HORIZONTAL SHORT-FORM AMALGAMATION
Amalgamation - Section 87 Tax Deferral - Long-Form Amalgamation - Vertical Short-Form Amalgamation - Horizontal Short-Form Amalgamation
Contact Neufeld Legal PC at 403-400-4092 / 905-616-8864 or Chris@NeufeldLegal.com
A horizontal short-form amalgamation is a streamlined corporate merger process involving two or more wholly-owned subsidiary corporations of the same parent corporation, such that you might merge together those wholly-owned subsidiary corporations.
The principal criteria for a horizontal short-form amalgamation include:
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Wholly-Owned Subsidiaries: All amalgamating corporations must be wholly-owned subsidiaries of the same holding corporation.
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Director Resolution: The amalgamation must be approved by a resolution of the directors of each of the amalgamating corporations.
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Cancellation of Shares: The shares of all but one of the amalgamating subsidiaries are cancelled without any repayment of capital.
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Continuation of Articles: The articles of amalgamation are the same as the articles of the subsidiary corporation whose shares were not cancelled, except for a possible name change.
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Solvency: A key condition is that there are reasonable grounds to believe that no creditor will be prejudiced by the amalgamation, and the new corporation will be able to pay its liabilities as they become due.
Certain legal and tax implications of a horizontal short-form amalgamation include:
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Legal Continuity: The amalgamated corporation is not a new legal entity; it's considered a continuation of the amalgamating corporations. It acquires all the property, rights, and contracts of the predecessor corporations and becomes liable for all their debts and obligations.
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Tax Rollover / Deferral: For income tax purposes, a horizontal short-form amalgamation can be structured as a tax-deferred "rollover" under Section 87 of the Income Tax Act (Canada). This means that the transfer of assets and liabilities from the predecessor corporations to the new corporation does not typically trigger a taxable event. The new corporation can also often carry forward certain tax attributes, such as losses, from the amalgamating companies [more on Applicability of Section 87].
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GST/HST: The transfer of property during an amalgamation is generally not considered a taxable supply for GST/HST purposes, so no GST/HST is payable on the transfer of assets.
For knowledgeable and experienced legal representation when undertaking an amalgamation or other corporate restructuring, contact corporate business lawyer Christopher Neufeld at Chris@NeufeldLegal.com or 403-400-4092 / 905-616-8864.
