXXXX initiatives each as a subsidiary of XXXXXXXXXX/ACO, an XXXXXXXXXX/ACO rights offering and a divisive reorganization of those initiatives contemporaneously with either private placement financing or a public equity offering.
On XXXXXXXXXX/ACO reached a conclusion that it would implement a plan to separate XXXXXXXXXX/ACO into three separate corporations. It was concluded such a plan would create three less diversified corporations which would improve each corporation's ability to obtain the capital resources required in the short-term.
9. XXXXXXXXXX ("XXXXXXXXXX/CCO") was incorporated under the XXXXXXXXXX. On that date, XXXXXXXXXX/ACO transferred all of its XXXXXXXXXX assets, consisting solely of business property (e.g. computer hardware and software, office furniture, internet domain names and other intellectual property) used in the XXXXXXXXXX business, into XXXXXXXXXX/CCO in exchange for XXXXXXXXXX common shares of XXXXXXXXXX/CCO. XXXXXXXXXX/ACO and XXXXXXXXXX/CCO will jointly elect in prescribed form and manner under subsection 85(1) and within the time set out in subsection 85(6) in respect of this transfer. XXXXXXXXXX/CCO is a taxable Canadian corporation.
10. XXXXXXXXXX ("XXXXXXXXXXUS") is a corporation incorporated under the laws of the State of XXXXXXXXXX in the United States. On XXXXXXXXXX/ACO transferred all of the issued and outstanding shares of XXXXXXXXXXUS to XXXXXXXXXX/CCO in exchange for XXXXXXXXXX common shares of XXXXXXXXXX/CCO. XXXXXXXXXX/ACO and XXXXXXXXXX/CCO will jointly elect in prescribed form and manner under subsection 85(1) and within the time set out in subsection 85(6) in respect of this transfer. After that transfer, XXXXXXXXXXUS became a wholly-owned subsidiary of XXXXXXXXXX/CCO. XXXXXXXXXXUS is inactive as of the date hereof. XXXXXXXXXXUS does not have a permanent establishment in Canada, within the meaning ascribed by Article V of the Canada-U.S. Income Tax Convention, nor does it carry on business in Canada within the extended meaning ascribed by section 253.
11. Effective XXXXXXXXXX, the Founders transferred certain "know-how" and other intellectual property to XXXXXXXXXX/CCO. The Founders and XXXXXXXXXX/ACO will jointly elect in prescribed form and manner under subsection 85(1) and within the time set out in subsection 85(6) in respect of these transfers. In exchange for the transfer of those assets, XXXXXXXXXX received XXXXXXXXXX common shares of XXXXXXXXXX/CCO, XXXXXXXXXX received XXXXXXXXXX common shares of XXXXXXXXXX/CCO and XXXXXXXXXX received XXXXXXXXXX common shares of XXXXXXXXXX/CCO. XXXXXXXXXX/CCO has XXXXXXXXXX common shares issued and outstanding and the Founders of XXXXXXXXXX have the equity interests in XXXXXXXXXX that were approved by XXXXXXXXXX/ACO's Board of Directors, as earlier described in paragraph 7.
The issuance of common shares of XXXXXXXXXX/CCO to the Founders would have been undertaken regardless of whether the Proposed Transactions would be undertaken. Similarly, the Proposed Transactions would be undertaken regardless of the issuance of common shares of XXXXXXXXXX/CCO to the Founders. The issuance of the shares was not in contemplation of the Proposed Transactions.
12. Historically, XXXXXXXXXX/ACO has grown through a combination of internally generated expansion and the acquisition of assets or interests of other corporations which complement existing business operations and which facilitate the achievement of its corporate objectives. Paragraphs 13 to 29 outline the corporations incorporated or acquired, either directly or indirectly, by XXXXXXXXXX/ACO. The acquisitions were not completed in contemplation of the Proposed Transactions described below and would have occurred regardless of whether or not the Proposed Transactions are implemented.
13. On XXXXXXXXXX/ACO acquired all of the issued and outstanding common shares of XXXXXXXXXX for cash and the issuance of XXXXXXXXXX common shares of XXXXXXXXXX/ACO. XXXXXXXXXX is a taxable Canadian corporation. XXXXXXXXXX was incorporated under the XXXXXXXXXX under the name XXXXXXXXXX. On XXXXXXXXXX, the corporate name was changed to XXXXXXXXXX.
14. XXXXXXXXXX is a corporation incorporated under the laws of the XXXXXXXXXX and is resident in XXXXXXXXXX. It is, and always has been, a direct, wholly-owned subsidiary of XXXXXXXXXX does not have a permanent establishment in Canada, within the meaning of XXXXXXXXXX, nor does it carry on business in Canada, within the extended meaning ascribed by section 253.
15. XXXXXXXXXX is a corporation incorporated under the laws of the State of XXXXXXXXXX in the United States and is resident in the United States. It is, and always has been, a direct, wholly-owned subsidiary of XXXXXXXXXX does not have a permanent establishment in Canada, within the meaning of Article V of the Canada-U.S. Income Tax Convention, nor does it carry on business in Canada, within the extended meaning ascribed by section 253.
16. XXXXXXXXXX is a corporation incorporated under the laws of XXXXXXXXXX and is resident in XXXXXXXXXX. It is, and always has been, a direct, wholly-owned subsidiary of XXXXXXXXXX does not have a permanent establishment in Canada, within the meaning of XXXXXXXXXX, nor does it carry on business in Canada, within the extended meaning ascribed by section 253.
17. XXXXXXXXXX is a corporation incorporated under the laws of XXXXXXXXXX and is resident in XXXXXXXXXX acquired all of the issued and outstanding shares of XXXXXXXXXX. It is a direct, wholly-owned subsidiary of XXXXXXXXXX does not have a permanent establishment in Canada, within the meaning of XXXXXXXXXX, nor does it carry on business in Canada, within the extended meaning ascribed by section 253.
18. XXXXXXXXXX is a corporation incorporated under the laws of XXXXXXXXXX and is resident in XXXXXXXXXX. On XXXXXXXXXX acquired XXXXXXXXXX%, and on XXXXXXXXXX acquired an additional XXXXXXXXXX%, of the issued and outstanding shares of XXXXXXXXXX does not have a permanent establishment in Canada, within the meaning of XXXXXXXXXX, nor does it carry on business in Canada, within the extended meaning ascribed by section 253. XXXXXXXXXX other issued and outstanding shares are held by persons who deal at arm's length with XXXXXXXXXX/ACO.
19. Effective XXXXXXXXXX acquired all of the issued and outstanding shares of XXXXXXXXXX, a corporation incorporated under the laws of the State of XXXXXXXXXX in the United States. As consideration for the XXXXXXXXXX issued XXXXXXXXXX common shares in the capital of XXXXXXXXXX to the XXXXXXXXXX shareholders. XXXXXXXXXX does not have a permanent establishment in Canada, within the meaning of Article V of the Canada-U.S. Income Tax Convention, nor does it carry on business in Canada, within the extended meaning ascribed by section 253.
On the date hereof XXXXXXXXXX/ACO owns XXXXXXXXXX % of XXXXXXXXXX issued and outstanding common shares.
20. XXXXXXXXXX is a corporation incorporated under the XXXXXXXXXX. On XXXXXXXXXX/ACO acquired XXXXXXXXXX% of the issued and outstanding shares of XXXXXXXXXX for cash. XXXXXXXXXX is a taxable Canadian corporation. XXXXXXXXXX other issued and outstanding shares are held by persons who deal at arm's length with XXXXXXXXXX/ACO.
21. XXXXXXXXXX is a corporation incorporated under the laws of XXXXXXXXXX and is resident in XXXXXXXXXX. It is, and always has been, a direct, wholly-owned subsidiary of XXXXXXXXXX/ACO since the company was incorporated on XXXXXXXXXX does not have a permanent establishment in Canada, within the meaning of XXXXXXXXXX, nor does it carry on business in Canada, within the extended meaning ascribed by section 253.
22. XXXXXXXXXX is a Limited Liability Company formed under the laws of the State of XXXXXXXXXX in the United States on XXXXXXXXXX. It is resident in the United States. It is a direct, wholly-owned subsidiary of XXXXXXXXXX/ACO. XXXXXXXXXX does not have a permanent establishment in Canada, within the meaning of Article V of the Canada-U.S. Income Tax Convention, nor does it carry on business in Canada, within the extended meaning ascribed by section 253.
