An indirect foreign subsidiary ("Forco 1") of a Canadian public company ("Opco 1" - likely, BCE Emergis Inc.) sold a foreign subsidiary of Forco 1 ("Forco 2" - likely BCE Emergis Corporation) in an arm's length sale to a purchaser. As a condition to the sale of Forco 2, a loan owing by Forco 2 to another indirect foreign subsidiary of Opco 1 ("Forco 3") was required to be paid off. Accordingly, Opco 1 used money borrowed by it from a Canadian bank to contribute, through a series of transactions, capital to Forco 2, in order that Forco 2 could pay off the loan owing by it to Forco 3. Upon completion of the sale of Forco 2, the sale proceeds were distributed, through winding-up of Forco 1 and its immediate parent to Opco 1 ,which used a portion of the proceeds so received by it to pay off the bank loan. Thereafter, Forco 3 uses the loan repayment proceeds received by it to effect a capital distribution to its immediate Canadian parent ("Sub 2") which, in turn, will effect a capital distribution directly (and through another intermediate corporation) to Opco 1, which will then effect a stated capital distribution of a portion of such cash proceeds on its shares.
CRA gave a favourable s. 84(2) ruling.