Before ruling that the contribution of shares of a Netherlands private limited liability company to a newly-formed Netherlands cooperative (Dutch Co-op, or "DC"), in consideration for a credit to the membership accounts of the contributing foreign affiliates, was eligible for s. 95(2)(c) rollover treatment, CRA ruled that DC was a corporation for the purposes of the Act, and a non-resident corporation without share capital for purposes of s. 93.2.
In connection with this ruling, the factual description noted the following:
- Upon the registration of the notarial deed with the commercial register, DC will be regarded as a legal entity that exists separately from its members under the Dutch Civil Code and the Netherlands domestic income tax law.
- The Articles will provide that each member must make capital contributions to DC as unanimously agreed upon by all members, the number of votes that a member may cast at a general meeting of members will generally be proportionate to its percentage of ownership in DC, a distribution of retained profits will only be made with the unanimous agreement of all members and such distribution will be proportional to the respective ownership percentages, and the members will not be liable for any debts or losses incurred by DC that are in excess of their required contributions to the capitalization of DC.
- The Dutch Civil Code provides that “a Dutch cooperative may, by its articles of association, exclude or limit to a maximum, any liability of its members or former members to contribute to a deficit.”