Current structure
USco is a US-resident corporation that is subject to tax in Canada and the US (in each case, as a regarded corporation). USco has only one class of shares issued and outstanding, being common shares divided into seven series with identical rights (the “Existing Common Shares”). The Existing Common Shares are owned by Foreign Sub (a holding company for two foreign “Pubcos”), Foreign Co, Canco1 (a Canadian public company entitled to royalties on the sales of USco) and Canco2 (also entitled to a percentage of such sales). Foreign Sub and its two shareholders deal at arm’s length with Canco1, Canco2 and Foreign Co. The shares of USco are taxable Canadian property.
Purpose of reorganization
With a view to becoming a publicly listed corporation, USco wishes to (i) reclassify all the Existing Common Shares as a number of shares of a single series of the “Reclassified Common Shares” (which will have the same terms, rights and preferences as the Existing Common Shares) in order to create a per share value for the Existing Common Shares that will be consistent with the preferred trading value of the Reclassified Common Shares and (ii) implement a stock split.
Proposed transactions
USco will reorganize its capital by amending its articles of incorporation to reclassify and split all the Existing Common Shares as a class with a single series (the “Reclassified Common Shares”) with the same terms, rights and preferences as the Existing Common Shares.
Rulings
The proposed transaction will not result in a disposition of the Existing Common Shares, or their acquisition by USco, and no s. 116 certificate will be required.