23. XXXXXXXXXX is a corporation incorporated under the laws of the State of XXXXXXXXXX in the United States and is resident in the United States. Before XXXXXXXXXX acquired XXXXXXXXXX% of the issued and outstanding shares of XXXXXXXXXX for cash. On XXXXXXXXXX acquired an additional XXXXXXXXXX% of the issued and outstanding shares of XXXXXXXXXX for cash and other assets. XXXXXXXXXX does not have a permanent establishment in Canada, within the meaning of Article V of the Canada-U.S. Income Tax Convention, nor does it carry on business in Canada, within the extended meaning ascribed by section 253. XXXXXXXXXX other issued and outstanding shares are held by persons who deal at arm's length with XXXXXXXXXX/ACO.
24. XXXXXXXXXX is a corporation incorporated under the CBCA. It is a direct, wholly-owned subsidiary of XXXXXXXXXX. It is a taxable Canadian corporation.
25. XXXXXXXXXX is a corporation incorporated under the XXXXXXXXXX. It is a direct, wholly-owned subsidiary of XXXXXXXXXX is a taxable Canadian corporation.
26. XXXXXXXXXX is a corporation incorporated under the XXXXXXXXXX. It is a direct, XXXXXXXXXX%-owned subsidiary of XXXXXXXXXX is a taxable Canadian corporation. It is inactive at this time.
27. XXXXXXXXXX is a corporation incorporated under the laws of the XXXXXXXXXX and is resident in the XXXXXXXXXX. On XXXXXXXXXX (a predecessor of XXXXXXXXXX/ACO through amalgamation) acquired all of the issued and outstanding shares of XXXXXXXXXX in exchange for XXXXXXXXXX common shares of XXXXXXXXXX. At the time of the acquisition, XXXXXXXXXX owned XXXXXXXXXX % of the shares of XXXXXXXXXX. Subsequent to the acquisition, XXXXXXXXXX was amalgamated with XXXXXXXXXX so that after such amalgamation, the shares of XXXXXXXXXX were held by XXXXXXXXXX and are now held by XXXXXXXXXX/ACO as a result of the subsequent amalgamation of XXXXXXXXXX/ACO, XXXXXXXXXX as described in paragraph 1. To your knowledge, XXXXXXXXXX does not have a permanent establishment in Canada nor does it carry on business in Canada, within the extended meaning ascribed by section 253.
28. XXXXXXXXXX is a corporation incorporated under the XXXXXXXXXX. It is a direct, wholly-owned subsidiary of XXXXXXXXXX/ACO. XXXXXXXXXX is a taxable Canadian corporation.
29. XXXXXXXXXX is a corporation incorporated under the XXXXXXXXXX. It is a direct, wholly-owned subsidiary of XXXXXXXXXX is a taxable Canadian corporation.
30. The following transactions are in the process of being completed or are being contemplated by XXXXXXXXXX as of the date hereof:
(i) On XXXXXXXXXX signed a letter of intent to acquire all of the issued and outstanding shares of XXXXXXXXXX, in exchange for the issuance of XXXXXXXXXX common shares and debt assumed by XXXXXXXXXX corporation, is engaged in the XXXXXXXXXX business. It is anticipated that this transaction will close on or about XXXXXXXXXX;
(ii) On XXXXXXXXXX signed a letter of intent to acquire all of the issued and outstanding shares of XXXXXXXXXX, in exchange for the issuance of XXXXXXXXXX common shares and debt assumed by XXXXXXXXXX corporation, is engaged in the XXXXXXXXXX business. It is anticipated that this transaction will close on or about XXXXXXXXXX;
(iii) On XXXXXXXXXX signed a letter of intent to acquire all of the issued and outstanding shares of XXXXXXXXXX, in exchange for the issuance of XXXXXXXXXX common shares. XXXXXXXXXX corporation, is also engaged in the XXXXXXXXXX business. It is anticipated that this transaction will close on or about XXXXXXXXXX;
(iv) On or about XXXXXXXXXX issued a term sheet to acquire all of the issued and outstanding shares of XXXXXXXXXX in exchange for the issuance of XXXXXXXXXX common shares of XXXXXXXXXX corporation and is engaged in the XXXXXXXXXX business. It is anticipated that this transaction will close on or about XXXXXXXXXX;
and
(v) On or about XXXXXXXXXX issued a term sheet to acquire all the issued and outstanding shares of XXXXXXXXXX in exchange for the issuance of XXXXXXXXXX common shares of XXXXXXXXXX corporation and is engaged in the XXXXXXXXXX business. It is anticipated that this transaction will close on or about XXXXXXXXXX.
XXXXXXXXXX would have entered into these transactions regardless of whether the Proposed Transactions are undertaken. Similarly, the Proposed Transactions would be undertaken regardless of the transactions entered into by XXXXXXXXXX. The undertaking of these transactions by XXXXXXXXXX was not done in contemplation of the Proposed Transactions.
Proposed Transactions
31. A newly created corporation, XXXXXXXXXX ("XXXXXXXXXX/NEWBCO"), will be incorporated under the XXXXXXXXXX/NEWBCO will be a taxable Canadian corporation. Prior to the transaction described in paragraph 38, XXXXXXXXXX/NEWBCO will not have any assets, liabilities or issued any shares. XXXXXXXXXX/NEWBCO's Articles of Incorporation will provide that its authorized share capital will include an unlimited number of common shares and an unlimited number of XXXXXXXXXX shares. The common shares will be fully participating and will be entitled to one vote per share. The XXXXXXXXXX shares of XXXXXXXXXX/NEWBCO will have the following attributes:
(a) each XXXXXXXXXX share will be redeemable, subject to applicable law, at any time at the option of XXXXXXXXXX/NEWBCO at an amount equal to the aggregate FMV of the consideration for which such shares are issued (the "XXXXXXXXXX/NEWBCO Redemption Amount", the total of which is hereafter referred to as the "XXXXXXXXXX/NEWBCO Aggregate Redemption Amounts") plus any declared but unpaid dividends;
(b) each XXXXXXXXXX share will be retractable, subject to applicable law, at any time at the option of the holder at a retraction amount equal to the XXXXXXXXXX/NEWBCO Redemption Amount plus any declared but unpaid dividends;
(c) the holder of each XXXXXXXXXX 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 XXXXXXXXXX/NEWBCO;
(d) if XXXXXXXXXX/NEWBCO is liquidated, dissolved or wound-up or its assets are otherwise distributed among the shareholders by way of repayment of capital, whether voluntary or involuntary, the holders of the XXXXXXXXXX shares will be entitled to receive, before any distribution of any assets of XXXXXXXXXX/NEWBCO among the holders of the common shares, an amount in respect of each XXXXXXXXXX share held, equal to the XXXXXXXXXX/NEWBCO Redemption Amount plus any declared but unpaid dividends;
(e) the holder of each XXXXXXXXXX share will be entitled to XXXXXXXXXX votes for each XXXXXXXXXX/NEWBCO XXXXXXXXXX share held; and
(f) for purposes of subsection 191(4), the terms and conditions of the XXXXXXXXXX shares will, at the time of their issue, specify an amount in respect of each share, including an amount for which the share is to be redeemed, acquired or cancelled. The amount to be specified in respect of each XXXXXXXXXX share will be expressed as a dollar amount, will not be determined by a formula and will be equal to the FMV of the property received as consideration for the share.
