Re HHT Investments Inc., 119 OR (3d) 473, 2014 ONSC 1582
The applicant ("HHT"), which was listed on the TSX Venture Exchange, proposed to reorganize as a publicly traded REIT pursuant to a plan of arrangement under the Business Corporation Act (Ontario), under which (following the formation of Boulevard Industrial REIT (the "REIT") and the formation of "Boulevard LP"):
- The REIT would contribute REIT units to Boulevard LP in exchange for Class A LP units.
- The shares of HHT would be transferred to Boulevard LP in exchange for REIT units – except that shareholders electing for rollover treatment would exchange their shares instead with Boulevard LP for Class B exchangeable LP units of Boulevard LP.
- The outstanding common shares of HHT would be exchanged under a s. 86 reorganization for new common shares and preferred shares with a paid-up capital equal to net cash on hand, with such preferred shares then being redeemed.
In finding that the proposed plan of arrangement qualified under s. 182 of the OBCA, Brown J stated (at para. 16):
In the broadest sense, the plan involves the reorganization of the structure of a corporate entity, HHT, and arranges the rights of its shareholders and other security holders. While it might be stretching the point to contend that the holders of the common shares of HHT are receiving, in exchange, the securities of "another body corporate", even though Boulevard LP would be acting at the instance of its corporate general partner, Boulevard GP, given the pervasive use of real estate investment trusts in our contemporary economy, I conclude that the key operative portion of the plan – the exchange of securities – constitutes "any other reorganization or scheme involving the business or affairs of the corporation or of any or all of the holders of its securities or of any options or rights to acquire any of its securities that is, at law, an arrangement", within the meaning of OBCA s. 182(1)(h).
Re: Interoil Corp., 2017 YKSC 16
The Yukon Court of Appeal (composed of members of the B.C. Court of Appeal) found that the Plan of Arrangement for the proposed Exxon acquisition of InterOil should not be approved. The parties returned with a revised plan of arrangement which had essentially the same proposed terms, except that contingent cash consideration to be paid to the InterOil shareholders based on the subsequently-measured size of InterOil’s natural gas resource was capped once the assessed size reach 11 trillion cubic feet equivalent rather than 10 tcfe.
Before approving the revised plan, Veale J, who had also granted the interim order for the revised plan, stated (at paras 9 and 10):
…[M]y Interim Order permitting the new plan of arrangement to proceed contains the following requirements:
- an independent fixed-fee long form Fairness Opinion prepared by a reputable expert… .
- the report of the independent Transaction Committee, consisting of the four independent members of the Board of Directors.
In my view, these requirements provide a minimum standard for interim orders of any plan of arrangement. It is not acceptable to proceed on the basis of a Fairness Opinion which is in any way tied to the success of the arrangement.
In connection with giving his (final) order approving the revised plan, he stated (at para 16):
a) the shareholder approval increased from 80% for the original Exxon Arrangement to over 90% for the new Arrangement. In addition, Interoil provided the shareholders with considerable information on the value of the new Arrangement and the value of the contingent resources;
b) the Transaction Committee was independent, examined and endorsed the arrangement;
c) the Fairness Opinion was independent and addressed the deficiencies of the previous fairness opinion;
d) the shareholders had access to dissent and appraisal remedies and those who indicated they wished dissent rights were reduced from 10% on the first plan of arrangement to 1 % on the new plan of arrangement.
InterOil Corp. v. Mulacek, 2016 YKCA 14
A chambers judge of the Yukon Supreme Court granted an application for the approval under s. 195(9) of the Business Corporations Act (Yukon) of an arrangement whereby all the shares of public Yukon corporation (“InterOil”) would be exchanged for shares of a U.S. public corporation (“Exxon”) valued at $45 per share, plus a capped “contingent resource payment” (“CRP”) [see summary]. InterOil’s primary asset was a 36.5% joint venture interest in an oil and gas field ("PRL") in Papua New Guinea that was still in the development stage. Mr. Mulacek, a founder and former chairman and director of InterOil, had provided the testimony of Peter Dey, who opined that the process undertaken by the board was deficient, and failed to ensure adequate safeguards of shareholder interests, including that the InterOIl board should "have engaged a second financial advisor whose compensation would not be dependent upon the success or failure of the transaction," and from Mr. Booth of Paradigm Capital, an expert in the valuation of reserves and resource estimates for the oil and gas industry, who concluded that the consideration contemplated by the arrangement was inadequate. No contrary expert opinions were adduced by InterOil or Exxon. Nevertheless, the chambers judge ruled that the arrangement was fair and reasonable, largely based on the shareholders’ 80% voting approval.
In reversing the chambers judge and dismissing the application under s. 195, Newbury JA stated (at para 40):
… Instead of ‘delving into’ the question of value (see [BCE Inc. v. 1976 Debentureholders, 2008 SCC 69] at para. 141), [the chambers judge] relied on the truism that the shareholders were “entitled to make the decision”. Clearly, it was the shareholders’ decision to make, but court approval was also required by the Act to ensure the decision was fair and reasonable in the sense of being based on information and advice that was adequate, objective and not undermined by conflicts of interest. Given the ‘red flags’ in this case – the absence of a fairness opinion from an independent expert, the failure of Morgan Stanley to assess the value of the CRP as compared with the value of the PRL prospects (again, the company’s primary asset); the deficiencies pointed out by Mr. Dey; the unchallenged report of Mr. Booth; the fact the CEO [who stood to receive contingent compenstion of $35M on completion] was in a position of conflict; the probability the “independent” special committee was not independent of management; and the lack of “necessity” for the deal – the Court was required to do more than accept the vote of the majority as a “proxy” for fairness, or the cash amount of Exxon’s offer as a proxy for reasonableness. As I say, this was an error of principle, if not law, in the sense that the correct ‘legal test’ was not brought to bear.
