Where a takeover is structured as a corporate arrangement pursuant to which the target company is dissolved and stock options of the target company are replaced by stock options of the acquiring company, will the substitution of the stock options be deemed not to be dispositions by the amendments to subsection 7(1.4) notwithstanding that there has been no amalgamation or merger and that the acquiring company deals at arm's length with the target company after the exchange and prior to target's dissolution?
Department's PositionAssuming that the transactions do not result in the acquiring company owning shares giving it a controlling interest in the target company, they would be dealing at arm's length at the time that the options are exchanged. Therefore, the provisions of proposed subsection 7(1.4) of the Act would not be applicable.
Prepared by A.A. Cameron
SEP 25 1991