LONG-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 long-form amalgamation is a legal process where two or more corporations merge to form a single, new corporation. It's the standard method for amalgamating companies that are not related or are "at arm's length" (not a parent-subsidiary relationship). It is also more complex than a short-form amalgamation, which is reserved for related corporations.
The principal characteristics of a long-form amalgamation include:
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Parties Involved: Used for merging unrelated corporations.
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Amalgamation Agreement: A formal amalgamation agreement must be drafted and signed by each of the merging corporations. This document outlines the terms of the merger, including how the shares of the original corporations will be converted into shares of the new, amalgamated corporation.
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Shareholder Approval: A long-form amalgamation requires shareholder approval from each of the amalgamating corporations, typically through a special resolution passed at a shareholders' meeting. The required vote is usually a two-thirds majority.
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Continuity: The resulting corporation is considered a continuation of the amalgamating corporations, not a new legal entity. All assets, liabilities, and obligations of the predecessor corporations are automatically transferred to the new amalgamated corporation by operation of law.
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Regulatory Compliance: The process is governed by the relevant corporate law, i.e., federal or provincial business corporations act. A key condition for amalgamation is that each of the amalgamating corporations must be incorporated under the same statute. If they aren't, one must first "continue" into the other's jurisdiction.
The long-form amalgamation process generally involves several key steps:
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Directors' Resolution: The boards of directors of each amalgamating corporation must approve the proposed amalgamation.
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Amalgamation Agreement: An amalgamation agreement is drafted, specifying all the terms and conditions of the merger. This includes the name of the new corporation, its proposed directors, the share conversion plan, and new bylaws.
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Shareholder Approval: The amalgamation agreement is presented to the shareholders of each corporation for approval. This typically requires a special resolution, meaning it must be approved by a supermajority (usually ⅔) of the votes cast.
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Filing Documents: The corporations must file the necessary documents with the appropriate governmental corporate authority. These documents include articles of amalgamation and a statutory declaration from a director or officer of each company. The statutory declaration confirms that the new corporation will be able to pay its liabilities as they become due and that the realizable value of its assets will not be less than the aggregate of its liabilities.
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Certificate of Amalgamation: Once the government body approves the filing, it issues a Certificate of Amalgamation, which legally formalizes the merger. The amalgamation becomes effective on the date specified on the certificate.
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Post-Amalgamation: The amalgamated corporation must then manage the administrative and tax consequences of the merger, such as updating business numbers, filing final tax returns for the predecessor corporations, and establishing a new fiscal year.
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.