32. A newly created corporation, XXXXXXXXXX ("XXXXXXXXXX/NEWCCO"), will be incorporated under the XXXXXXXXXX/NEWCCO will be a taxable Canadian corporation. Prior to the transaction described in paragraph 40, XXXXXXXXXX/NEWCCO will not have any assets, liabilities or issued any shares. XXXXXXXXXX/NEWCCO's Articles of Incorporation will provide that its authorized share capital will include an unlimited number of common shares and an unlimited number of XXXXXXXXXX shares. The common shares will be fully participating and will be entitled to one vote per share. The XXXXXXXXXX shares of XXXXXXXXXX/NEWCCO will have the following attributes:
(a) each XXXXXXXXXX share will be redeemable, subject to applicable law, at any time at the option of XXXXXXXXXX/NEWCCO at an amount equal to the aggregate FMV of the consideration for which such shares are issued (the "XXXXXXXXXX/NEWCCO Redemption Amount", the total of which is hereafter referred to as the "XXXXXXXXXX/NEWCCO Aggregate Redemption Amounts") plus any declared but unpaid dividends;
(b) each XXXXXXXXXX share will be retractable, subject to applicable law, at any time at the option of the holder at a retraction amount equal to the XXXXXXXXXX/NEWCCO Redemption Amount plus any declared but unpaid dividends;
(c) the holder of each XXXXXXXXXX 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 XXXXXXXXXX/NEWCCO;
(d) if XXXXXXXXXX/NEWCCO is liquidated, dissolved or wound-up or its assets are otherwise distributed among the shareholders by way of repayment of capital, whether voluntary or involuntary, the holders of the XXXXXXXXXX shares will be entitled to receive, before any distribution of any assets of XXXXXXXXXX/NEWCCO among the holders of the common shares, an amount in respect of each XXXXXXXXXX share held, equal to the XXXXXXXXXX/NEWCCO Redemption Amount plus any declared but unpaid dividends;
(e) the holder of each XXXXXXXXXX share will be entitled to XXXXXXXXXX votes for each XXXXXXXXXX/NEWCCO XXXXXXXXXX share held; and
(f) for purposes of subsection 191(4), the terms and conditions of the XXXXXXXXXX shares will, at the time of the issue, specify an amount in respect of each share including an amount for which the share is to be redeemed, acquired or cancelled. The amount to be specified in respect of each XXXXXXXXXX share will be expressed as a dollar amount, will not be determined by a formula and will be equal to the FMV of the property received as consideration for the share.
33. Subject to obtaining the appropriate shareholder, court and regulatory approvals, the transactions described in paragraphs 35 to 51 will be undertaken and designated to occur on the Transaction Date in the order set out below.
34. Each XXXXXXXXXX/ACO common shareholder will be entitled to dissent in respect of the Reorganization pursuant to the provisions of the XXXXXXXXXX. A shareholder who dissents will cease to be a shareholder of XXXXXXXXXX/ACO on the Transaction Date, and the XXXXXXXXXX/ACO common shares held by such shareholder will no longer be considered to be outstanding as common shares for the purpose of the transactions comprising the Reorganization. Each such dissenting shareholder will be entitled to be paid the fair value of the XXXXXXXXXX/ACO common shares in respect of which the right of dissent is exercised
35. All of the XXXXXXXXXX/ACO shareholders who own XXXXXXXXXX/ACO's issued and outstanding XXXXXXXXXX shares will exchange all of their XXXXXXXXXX/ACO XXXXXXXXXX shares for XXXXXXXXXX/ACO common shares. The addition to the stated capital of the XXXXXXXXXX/ACO common shares will equal the PUC of the XXXXXXXXXX/ACO XXXXXXXXXX shares that are exchanged. After this exchange, each XXXXXXXXXX/ACO XXXXXXXXXX share issued will be cancelled.
36. XXXXXXXXXX/ACO's Articles will be amended in such a manner that, in addition to any other shares that may be authorized for issue, the company's share capital will be comprised of three new classes of shares, being: an unlimited number of XXXXXXXXXX/ACO XXXXXXXXXX common shares, XXXXXXXXXX/ACO XXXXXXXXXX shares and XXXXXXXXXX/ACO XXXXXXXXXX shares. These three classes of shares will have the following attributes:
(a) each XXXXXXXXXX/ACO XXXXXXXXXX common share will be a fully-participating, voting share with the holder thereof entitled to one vote at meetings of the shareholders of XXXXXXXXXX/ACO. The terms of the XXXXXXXXXX/ACO XXXXXXXXXX common shares will differ from the XXXXXXXXXX/ACO common shares to the extent required under the XXXXXXXXXX to be treated as new shares;
(b) each XXXXXXXXXX/ACO XXXXXXXXXX share will be redeemable, subject to applicable law, at any time at the option of XXXXXXXXXX/ACO at an amount equal to the Aggregate XXXXXXXXXX/ACO XXXXXXXXXX Redemption Amounts, as defined in paragraph 37, divided by the number of XXXXXXXXXX/ACO XXXXXXXXXX shares issued and outstanding (the "XXXXXXXXXX/ACO XXXXXXXXXX Redemption Amount") plus any declared but unpaid dividends;
(c) each XXXXXXXXXX/ACO XXXXXXXXXX share will be retractable, subject to applicable law, at any time at the option of the holder at a retraction amount equal to the XXXXXXXXXX/ACO XXXXXXXXXX Redemption Amount plus any declared but unpaid dividends;
(d) each XXXXXXXXXX/ACO XXXXXXXXXX share will be redeemable, subject to applicable law, at any time at the option of XXXXXXXXXX/ACO at an amount equal to the Aggregate XXXXXXXXXX/ACO XXXXXXXXXX Redemption Amounts, as defined in paragraph 37, divided by the number of XXXXXXXXXX/ACO XXXXXXXXXX shares issued and outstanding (the "XXXXXXXXXX/ACO XXXXXXXXXX Redemption Amount") plus any declared but unpaid dividends;
(e) each XXXXXXXXXX/ACO XXXXXXXXXX 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 XXXXXXXXXX/ACO XXXXXXXXXX Redemption Amount plus any declared but unpaid dividends;
(f) the holders of the XXXXXXXXXX/ACO XXXXXXXXXX common shares, XXXXXXXXXX/ACO XXXXXXXXXX shares and XXXXXXXXXX/ACO XXXXXXXXXX shares of XXXXXXXXXX/ACO will be entitled to non-cumulative dividends as and when declared by the Board of Directors, from time to time. No dividends will be declared or paid on the XXXXXXXXXX/ACO XXXXXXXXXX common shares, XXXXXXXXXX/ACO XXXXXXXXXX shares and XXXXXXXXXX/ACO XXXXXXXXXX shares unless a dividend is declared and paid on all such classes of shares simultaneously;
(g) if XXXXXXXXXX/ACO is liquidated, dissolved or wound-up or its assets are otherwise distributed, whether voluntarily or involuntarily, the holders of the XXXXXXXXXX/ACO XXXXXXXXXX shares will rank pari passu and be entitled to receive, before any distribution of any assets of XXXXXXXXXX/ACO among the holders of the XXXXXXXXXX/ACO XXXXXXXXXX common shares, an amount in respect of the XXXXXXXXXX/ACO XXXXXXXXXX Redemption Amount plus any declared but unpaid dividends in respect of the XXXXXXXXXX/ACO XXXXXXXXXX shares and an amount in respect of the XXXXXXXXXX/ACO XXXXXXXXXX Redemption Amount plus any declared but unpaid dividends in respect of the XXXXXXXXXX/ACO XXXXXXXXXX shares;
(h) the holder of each XXXXXXXXXX/ACO XXXXXXXXXX share will be entitled to one vote for each XXXXXXXXXX/ACO XXXXXXXXXX share held and the holder of each XXXXXXXXXX/ACO XXXXXXXXXX share will be entitled to one vote for each XXXXXXXXXX/ACO XXXXXXXXXX share held; and
(i) for purposes of subsection 191(4), the terms and conditions of the XXXXXXXXXX/ACO XXXXXXXXXX shares and the XXXXXXXXXX/ACO XXXXXXXXXX shares will, at the time of their issue, specify an amount in respect of each share, including an amount for which the share is to be redeemed, acquired or cancelled. The amount to be specified in respect of each share will be expressed as a dollar amount, will not be determined by a formula and will be equal to the FMV of the property received as consideration for the share.
