Background.
The central management and control of ACo, which was originally incorporated under the Country A Corporate Act, shifted to Canada. In order to avoid any deemed dividend under paragraph 128.1(1)(c.2), it did not elect under s. 128.1(2)(b)(i) to add the amount of the positive PUC adjustment available to it under s. 128.1(2)(a) in computing its PUC. Its common shares had a nominal value, which had been added to its “Issued Capital” and also had a “Share Premium Account” which among other elements included premiums received by it in excess of the Issued Capital on share issuances (the “Share Issue Surplus”). As a result of a share-for-share exchange, it became a wholly-owned subsidiary of CCo.
Proposed transactions.
- ACo will be continued to Province 2. The Articles of Continuance will provide that the issued common shares in the capital of ACo will be converted into common shares without par value, and that ACo’s Issued Capital will become the initial stated capital of such common shares, and that ACo’s Share Premium Account will be renamed as its “Contributed Surplus Account”.
- Pursuant to the Province 2 Corporate Act, the board of directors of ACo will pass a resolution whereby ACo will add a portion of its Contributed Surplus Account equal to the Share Issue Surplus to its Stated Capital Account in respect of its common shares.
Ruling
Re no s. 84(1) dividend.