XXXX
J. Teixeira (613) 957-2110
Attention: XXXX
MAR 16 1990
Dear Sirs:
Re: Payments to Shareholders dissenting from an Amalgamation
This is in reply to your letter of April 18, 1990 wherein you requested an explanation of the reasoning to our response to question 59 at the 1987 Canadian Tax Foundation Conference, Revenue Canada Round Table.
Our position that a shareholder dissenting from an amalgamation receives proceeds of disposition and the provisions of subsection 84(3) of the Act do not apply, is based on the opinion that the shareholder who intends to dissent, has, by virtue of subsection 184(5) of the Canada Business Corporation Act, given notice to the corporation that he objects to the amalgamation and that he does not wish to acquire shares of the amalgamated company ("Amalco").
It therefore follows that if the dissenting shareholder of a predecessor corporation does not become a shareholder of Amalco, neither the amalgamating nor the amalgamated corporation would be redeeming, acquiring or cancelling shares of its capital stock. It is Amalco which pays the shareholders of the predecessor company ("Predco") for their shares in Predco, and therefore Amalco has not redeemed, acquired or cancelled shares of its capital stock as required for subsection 84(3) of the Act to apply.
In the instances where the shares of a dissenting shareholder are acquired by the predecessor corporation prior to the effective date of the amalgamation, subsection 84(3) of the Act would be applicable, as the predecessor would be redeeming, acquiring or cancelling shares of its capital stock.
Yours truly,
for Director Reorganizations and Non-Resident Division Specialty Rulings Directorate Legislative and Intergovernmental Affairs Branch