37. Each XXXXXXXXXX/ACO common share held by an XXXXXXXXXX/ACO shareholder will be exchanged (excepting any shares held by a shareholder who dissents to the Reorganization) for one XXXXXXXXXX/ACO XXXXXXXXXX common share, one XXXXXXXXXX/ACO XXXXXXXXXX share and one XXXXXXXXXX/ACO XXXXXXXXXX share (such exchanges referred to hereinafter as the "Share Exchange"). As a result:
(a) the Aggregate Redemption Amount of the XXXXXXXXXX/ACO XXXXXXXXXX shares issued on the Share Exchange (hereafter "Aggregate XXXXXXXXXX/ACO XXXXXXXXXX Redemption Amounts") will be equal to a proportion (the "XXXXXXXXXX/BCO Proportion") of the FMV of all of the issued and outstanding XXXXXXXXXX/ACO common shares immediately before the Share Exchange. The XXXXXXXXXX/BCO Proportion is the proportion that:
(i) the net FMV of the property of XXXXXXXXXX/ACO as represented by the XXXXXXXXXX/BCO shares, is of
(ii) the net FMV of all of the property of XXXXXXXXXX/ACO determined immediately before the transfer of the XXXXXXXXXX/BCO shares and the transfer of the XXXXXXXXXX/CCO shares described in paragraphs 42 and 43, respectively;
(b) the Aggregate Redemption Amount of the XXXXXXXXXX/ACO XXXXXXXXXX shares issued on the Share Exchange (hereafter "Aggregate XXXXXXXXXX/ACO XXXXXXXXXX Redemption Amounts") will be equal to a proportion (the "XXXXXXXXXX/CCO Proportion") of the FMV of all of the issued and outstanding XXXXXXXXXX/ACO common shares immediately before the Share Exchange. The XXXXXXXXXX/CCO Proportion is the proportion that:
(i) the net FMV of the property of XXXXXXXXXX/ACO as represented by the XXXXXXXXXX/CCO shares, is of
(ii) the net FMV of all of the property of XXXXXXXXXX/ACO determined immediately before the transfer of the XXXXXXXXXX/BCO shares and the transfer of the XXXXXXXXXX/CCO shares described in paragraphs 42 and 43, respectively;
(c) the aggregate stated capital of the XXXXXXXXXX/ACO XXXXXXXXXX common shares, the XXXXXXXXXX/ACO XXXXXXXXXX shares and the XXXXXXXXXX/ACO XXXXXXXXXX shares will not exceed the PUC or stated capital of the XXXXXXXXXX/ACO common shares, and
(i) the addition to the stated capital of the XXXXXXXXXX/ACO XXXXXXXXXX common shares will equal that portion of the aggregate PUC of the XXXXXXXXXX/ACO common shares that the FMV of the XXXXXXXXXX/ACO XXXXXXXXXX common shares is of the total FMV of the new XXXXXXXXXX/ACO common shares, the XXXXXXXXXX/ACO XXXXXXXXXX shares and the XXXXXXXXXX/ACO XXXXXXXXXX shares;
(ii) the addition to the stated capital of the XXXXXXXXXX/ACO XXXXXXXXXX shares will equal that portion of the aggregate PUC of the XXXXXXXXXX/ACO common shares that the FMV of the XXXXXXXXXX/ACO XXXXXXXXXX shares is of the total FMV of the XXXXXXXXXX/ACO XXXXXXXXXX common shares, the XXXXXXXXXX/ACO XXXXXXXXXX shares and the XXXXXXXXXX/ACO XXXXXXXXXX shares; and
(iii) the addition to the stated capital of the XXXXXXXXXX/ACO XXXXXXXXXX shares will equal that portion of the aggregate PUC of the XXXXXXXXXX/ACO common shares that the FMV of the XXXXXXXXXX/ACO XXXXXXXXXX shares is of the total FMV of the XXXXXXXXXX/ACO XXXXXXXXXX common shares, the XXXXXXXXXX/ACO XXXXXXXXXX shares and the XXXXXXXXXX/ACO XXXXXXXXXX shares; and
(d) each issued XXXXXXXXXX/ACO common share will be cancelled.
The employees of XXXXXXXXXX/ACO and its subsidiaries who currently hold XXXXXXXXXX/ACO stock options ("Old XXXXXXXXXX/ACO stock options") will exchange their rights under those stock options for rights under a new stock option plan of XXXXXXXXXX/ACO to acquire XXXXXXXXXX/ACO XXXXXXXXXX common shares ("New XXXXXXXXXX/ACO stock options"). The exercise price of the New XXXXXXXXXX/ACO stock options will remain unchanged. Outstanding options will be cancelled and replaced with replacement options exercisable after the Transaction Date into the same number of New XXXXXXXXXX/ACO common shares at the same exercise price and otherwise having the same terms and conditions as the outstanding options so replaced. No consideration will be given to any holder of the Old XXXXXXXXXX/ACO stock options in relation to such amendments. No other amendments to the options plans are contemplated.
38. XXXXXXXXXX/NEWBCO will acquire from the XXXXXXXXXX/ACO shareholders all of the issued and outstanding XXXXXXXXXX/ACO XXXXXXXXXX shares in exchange for its issuing an identical number of XXXXXXXXXX/NEWBCO common shares to those shareholders. The certificates for the XXXXXXXXXX/ACO XXXXXXXXXX shares which would normally be delivered to the XXXXXXXXXX/ACO shareholders on the Share Exchange instead will be delivered directly to XXXXXXXXXX/NEWBCO.
Immediately before the transfers of property described in paragraphs 42 and 43, the FMV of each XXXXXXXXXX/ACO shareholder's common shares of XXXXXXXXXX/NEWBCO will be equal to or approximate the amount determined by the formula as found in subparagraph (b)(iii) of the definition "permitted exchange" in subsection 55(1). In addition, no person who is not an XXXXXXXXXX/ACO shareholder will own any shares of XXXXXXXXXX/NEWBCO.
39. The addition to the stated capital of the XXXXXXXXXX/NEWBCO common shares will equal the aggregate PUC of the XXXXXXXXXX/ACO XXXXXXXXXX shares. Immediately before the transfer of property described in paragraphs 42 and 43, the property of XXXXXXXXXX/ACO will be determined as though there was one type of property, as contemplated in proposed subsection 55(3.02) of the Draft Amendments.
40. XXXXXXXXXX/NEWCCO will acquire from the XXXXXXXXXX/ACO shareholders all of the issued and outstanding XXXXXXXXXX/ACO XXXXXXXXXX shares in exchange for its issuing an identical number of XXXXXXXXXX/NEWCCO common shares to those shareholders. The certificates for the XXXXXXXXXX/ACO XXXXXXXXXX shares which would normally be delivered to the XXXXXXXXXX/ACO shareholders on the Share Exchange instead will be delivered directly to XXXXXXXXXX/NEWCCO.
Immediately before the transfers of property described in paragraphs 42 and 43, the FMV of each XXXXXXXXXX/ACO shareholder's shares of the capital stock of XXXXXXXXXX/NEWCCO will be equal to or approximate the amount determined by the formula as found in subparagraph (b)(iii) of the definition "permitted exchange" in subsection 55(1). In addition, no person who is not an XXXXXXXXXX/ACO shareholder will own any shares of XXXXXXXXXX/NEWCCO.
41. The addition to the stated capital of the XXXXXXXXXX/NEWCCO common shares will equal the aggregate PUC of the XXXXXXXXXX/ACO XXXXXXXXXX shares. Immediately before the transfer of property described in paragraphs 42 and 43, the property of XXXXXXXXXX/ACO will be determined as though there was one type of property, as contemplated in proposed subsection 55(3.02) of the Draft Amendments. Immediately before the transfer of property described in paragraphs 42 and 43, the property of XXXXXXXXXX/ACO will be determined on a "net" basis. Thus, the gross FMV of XXXXXXXXXX/ACO's property will be comprised of the property owned directly by XXXXXXXXXX/ACO (including shares of, and amounts receivable from, another member of the related group). The net FMV of XXXXXXXXXX/ACO property will then be determined. In making this determination, the liabilities of XXXXXXXXXX/ACO, determined on an unconsolidated basis, will be deducted by allocating the same against the property of XXXXXXXXXX/ACO on an aggregate basis.
For greater certainty, the following principles will also be applied in determining the net fair market value of XXXXXXXXXX/ACO's property for the purposes of the Proposed Transactions:
(a) any tax accounts, such as the balance of any non-capital losses, net capital losses, and investment tax credits of XXXXXXXXXX/ACO, will not be considered property for purposes of the Proposed Transactions;
and
(b) liabilities will be determined in accordance with generally accepted accounting principles, except that:
(i) the amount of any deferred income tax will not be considered a liability;
and
(ii) any amounts reported on the financial statements of XXXXXXXXXX/ACO as equity or as liabilities, as the case may be, because of the application of sections 3065 or 3860 of the CICA Handbook, or otherwise, will be treated in accordance with their legal character.