1455257 Ontario Inc. v. Canada, 2016 FCA 100
The appellant, an Ontario corporation, was dissolved in 2007 by the Companies Branch for defaults, and assessed under ITA 160 in 2010. Following filing a notice of appeal, the Tax Court granted the respondent’s motion to adjourn the appeal to allow the appellant to be revived under OBCA s. 241(5), and the appellant appealed this decision.
Dawson JA noted that in 495187 Ontario Ltd. v. MNR, 94 DTC 6229 (“’187”), a.ka. Sarraf, the Federal Court of Appeal, in finding that a dissolved corporation could pursue an appeal of an assessment, followed the reasons in 460354 Ontario, where Jerome ACJ considered that when a tax appeal is launched in a court, it is not an initiation of proceedings but, rather, represents the final stage of an appeal procedure that commenced with the filing of the notice of objection, so that court proceedings were authorized by s. 242(b), which authorized proceedings to be brought against a dissolved corporation.
In finding (at para. 22) “that ‘187 is no longer good law,” Dawson JA found that, in contrast to the appeal procedures which informed an earlier decision relied on by Jerome ACJ, an appeal in the Tax Court is instituted when the originating document is received by the Registry.
Accordingly, the Tax Court did not err in adjourning the appeal to require the appellant to revive its corporate status. Although only corporations that had been dissolved by the corporate Director could be revived under the OBCA administrative procedure, a dissolved corporation could be revived by a Private Act of the Legislature.
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|Tax Topics - Income Tax Act - Section 169 - Subsection 169(1)||dissolved corporation cannot appeal to Tax Court||116|
|Tax Topics - General Concepts - Stare Decisis||prior decisons overruled only if manifestly wrong||89|
460354 Ontario Inc. v. The Queen, 92 DTC 6534,  2 CTC 287 (FCTD)
S.241(1)(a) of the Business Corporations Act, 1982 (Ontario) permitted a corporation which had been dissolved to appeal to the Tax Court and, later, to the Federal Court, from a reassessment issued after the date of dissolution.
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|Tax Topics - Income Tax Act - Section 169||40|
1455257 Ontario Inc. v. The Queen, 2015 TCC 173, aff'd on different grounds 2016 FCA 100
The taxpayer was dissolved under s. 241 of the Ontario Business Corporations Act. The Minister assessed the taxpayer pursuant to s. 242. In response to the taxpayer's appeal at the behest of its former principal, the Minister applied to adjourn the appeal for 60 days to allow the taxpayer to be revived under s. 241(5) of the OBCA in order to proceed.
Lyons J granted the Minister's motion. Faced with conflicting authorities on whether s. 242 permits a dissolved corporation to defend against an action brought against it under that section (e.g. 460354 Ontario; Malamas,  OJ No. 4726, 2009 CarswellOnt 6878 (Ont Sup Ct)), she found that GMC Distribution was more persuasive in considering that s. 242 does not permit defence without revival. The GMC line relied on a contextual interpretation while the Malamas line relied on an overly narrow textual interpretation (paras. 29-31).
GMC Distribution Ltd. v. The Queen, 2012 TCC 262
The taxpayer was dissolved pursuant to s. 241 of the Ontario Business Corporations Act for failing to file tax returns. The taxpayer's principal applied for leave to represent the corporation in a tax appeal.
Webb J dismissed the taxpayer's motion. Reliable Life Insurance v. Ingle,  O.J. No. 2312, establishes that, while s. 242(1)(b) empowers the Minister to assess a dissolved OBCA corporation, such a corporation cannot defend itself (in this case, by appealing the assessment) without first being revived under the OBCA.
Webb J also granted the Minister's motion to quash the appeal, as the taxpayer (or its principal) had not prosecuted its appeal with due dispatch, having taken almost no action to further the appeal since 2004
7 December 1999 External T.I. 1999-0006715 - Right to object and appeal
What is Revenue Canada's position in respect of the shareholder's rights to file a Notice of Objection where the corporation has been dissolved? Revenue Canada responded:
Once… a certificate of dissolution is issued…[u]nder section 226 of the CBCA, a civil, criminal, or administrative action or proceeding may be brought against the dissolved corporation within two years after its dissolution as if the corporation had not been dissolved. However, the period of time during which actions can be brought against a corporation differs between jurisdictions… .
… 460354 Ontario Inc. (92 DTC 6534) and Hadi Saraf… (94 DTC 6229), …[involving] the Ontario Business Corporations Act, held that an assessment is an administrative action and therefore a dissolved corporation may be assessed or reassessed, provided the relevant time limit has not expired. This assessment would be under section 152 of the Income Tax Act and would be served in the name of the dissolved corporation on the last known director or other officer of the corporation.
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|Tax Topics - Income Tax Act - Section 152 - Subsection 152(1)||assessment of dissolved corp||169|
5 July 1994 Internal T.I. 9414347 - ASSESSMENT OF A DISSOLVED CORPORATION
If the two-year time limit provided in s. 219(2) of the Business Corporations Act (Alberta) has expired, there is no way the dissolved corporation can be reassessed. Accordingly, revival of the corporation may be necessary.
If the time limit has not expired, the 460354 (92 DTC 6534) and Saraf (94 DTC 6229) cases confirm that the tax return of the dissolved corporation may be assessed without having to revive the corporation. Such assessment would be under s. 152 of the Act and would be served in the name of the dissolved corporation on the director or other officer of the corporation as last shown in notices filed under the Business Corporations Act.
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|Tax Topics - Income Tax Act - Section 160 - Subsection 160(2)||46|