VERTICAL 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 vertical short-form amalgamation in Canada is a streamlined corporate merger process that involves a parent company and one or more of its wholly-owned subsidiaries. This type of amalgamation is often quicker and simpler than a long-form amalgamation because it does not require shareholder approval or an amalgamation agreement.
To qualify for a vertical short-form amalgamation, the following conditions generally must be met:
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Parent-Subsidiary Relationship: The amalgamation must be between a holding corporation and one or more of its wholly-owned subsidiaries.
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Board Approval: The boards of directors of each of the amalgamating corporations must approve the amalgamation via a resolution.
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Share Cancellation: The shares of the subsidiary corporation(s) are cancelled without any repayment of capital.
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No New Shares Issued: The amalgamated corporation does not issue new shares in connection with the amalgamation. The shares of the parent company remain outstanding and become the shares of the new amalgamated corporation.
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Articles of Amalgamation: The articles of amalgamation for the new entity must be the same as the articles of the amalgamating parent corporation, with the exception of the name, which can be different.
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Solvency: The directors of each corporation must have reasonable grounds to believe that each company is, and the amalgamated company will be, able to pay its liabilities as they become due. They must also believe that the realizable value of the amalgamated corporation's assets will not be less than the aggregate of its liabilities and stated capital.
Businesses typically opt for a vertical short-form amalgamation to simplify their corporate structure. A vertical short-form amalgamation is typically intended to facilitate:
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Reduce Administrative Costs: Consolidating multiple corporations into one reduces ongoing administrative and compliance costs, such as separate tax filings and record-keeping.
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Streamline Operations: It simplifies the overall business structure, making internal operations and management more efficient.
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Consolidate Losses: The process can be used as a corporate tax planning tool to consolidate losses from one company against the income of another within the group. This method is an efficient way for a parent company to absorb its subsidiaries, creating a single legal and financial entity while maintaining a continuous legal existence.
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.