42. XXXXXXXXXX/NEWBCO will acquire from XXXXXXXXXX/ACO all of the issued and outstanding XXXXXXXXXX/BCO common shares held by XXXXXXXXXX/ACO in exchange for its issuing an identical number of XXXXXXXXXX/NEWBCO XXXXXXXXXX shares to XXXXXXXXXX/ACO.
The aggregate FMV of XXXXXXXXXX/ACO's XXXXXXXXXX shares of XXXXXXXXXX/NEWBCO and the Aggregate XXXXXXXXXX/NEWBCO Redemption Amounts will be equal to the FMV of the XXXXXXXXXX/BCO shares at the time that such shares are transferred by XXXXXXXXXX/ACO to XXXXXXXXXX/NEWBCO. XXXXXXXXXX/ACO and XXXXXXXXXX/NEWBCO will jointly elect in prescribed form and manner under subsection 85(1) and within the time set out in subsection 85(6) in respect of this transfer. The agreed amount in respect of such an election will not be less than the lesser of the amounts specified in subparagraphs 85(1)(c.1)(i) or (ii) and will not exceed the FMV of the XXXXXXXXXX/BCO common shares.
43. XXXXXXXXXX/NEWCCO will acquire from XXXXXXXXXX/ACO all of the issued and outstanding XXXXXXXXXX/CCO common shares held by XXXXXXXXXX/ACO in exchange for its issuing an identical number of XXXXXXXXXX/NEWCCO XXXXXXXXXX shares to XXXXXXXXXX/ACO.
The aggregate FMV of XXXXXXXXXX/ACO's XXXXXXXXXX shares of XXXXXXXXXX/NEWCCO and the Aggregate XXXXXXXXXX/NEWCCO Redemption Amounts will be equal to the FMV of the XXXXXXXXXX/CCO shares at such time that such shares are transferred by XXXXXXXXXX/ACO to XXXXXXXXXX/NEWCCO. XXXXXXXXXX/ACO and XXXXXXXXXX/NEWCCO will jointly elect in prescribed form and manner under subsection 85(1) and within the time set out in subsection 85(6) in respect of this transfer. The agreed amount in respect of such an election will not be less than the lesser of the amounts specified in subparagraphs 85(1)(c.1)(i) or (ii) and will not exceed the FMV of the XXXXXXXXXX/CCO shares.
44. XXXXXXXXXX/ACO will redeem from XXXXXXXXXX/NEWBCO all of its XXXXXXXXXX/ACO XXXXXXXXXX shares for an amount equal to the Aggregate XXXXXXXXXX/ACO XXXXXXXXXX Redemption Amounts (as defined in paragraph 37) and will issue to XXXXXXXXXX/NEWBCO in consideration therefor a demand promissory note (hereinafter referred to as the "XXXXXXXXXX/ACO XXXXXXXXXX Redemption Note") with a principal amount and FMV equal to the Aggregate XXXXXXXXXX/ACO XXXXXXXXXX Redemption Amounts. XXXXXXXXXX/NEWBCO will accept such XXXXXXXXXX/ACO XXXXXXXXXX Redemption Note as full payment of the Aggregate XXXXXXXXXX/ACO XXXXXXXXXX Redemption Amounts in respect of the redeemed XXXXXXXXXX/ACO XXXXXXXXXX shares.
45. XXXXXXXXXX/NEWBCO will redeem from XXXXXXXXXX/ACO all of its XXXXXXXXXX shares for an amount equal to the XXXXXXXXXX/NEWBCO Aggregate Redemption Amounts (as defined in paragraph 31) and will issue to XXXXXXXXXX/ACO in consideration therefor a demand promissory note (hereinafter referred to as the "XXXXXXXXXX/NEWBCO Redemption Note") with a principal amount and FMV equal to the XXXXXXXXXX/NEWBCO Aggregate Redemption Amounts. XXXXXXXXXX/ACO will accept such note as full and absolute payment of the XXXXXXXXXX/NEWBCO Aggregate Redemption Amounts in respect of the redeemed XXXXXXXXXX shares of XXXXXXXXXX/NEWBCO.
46. Each of the XXXXXXXXXX/ACO XXXXXXXXXX Redemption Note and the XXXXXXXXXX/NEWBCO Redemption Note will be a demand promissory note with interest payable only from the date of demand for payment by the holder to the date of payment of the amount owing under the particular note at a rate equal to the prime rate of the XXXXXXXXXX, as set from time to time.
47. The XXXXXXXXXX/ACO XXXXXXXXXX Redemption Note issued by XXXXXXXXXX/ACO and the XXXXXXXXXX/NEWBCO Redemption Note issued by XXXXXXXXXX/NEWBCO will be set off by each holder and issuer of the particular demand note and accepted as full payment by each of them. The XXXXXXXXXX/ACO XXXXXXXXXX Redemption Note and the XXXXXXXXXX/NEWBCO Redemption Note will both thereupon be marked "paid in full" and cancelled.
48. XXXXXXXXXX/ACO will redeem from XXXXXXXXXX/NEWCCO all of its XXXXXXXXXX/ACO XXXXXXXXXX shares for an amount equal to the XXXXXXXXXX/ACO Aggregate XXXXXXXXXX Redemption Amounts (as defined in paragraph 37) and will issue to XXXXXXXXXX/NEWCCO in consideration therefor a demand promissory note (hereinafter referred to as the "XXXXXXXXXX/ACO XXXXXXXXXX Redemption Note") with a principal amount and FMV equal to the XXXXXXXXXX/ACO Aggregate XXXXXXXXXX Redemption Amounts. XXXXXXXXXX/NEWCCO will accept such XXXXXXXXXX/ACO XXXXXXXXXX Redemption Note as full payment of the XXXXXXXXXX/ACO Aggregate XXXXXXXXXX Redemption Amounts in respect of the redeemed XXXXXXXXXX/ACO XXXXXXXXXX shares.
49. XXXXXXXXXX/NEWCCO will redeem from XXXXXXXXXX/ACO all of its XXXXXXXXXX shares for an amount equal to the XXXXXXXXXX/NEWCCO Aggregate Redemption Amounts (as defined in paragraph 32) and will issue to XXXXXXXXXX/ACO in consideration therefor a demand promissory note (hereinafter referred to as the "XXXXXXXXXX/NEWCCO Redemption Note") with a principal amount and FMV equal to the XXXXXXXXXX/NEWCCO Aggregate Redemption Amounts. XXXXXXXXXX/ACO will accept such note as full and absolute payment of the XXXXXXXXXX/NEWCCO Aggregate Redemption Amounts in respect of the redeemed XXXXXXXXXX shares of XXXXXXXXXX/NEWCCO.
50. Each of the XXXXXXXXXX/ACO XXXXXXXXXX Redemption Note and the XXXXXXXXXX/NEWCCO Redemption Note will be a demand promissory note with interest payable only from the date of demand for payment by the holder to the date of payment of the amount owing under the particular note at a rate equal to the prime rate of the XXXXXXXXXX, as set from time to time.
51. The XXXXXXXXXX/ACO XXXXXXXXXX Redemption Note issued by XXXXXXXXXX/ACO and the XXXXXXXXXX/NEWCCO Redemption Note issued by XXXXXXXXXX/NEWCCO will be set off by each holder and issuer of the particular demand note and accepted as full payment by each of them. The XXXXXXXXXX/ACO XXXXXXXXXX Redemption Note and the XXXXXXXXXX/NEWCCO Redemption Note will both thereupon be marked "paid in full" and cancelled.
52. No property has or will become property of XXXXXXXXXX/ACO, XXXXXXXXXX/BCO, XXXXXXXXXX/CCO or any corporation controlled by such corporations or a predecessor corporation of any such corporation, and no liabilities (other than those incurred in relation to fees and expenses incurred in implementing the Proposed Transactions) have been or will be incurred by XXXXXXXXXX/ACO, XXXXXXXXXX/BCO, XXXXXXXXXX/CCO or any corporation controlled by such corporations or a predecessor corporation of any such corporation, in contemplation of and before the transfers of property described in the Proposed Transactions.
53. XXXXXXXXXX/BCO and/or XXXXXXXXXX/CCO may obtain private placement financing, or a commitment to provide such financing, through the issuance of shares, rights to acquire shares, warrants or another form of security, from an arm's-length person before or immediately after the Proposed Transactions are completed. It is anticipated that any shares of XXXXXXXXXX/BCO and/or XXXXXXXXXX/CCO issued as a part of such financing would be exchanged for common shares of XXXXXXXXXX/NEWBCO and/or XXXXXXXXXX/NEWCCO, respectively, after the Proposed Transactions are completed. The subscription of such shares and the following exchange of those shares would not result in a person or group of persons acquiring control or being deemed by section 256 to acquire control of XXXXXXXXXX/BCO, XXXXXXXXXX/NEWBCO, XXXXXXXXXX/CCO or XXXXXXXXXX/NEWCCO.
The purpose of such private placement financing would be to enable each of the XXXXXXXXXX/BCO/XXXXXXXXXX/NEWBCO group and the XXXXXXXXXX/CCO/XXXXXXXXXX/NEWCCO group to finance its ongoing operations and to provide each of those groups with the critical asset mass required by the either the XXXXXXXXXX or the Securities and Exchange Commission to ensure that each group could apply for immediate listings on XXXXXXXXXX.
The private placement financing would be undertaken regardless of whether the Proposed Transactions are undertaken.
54. 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", as defined in subsection 112(2.2), in respect of any of the XXXXXXXXXX/ACO XXXXXXXXXX shares, the XXXXXXXXXX/ACO XXXXXXXXXX shares, the XXXXXXXXXX/NEWBCO XXXXXXXXXX shares or the XXXXXXXXXX/NEWCCO XXXXXXXXXX shares.
55. None of XXXXXXXXXX/ACO, XXXXXXXXXX/NEWBCO and XXXXXXXXXX/NEWCCO has, or will have, entered into a "dividend rental arrangement", as defined in subsection 248(1), in respect of any of the shares to be redeemed as part of the Proposed Transactions.
56. None of the XXXXXXXXXX/ACO XXXXXXXXXX shares, the XXXXXXXXXX/ACO XXXXXXXXXX shares, the XXXXXXXXXX/NEWBCO XXXXXXXXXX shares or the XXXXXXXXXX/NEWCCO XXXXXXXXXX shares will be issued or acquired as part of a series of transactions of the type described in subsection 112(2.5).
57. None of XXXXXXXXXX/ACO, XXXXXXXXXX/NEWBCO and XXXXXXXXXX/NEWCCO will be a corporation described in any of paragraphs (a) to (f) of the definition of "financial intermediary corporation" in subsection 191(1).
58. Each of XXXXXXXXXX/ACO, XXXXXXXXXX/NEWBCO and XXXXXXXXXX/NEWCCO will have the financial capacity to honour, upon presentation for payment, the amount payable under its respective promissory note issued as part of the Proposed Transactions.
Purpose of the Proposed Transactions
a) The separation of XXXXXXXXXX/ACO's businesses into three separate independent corporations will enhance the ability of such corporations to pursue their independent strategies through an increased management focus on growth and profitability in their respective businesses.
b) The economics of XXXXXXXXXX/ACO, XXXXXXXXXX/NEWBCO and XXXXXXXXXX/NEWCCO are essentially unrelated to each other, and, accordingly, it would be preferable to give the XXXXXXXXXX/ACO shareholders the choice to make independent investment decisions in respect of their holdings in each business.
c) The separation of XXXXXXXXXX/ACO into three separate independent corporations will create three less diversified corporations. It is anticipated that the capital markets will find it easier to effectively value these three new corporations when comparing them to more specific industry benchmarks and performance criteria.
Rulings
Provided that the above statements are accurate and constitute complete disclosure of all of the relevant facts, purposes of proposed transactions and proposed transactions, we confirm the following:
A. Provided that a particular XXXXXXXXXX/ACO shareholder holds XXXXXXXXXX/ACO XXXXXXXXXX shares as capital property, the provisions of subsection 86(1) will apply and the provisions of subsection 86(2) will not apply to the exchange of the XXXXXXXXXX/ACO XXXXXXXXXX shares, as described in paragraph 35 such that:
i) the cost of the XXXXXXXXXX/ACO common shares issued on the exchange will be deemed by paragraph 86(1)(b) to be the ACB of the XXXXXXXXXX/ACO XXXXXXXXXX shares before the exchange;
ii) pursuant to paragraph 86(1)(c), a particular XXXXXXXXXX/ACO shareholder will be deemed to have disposed of that shareholder's XXXXXXXXXX/ACO XXXXXXXXXX shares for proceeds of disposition equal to cost to the particular XXXXXXXXXX/ACO shareholders of the XXXXXXXXXX/ACO common shares as described in paragraph (i) above; and
iii) no dividend will be deemed to arise pursuant to subsection 84(1) or (3) with respect to the exchange.
Furthermore, the exchange will qualify as a "permitted exchange" as defined in subsection 55(1).
B. Provided that a particular XXXXXXXXXX/ACO shareholder holds the XXXXXXXXXX/ACO common shares as capital property, the provisions of subsection 86(1) will apply and the provisions of subsection 86(2) will not apply to the exchange of common shares of XXXXXXXXXX/ACO, as described in paragraph 37 such that:
i) the cost of the XXXXXXXXXX/ACO XXXXXXXXXX common shares received on the exchange will be deemed by paragraph 86(1)(b), to be an amount equal to that proportion of the ACB to the particular XXXXXXXXXX/ACO shareholder immediately before the exchange, of that shareholder's XXXXXXXXXX/ACO common shares, that
- the FMV, immediately after the exchange, of the XXXXXXXXXX/ACO XXXXXXXXXX common shares is of
- the total FMV, immediately after the exchange, of the XXXXXXXXXX/ACO XXXXXXXXXX common shares, the XXXXXXXXXX/ACO XXXXXXXXXX shares and the XXXXXXXXXX/ACO XXXXXXXXXX shares;
ii) the cost of the XXXXXXXXXX/ACO XXXXXXXXXX shares received on the exchange will be deemed, by paragraph 86(l)(b), to be an amount equal to that proportion of the ACB to the particular XXXXXXXXXX/ACO shareholder immediately before the exchange, of that shareholder's XXXXXXXXXX/ACO common shares, that
-the FMV, immediately after the exchange, of the XXXXXXXXXX/ACO XXXXXXXXXX XXXXXXXXXX shares is of
- the total FMV, immediately after the exchange, of the XXXXXXXXXX/ACO XXXXXXXXXX common shares, the XXXXXXXXXX/ACO XXXXXXXXXX shares and the XXXXXXXXXX/ACO XXXXXXXXXX shares;
iii) the cost of the XXXXXXXXXX/ACO XXXXXXXXXX shares received on the exchange will be deemed, by paragraph 86(1)(b), to be an amount equal to that proportion of the ACB to the particular XXXXXXXXXX/ACO shareholder immediately before the exchange, of that shareholder's XXXXXXXXXX/ACO common shares, that
-the FMV, immediately after the exchange, of the XXXXXXXXXX/ACO XXXXXXXXXX XXXXXXXXXX shares is of
- the total FMV, immediately after the exchange, of the XXXXXXXXXX/ACO XXXXXXXXXX common shares, the XXXXXXXXXX/ACO XXXXXXXXXX shares and the XXXXXXXXXX/ACO XXXXXXXXXX shares;
iv) pursuant to paragraph 86(1)(c), a particular XXXXXXXXXX/ACO shareholder will be deemed to have disposed of that shareholder's XXXXXXXXXX/ACO common shares for proceeds of disposition equal to cost of the XXXXXXXXXX/ACO XXXXXXXXXX common shares, XXXXXXXXXX/ACO XXXXXXXXXX shares and XXXXXXXXXX/ACO XXXXXXXXXX shares as described in paragraphs (i), (ii), and (iii) above;
and
v) no dividend will be deemed to arise pursuant to subsection 84(1) or (3) with respect to the exchange.
C. Provided that an XXXXXXXXXX/ACO shareholder who, immediately before the exchange described in paragraph 38, owns XXXXXXXXXX/ACO XXXXXXXXXX shares:
(a) holds those shares as capital property;
(b) deals at arm's length with XXXXXXXXXX/NEWBCO immediately before the exchange;
(c) does not include any portion of the gain or loss otherwise determined, from the disposition of those shares, in computing that shareholder's income for the taxation year in which the exchange takes place;
(d) does not file an election under subsection 85(1) or 85(2) with XXXXXXXXXX/NEWBCO with respect to those shares; and
(e) does not receive any consideration other than common shares of XXXXXXXXXX/NEWBCO in exchange for those shares;
and further provided that immediately after the exchange:
(f) no such shareholder or any person or persons with whom the shareholder does not deal at arm's length, or no such shareholder together with any person or persons with whom the shareholder does not deal at arm's length, will
(i) control XXXXXXXXXX/NEWBCO, or
(ii) beneficially own shares of XXXXXXXXXX/NEWBCO having a FMV of more than 50% of the FMV of all of the outstanding shares of XXXXXXXXXX/NEWBCO, then
pursuant to paragraph 85.1(1)(a), such shareholder will be deemed:
(g) to have disposed of that shareholder's XXXXXXXXXX/ACO XXXXXXXXXX shares for proceeds of disposition equal to the ACB to that shareholder of those shares immediately before the exchange; and
(h) to have acquired the XXXXXXXXXX/NEWBCO common shares at a cost to that shareholder equal to the ACB to that shareholder of the XXXXXXXXXX/ACO XXXXXXXXXX shares immediately before the exchange.
Further, the cost to XXXXXXXXXX/NEWBCO of the XXXXXXXXXX/ACO XXXXXXXXXX shares will be deemed, by virtue of paragraph 85.1(1)(b), to be the lesser of the FMV and the PUC of the XXXXXXXXXX/ACO XXXXXXXXXX shares immediately before the exchange.
D. Provided that an XXXXXXXXXX/ACO shareholder who, immediately before the exchange described in paragraph 40, owns XXXXXXXXXX/ACO XXXXXXXXXX shares:
(a) holds those shares as capital property;
(b) deals at arm's length with XXXXXXXXXX/NEWCCO immediately before the exchange;
(c) does not include any portion of the gain or loss otherwise determined, from the disposition of those shares, in computing that shareholder's income for the taxation year in which the exchange takes place;
(d) does not file an election under subsection 85(1) or 85(2) with XXXXXXXXXX/NEWCCO with respect to those shares; and
(e) does not receive any consideration other than XXXXXXXXXX/NEWCCO common shares in exchange for those shares;
and further provided that immediately after the exchange:
(f) no such shareholder or any person or persons with whom the shareholder does not deal at arm's length, or no such shareholder together with any person or persons with whom the shareholder does not deal at arm's length, will
(i) control XXXXXXXXXX/NEWCCO, or
(ii) beneficially own shares of XXXXXXXXXX/NEWCCO having a FMV of more than 50% of the FMV of all of the outstanding shares of XXXXXXXXXX/NEWCCO, then,
pursuant to paragraph 85.1(1)(a), such shareholder will be deemed:
(g) to have disposed of that shareholder's XXXXXXXXXX/ACO XXXXXXXXXX shares for proceeds of disposition equal to the ACB to that shareholder of those shares immediately before the exchange; and
(h) to have acquired the XXXXXXXXXX/NEWCCO common shares at a cost to that shareholder equal to the ACB to that shareholder of the XXXXXXXXXX/ACO XXXXXXXXXX shares immediately before the exchange.
Further, the cost to XXXXXXXXXX/NEWCCO of the XXXXXXXXXX/ACO XXXXXXXXXX shares will be deemed, by virtue of paragraph 85.l(1)(b), to be the lesser of the FMV and the PUC of the XXXXXXXXXX/ACO XXXXXXXXXX shares immediately before the exchange.
E. Subject to the provisions of subsection 69(11), provided that XXXXXXXXXX/ACO and XXXXXXXXXX/NEWBCO jointly file an election pursuant to subsection 85(1) in respect of the transfer of the XXXXXXXXXX/BCO common shares to XXXXXXXXXX/NEWBCO as described in paragraph 42 above, within the time specified in subsection 85(6) , the provisions of subsection 85(1) will apply to that transfer such that the agreed amount in respect of the XXXXXXXXXX/BCO common shares will be deemed to be the proceeds of disposition to XXXXXXXXXX/ACO of the XXXXXXXXXX/BCO common shares and the ACB to XXXXXXXXXX/NEWBCO of XXXXXXXXXX/BCO common shares transferred.
For greater certainty, paragraph 85(1)(e.2) will not apply to the transfer.
F. Subject to the provisions of subsection 69(11), provided that XXXXXXXXXX/ACO and XXXXXXXXXX/NEWCCO jointly file an election pursuant to subsection 85(1) in respect of the transfer of the XXXXXXXXXX/CCO common shares to XXXXXXXXXX/NEWCCO as described in paragraph 43 above, within the time specified in subsection 85(6), the provisions of subsection 85(1) will apply to that transfer such that the agreed amount in respect of the XXXXXXXXXX/CCO common shares will be deemed to be the proceeds of disposition to XXXXXXXXXX/ACO of the XXXXXXXXXX/CCO common shares and the ACB to XXXXXXXXXX/NEWCCO of XXXXXXXXXX/CCO common shares transferred.
For greater certainty, paragraph 85(1)(e.2) will not apply to the transfer.
G. As a result of the redemption by XXXXXXXXXX/ACO of the XXXXXXXXXX/ACO XXXXXXXXXX shares as described in paragraph 44 of the Proposed Transactions and the redemption by XXXXXXXXXX/NEWBCO of the XXXXXXXXXX/NEWBCO XXXXXXXXXX shares, as described in paragraph 45:
(i) pursuant to paragraphs 84(3)(a) and 84(3)(b):
(A) XXXXXXXXXX/ACO will be deemed to have paid, and XXXXXXXXXX/NEWBCO will be deemed to have received, a taxable dividend equal to the amount by which the Aggregate XXXXXXXXXX /ACO XXXXXXXXXX Redemption Amounts exceeds the PUC of the XXXXXXXXXX/ACO XXXXXXXXXX shares; and
(B) XXXXXXXXXX/NEWBCO will be deemed to have paid, and XXXXXXXXXX/ACO will be deemed to have received, a taxable dividend equal to the amount by which the XXXXXXXXXX/NEWBCO Aggregate Redemption Amounts exceeds the PUC of the XXXXXXXXXX/NEWBCO XXXXXXXXXX shares;
(ii) the taxable dividend deemed to be received by XXXXXXXXXX/NEWBCO resulting from the redemption referred to in (i)(A) above will be included in computing the income of XXXXXXXXXX/NEWBCO pursuant to paragraph 12(l)(j) and will be deductible by XXXXXXXXXX/NEWBCO in computing its taxable income pursuant to subsection 112(1);
(iii) the taxable dividend deemed to be received by XXXXXXXXXX/ACO resulting from the redemption referred to in (i)(B) above will be included in computing the income of XXXXXXXXXX/ACO pursuant to paragraph 12(1)(j) and will be deductible by XXXXXXXXXX/ACO in computing its taxable income pursuant to subsection 112(1);
(iv) provided that the amount paid on the redemption of the XXXXXXXXXX/ACO XXXXXXXXXX shares and the amount paid on the redemption of the XXXXXXXXXX/NEWBCO XXXXXXXXXX shares is equal to the amount specified in respect of such shares as described in paragraphs 36 and 31 above, the dividends deemed to have been received and paid in paragraphs (ii) and (iii) above will not be subject to tax under Parts IV.l and V1.l because those dividends will be dividends deemed by paragraph 191(4)(d) to be "excluded dividends" and "excepted dividends";
(v) the proceeds of disposition, as defined in section 54, in respect of the redemption of the XXXXXXXXXX/ACO XXXXXXXXXX shares held by XXXXXXXXXX/NEWBCO and in respect of the redemption of the XXXXXXXXXX/NEWBCO XXXXXXXXXX shares held by XXXXXXXXXX/ACO, will be reduced by the amount of the dividend deemed, by paragraph 84(3)(b), to be received by the holder of the particular share; and
(vi) the provisions of subsection 112(3) will apply to reduce the loss which otherwise would be determined for XXXXXXXXXX/NEWBCO and XXXXXXXXXX/ACO as a result of the redemption of shares.
H. As a result of the redemption by XXXXXXXXXX/ACO of the XXXXXXXXXX/ACO XXXXXXXXXX shares as described in paragraph 48 of the Proposed Transactions and the redemption by XXXXXXXXXX/NEWCCO of the XXXXXXXXXX/NEWCCO XXXXXXXXXX shares as described in paragraph 49:
(i) pursuant to paragraphs 84(3)(a) and 84(3)(b):
(A) XXXXXXXXXX/ACO will be deemed to have paid, and XXXXXXXXXX/NEWCCO will be deemed to have received, a taxable dividend equal to the amount by which the Aggregate XXXXXXXXXX/ACO XXXXXXXXXX Redemption Amounts exceeds the PUC of the XXXXXXXXXX/ACO XXXXXXXXXX shares; and
(B) XXXXXXXXXX/NEWCCO will be deemed to have paid, and XXXXXXXXXX/ACO will be deemed to have received, a taxable dividend equal to the amount by which the XXXXXXXXXX/NEWCCO Aggregate Redemption Amounts exceeds the PUC of the XXXXXXXXXX/NEWCCO XXXXXXXXXX shares;
(ii) the taxable dividend deemed to be received by XXXXXXXXXX/NEWCCO resulting from the redemption referred to in (i)(A) above will be included in computing the income of XXXXXXXXXX/NEWCCO pursuant to paragraph 12(1)(j) and will be deductible by XXXXXXXXXX/NEWCCO in computing its taxable income pursuant to subsection 112(1);
(iii) the taxable dividend deemed to be received by XXXXXXXXXX/ACO resulting from the redemption referred to in (i)(B) above will be included in computing the income of XXXXXXXXXX/ACO pursuant to paragraph 12(1)(j) and will be deductible by XXXXXXXXXX/ACO in computing its taxable income pursuant to subsection 112(1);
(iv) provided that the amount paid on the redemption of the XXXXXXXXXX shares and the amount paid on the redemption of the XXXXXXXXXX/NEWCCO XXXXXXXXXX shares is equal to the amount specified in respect of such shares as described in paragraphs 36 and 32 above, the dividends deemed to have been received and paid in paragraphs (ii) and (iii) above will not be subject to tax under Parts IV.1 and V1.1 because those dividends will be deemed by paragraph 191(4)(d) to be "excluded dividends" and "excepted dividends";
(v) the proceeds of disposition, as defined in section 54 , in respect of the redemption of the XXXXXXXXXX/ACO XXXXXXXXXX shares held by XXXXXXXXXX/NEWCCO and in respect of the redemption of the XXXXXXXXXX/NEWCCO XXXXXXXXXX shares held by XXXXXXXXXX/ACO, will be reduced by the amount of the dividend deemed, by paragraph 84(3)(b) , to be received by the holder of the particular share; and
(vi) the provisions of subsection 112(3) will apply to reduce the loss which otherwise would be determined for XXXXXXXXXX/NEWCCO and XXXXXXXXXX/ACO as a result of the redemption of shares.
I. The extinguishment of the XXXXXXXXXX/ACO XXXXXXXXXX Redemption Note and of the XXXXXXXXXX/NEWBCO Redemption Note as described in paragraph 47 of the Proposed Transactions will not give rise to a "forgiven amount" within the meaning of subsections 80(1) and 80.01(1) . Neither XXXXXXXXXX/ACO nor XXXXXXXXXX/NEWBCO will realize a gain or incur any loss from the transfer and assignment to XXXXXXXXXX/ACO of the XXXXXXXXXX/ACO XXXXXXXXXX Redemption Note by XXXXXXXXXX/NEWBCO, the transfer and assignment to XXXXXXXXXX/NEWBCO of the XXXXXXXXXX/NEWBCO Redemption Note by XXXXXXXXXX/ACO, and the extinguishment and cancellation of the XXXXXXXXXX/ACO XXXXXXXXXX Redemption Note and the XXXXXXXXXX/NEWBCO Redemption Note.
J. The extinguishment of the XXXXXXXXXX/ACO XXXXXXXXXX Redemption Note and of the XXXXXXXXXX/NEWCCO Redemption Note as described in paragraph 51 of the Proposed Transactions will not give rise to a "forgiven amount" within the meaning of subsections 80(1) and 80.01(1) . Neither XXXXXXXXXX/ACO nor XXXXXXXXXX/NEWCCO will realize a gain or incur any loss from the transfer and assignment to XXXXXXXXXX/ACO of the XXXXXXXXXX/ACO XXXXXXXXXX Redemption Note by XXXXXXXXXX/NEWCCO, the transfer and assignment to XXXXXXXXXX/NEWCCO of the XXXXXXXXXX/NEWCCO Redemption Note by XXXXXXXXXX/ACO, and the extinguishment and cancellation of the XXXXXXXXXX/ACO XXXXXXXXXX Redemption Note and the XXXXXXXXXX/NEWCCO Redemption Note.
K. Subsection 7(1.4) will apply to the exchange, described in paragraph 37, by the option holder of that option holder's Old XXXXXXXXXX/ACO stock options for New XXXXXXXXXX/ACO stock options and such option holder will be deemed not to have disposed of his or her Old XXXXXXXXXX/ACO stock options and not to have acquired New XXXXXXXXXX/ACO stock options. Furthermore, such option holder's New XXXXXXXXXX/ACO stock options will be deemed to be the same as, and a continuation of, his or her Old XXXXXXXXXX/ACO stock options. For greater certainty, to the extent that subsection 7(1.4) is applicable to the exchange of Old XXXXXXXXXX/ACO stock option, paragraph 7(1)(b) will not apply in respect of such exchange.
L. The provisions of subsections 15(1), 56(2), 56(4), 69(4), and 246(1) will not apply as a result of the Proposed Transactions herein.
M. Subsection 245(2) will not be applied as a result of the Proposed Transactions, in and of themselves, to redetermine the tax consequences as described in the Rulings given.
These rulings are given subject to the limitations and qualifications set forth in Information Circular 70-6R3 issued on December 30, 1996, and are binding on the Canada Customs and Revenue Agency provided that the proposed transactions are completed before XXXXXXXXXX.
The above rulings are based on the Act in its present form and do not take into account any proposed amendments to the Act which if enacted could have an effect on the rulings provided herein.
1. Nothing in this ruling should be construed as implying that the Canada Customs and Revenue Agency has reviewed, accepted or otherwise agreed to:
(a) the determination of the adjusted cost base, the fair market value or the paid-up capital of any shares referred to herein; or
(b) any tax consequences relating to the facts and proposed transactions described herein other than those specifically described in the rulings given above.
2. The XXXXXXXXXX/ACO XXXXXXXXXX shares and the XXXXXXXXXX/ACO XXXXXXXXXX shares will not be "excluded property" within the meaning ascribed in subsection 116(6) .
3. XXXXXXXXXX will be a specified shareholder of XXXXXXXXXX/ACO at any time during the course of the series for purposes of clause 55(3.1)(b)(i)(B).
4. There will be an acquisition of control of XXXXXXXXXX/BCO, XXXXXXXXXX/CCO and each corporation controlled by them as a result of the Proposed Transactions.
OPINIONS
In the event that the proposed amendments to add subsection 55(3.02) and the definition "specified corporation" in subsection 55(1) are enacted substantially in the form proposed in the Draft Amendments, and provided that:
(a) there is not a distribution by XXXXXXXXXX/ACO to a corporation that is not an "acquiror" within the meaning ascribed in the definition "specified corporation" before the day that is three years after the Transaction Date;
(b) there is not a distribution by XXXXXXXXXX/NEWBCO or XXXXXXXXXX/NEWCCO or any other acquiror in relation to XXXXXXXXXX/ACO before the day that is XXXXXXXXXX years after the Transaction Date;
and provided that as part of the series of transactions or events that includes the Proposed Transactions there is not:
(c) a disposition of property in 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 a distributing corporation in contemplation of the distribution in the circumstances described in subparagraph 55(3.1)(b)(iii);
(f) an acquisition of property in circumstances described in paragraph 55(3.1)(c); or
(g) an acquisition of property in circumstances described in paragraph 55(3.1)(d)
which has not been described herein , it is then our opinion that, by virtue of paragraph 55(3)(b), subsection 55(2) will not apply to the taxable dividends referred to in Rulings G and H above and, for greater certainty, subsection 55(3.1) will not apply to deny the exemption under paragraph 55(3)(b).
The foregoing opinions are not rulings, and, in accordance with the practice referred to in Information Circular 70-6R3, are not binding on the Canada Customs and Revenue Agency.
Yours truly,
for Director
Reorganizations and International Division
Income Tax Rulings Directorate
Policy and Legislation Branch
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